Chapter 06 – Entrepreneurship and Starting a Small Business
206. Jake is an innovative engineering graduate who works for a large company that makes
adhesive products for commercial and consumer use. One of his primary responsibilities is
to initiate and develop new products to complement the firm’s current product line. Jake’s
company is ___________.
A. intrapreneurial
B. entrepreneurial
C. an outside consultant for other firms
D. at a disadvantage because it is trying to operate like a small business
Feedback: Intrapreneurs are creative people who work as entrepreneurs within corporations to
create new products that will provide returns on investment.
207. Southwest College received a government grant to establish a business incubator. This
facility will offer:
A. local government agencies assistance in obtaining funds for urban renewal.
B. area businesses advice on employee benefits and ways to reduce taxes.
C. venture capitalists an opportunity to identify new entrepreneurs.
D. new businesses low-cost office space with basic business services.
Feedback: Incubators are created to reduce the start-up capital needed by new firms.
Incubators offer assistance in the critical stage of early development with services such as
accounting, legal advice, and secretarial help.
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212. Located on Monsanto’s world headquarters campus, the Nidus Center is a unique
___________ facility. The tenants are biotechnology companies who are at various stages
of product development. The agricultural giant, Monsanto, the Danforth Foundation,
Washington University St. Louis, St. Louis University, and several venture capital firms
contribute seed money for these small start-up ventures that receive approval to further
develop their ideas at the Nidus Center.
A. incubator
B. intrapreneurial
C. enterprise zone
D. micropreneurial
Feedback: Incubator facilities offer new businesses in the critical stages of early development
low-cost offices, and in this case, laboratory space and shared business services.
213. Small businesses:
A. deal with similar management issues that large companies face.
B. deal with very different management issues due to the very different management
challenges experienced by small businesses.
C. do not seek government funding due to the fact that the federal government has made it
very clear that it must support large operations before small operations.
D. concern themselves with state-of-the-art information and accounting technology but
not employee relations due to their challenge to financially support employee benefits
programs.
214.
Chapter 06 – Entrepreneurship and Starting a Small Business
The Small Business Administration defines a small business as a firm that:
A. has fewer than 100 partners.
B. is independently owned but not dominant in its industry.
C. is dominant in its industry, but small in the number of workers it employs.
D. has annual receipts of more than a specified amount depending upon the industry.
215. Small businesses create about __________ percent of the new jobs in the United
States.
A. 5-10
B. 25-35
C. 60-80
D. 100
216. A business’s size is measured:
A. in relation to the number of competitors in its industry.
B. in relation to other firms in its industry.
C. in relation to the number of dominant competitors in its sector.
D. as small, if it participates in the services sector.
217. According to economist Bruce Kirchhoff, small business failures are:
A. lower than traditionally reported.
B. understated to keep small business creation enthusiasm.
C. accurate and alarming.
D. inconclusive.
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218. When comparing small businesses to their larger competitors, it is clear that:
A. bigger is always better.
B. small firms can always outperform big firms on a level playing field.
C. small firms often can offer more personalized customer services than big firms.
D. small firms are slower to respond to opportunities than are large firms.
219. Which of the following is not a reason stated for small business failure?
A. Managerial incompetence
B. Inadequate financial planning
C. Buying too little on credit and not being lenient enough with your credit paying
customers
D. Borrowing money without a plan of how and when you will repay the debt
Feedback: Figure 6.3 lists several reasons that small business fail, but they do not fail because
the owner did not buy enough on credit, nor do they fail because the owner was not lenient to
credit paying customers. They do fail due to managerial incompetence, inadequate financial
planning, and borrowing too much money without a plan for repayment.
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228. After graduation, Manny focused his attention on finding full time employment. He
has decided to narrow his job search to jobs with a major corporation. His job search
strategy:
A. makes sense because managerial skills are best developed by working for big firms.
B. is smart because major corporations represent the most important source of
employment growth in the United States.
C. indicates that Manny’s passion is to fulfill his dream of owning his own business.
D. will likely limit his job prospects since most new jobs are with small businesses.
Feedback: In recent years many major corporations have downsized. The text identifies
statistics that small businesses create 60-80 percent of new jobs and 80% of Americans find
their first jobs in small businesses.
229. After several years of working as a regional manager for a nationally known nonprofit,
Janelle landed a management position with an innovative small business. If she accepts
the job offer, she is likely to find that:
A. due to the significant differences in large and small firms, her previous experience will
be of little value in her new position.
B. the principles of management are much the same at large and small firms.
C. nonprofit organizations are motivated by their desire to help people and so financial
management is of little concern.
D. planning is more important to a nonprofit organization and less important to a small
business so she will need to adjust the time she spends on the planning function.
Feedback: The principles of managing a small business are very similar to those needed to
manage a large corporation or a nonprofit organization such as a charity.
230.
Chapter 06 – Entrepreneurship and Starting a Small Business
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As a result of corporate downsizing, Alex lost his job as an information systems manager
for a large telecommunications company. A bonafide computer geek in his own right,
Alex knew that several of his past company contacts often outsourced their computer
problems. He decided it was a good time to test the waters and see if he could secure
enough computer clients to be in business for himself. His success demonstrated that:
A. starting your own business can quickly provide security and profits.
B. people always tend to hire people they know from past associations.
C. the service sector is not an area of significant growth.
D. successful big businesses often create profitable opportunities for small businesses.
Feedback: As big businesses downsize, they often find that they do not always have the staff
they need and are increasingly contracting with small companies to temporarily fill their
needs through outsourcing. Big businesses don’t serve all the needs of the market. There is
plenty of room for small companies to make a profit filling those niches.
