Chapter 06 – Entrepreneurship and Starting a Small Business
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244. The Making Ethical Decisions box, “Going Down with the Ship” addresses a dilemma
worthy of consideration. It describes:
A. an unethical situation where the business owner’s need for capital causes him/her to
delay all payments to suppliers for 120 days, forcing several of his close business
relationships, out-of-business.
B. the slow death of a business and how important it is to delay payments, sell-off assets
and do everything possible to save a failing business except dismissing employees who
need their jobs for survival.
C. ethical decisions that need to be considered when employees leave a faltering business
to start their own, eventually competing against their previous employer.
D. the unethical and disloyal decision to leave your family business and start your own,
taking with you all the family business’s trade secrets.
Feedback: The box describes a situation where employees have ideas of how to make a
failing business model successful. They choose to leave the faltering company and go out on
their own. As competitors, do they seek to communicate directly with their previous
employer’s loyal customers; or, is this strategy unethical? The box asks the student to explore
the alternatives and the consequences.
245. Motivated by his desire to operate his own business, Nick considers purchasing an
existing business. As he carefully weighs this option, he is likely to find that:
A. very few owners of small businesses have any interest in selling.
B. his potential for success would greatly improve if he started his own new firm.
C. the value of an existing business is determined by what the business owns, what it
earns, and what makes it unique.
D. any entrepreneur willing to sell his/her business is experiencing serious financial
problems.
Feedback: The value of a firm is based on three things: what it owns, what it earns, and what
makes it unique.
246.
Chapter 06 – Entrepreneurship and Starting a Small Business
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Carrie, a student at Metropolitan Community College, dreams of starting her own
business. In an effort to learn as much as she can about small business management, she
talked to four friends who each offered their advice. Which of these suggestions is likely
to help Carrie the most?
A