231.
Chapter 06 – Entrepreneurship and Starting a Small Business
After selling his software business for a sizeable profit, software engineer Gus Greene
decided to try something different. He would become a general contractor on a large
condo development in an upcoming area of Atlanta, Georgia. He invested several million
and then borrowed another $30 million (or 75% of the project cost) from a lending
institution. He based his borrowing risk on the assumption that the housing market would
continue to appreciate for several years to come. As the housing market began a free-fall
in early 2008 and continued into 2010, Gus saw his business crashing around him. Sales
were very meager and the bank wanted its money back. Which of the following statements
might best describe the reason Gus’ business failed?
A. Although Gus took some risk, it wasn’t enough. In business, it is “more risk, more
expected reward!”
B. The bank let Gus down. It should not have lent him that much money.
C. He should have designated himself as a passive investor. Therefore, his investment
would not be in jeopardy.
D. Gus went into the business with very little knowledge about the industry or the market.
Feedback: One reason that we experience business failure is that the management has little
experience in the industry, and/or knowledge of the market and market conditions.
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232. Jennifer, a talented photography major started a corporate photography business. She
planned to solicit jobs from large corporations who needed pictures for their annual
reports and websites. Although filling a unique niche, Jennifer needed the security that the
business would thrive and that she would earn enough to support herself and her child.
She also hoped that she would spend less time each day calling on potential clients and
more time doing the actual shoots. As her small business consultant, which of the
following suggestions would you have for Jennifer?
A. Jennifer should either take the risk necessary to develop a small business, or go to work
for someone else.
B. In the beginning, it’s doubtful that Jennifer will realize ease of entry, security, and good
profits. She needs to make plans in the event that one or more of these does not
materialize quickly.
C. Photographers can take pictures of a multitude of things. It’s probably not good strategy
to limit her business to only photographing the needs of large corporations.
D. Jennifer should definitely make time for herself each day so that she does not
experience burn-out. If she plans well, leaping into her own business will provide with her
several hours of unstructured time each day where she can perfect her craft even more.
Feedback: Prospective small business owners should be aware that it is unlikely that easy of
entry into a market, security, and reward will come all at once. At least in the beginning, if
you need security, you may have to pursue the business idea on the side. However, the trade-
off is that you will probably have to forego rapid rewards since you are spending only part of
your time in developing the business.
233.
Chapter 06 – Entrepreneurship and Starting a Small Business
Dr. Smiley White just graduated from dental school. He is hoping to acquire the necessary
funding to start his own dental practice. One advantage of this type of business is:
A. above average opportunity to borrow funds at a high interest rate
B. nearly unlimited growth potential
C. the service is individualized and not easily mass-produced
D. very low startup costs
Feedback: Healthcare businesses that require advanced technical degrees get licensed
generally have a good chance of success due to the individualized attention necessary to
perform the service.
234. Jayne started a small bakery in a resort town. She was certain she had the ideal
location, with plenty of hotels and inns within walking distance of her establishment. She
planned to use her grandmother’s recipes, using only the finest ingredients for her upscale
resort customers. During the first week of business, she was disappointed with lackluster
sales. When she drove past the regular breakfast style restaurants and even the
Starbucks™, she noticed they were rather bustling. Jayne most likely:
A. Did not publicize in the appropriate places.
B. Underestimated the competition.
C. Should have considered weather conditions before assuming that her business would be
vibrant.
D. Did not consider that small businesses never get the name recognition in resort towns
that larger businesses and franchises realize.
Feedback: Underestimating the amount of competition in your service area is a reason some
small businesses falter or fail.
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237.
Chapter 06 – Entrepreneurship and Starting a Small Business
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A small business management course at a community college may offer entrepreneurs an
opportunity to:
A. meet with experienced entrepreneurs and learn from their advice.
B. try out ideas on a computer simulation before risking real time and money.
C. listen to a qualified instructor solve all of the problems of small business owners.
D. be part of a group that will include angel investors.
238. One way to get into business is to buy an existing company. The value of the business
used to determine a fair purchase price is based on:
A. the prospects for business competition.
B. the current owner’s retirement plan.
C. the amount of government contracts the company has.
D. the value of what the business owns, what it earns, and what makes it unique.
239. Conversations with people who start their own business often reveal that:
A. many small business owners got their entrepreneurial idea from a previous job.
B. it is unusual for experienced corporate managers to start their own businesses.
C. the most successful entrepreneurs often start their business ventures right after high
school.
D. most small business owners begin with significant personal wealth.
240.
Chapter 06 – Entrepreneurship and Starting a Small Business
For prospective entrepreneurs, enrolling in an introduction to business or small business
management course offered through their community college:
A. is likely to be wasted time since college courses tend to be too theoretical.
B. can be helpful by offering them an opportunity to meet experienced small business
owners.
C. serves as supplementary information, only after starting their business venture.
D. seldom provides you with information to help make small business decisions.
Feedback: One of the best things about small business courses offered by community colleges
is that they can bring together entrepreneurs. The advice experienced entrepreneurs can share
with those just getting started can be invaluable.
241. Which of the following suggestions would an experienced business owner offer to
help someone who is thinking about starting a business venture?
A. Avoid the temptation of buying an existing firm. Build your own reputation and make
your own mistakes.
B. Gain experience by working for a successful businessperson.
C. Postpone consulting with an accountant or lawyer until you can afford their services.
D. Jump in quickly, before the market conditions change and opportunities are lost.
Feedback: Experienced entrepreneurs regularly state that there is no better way to learn small
business management than by working for a successful businessperson.
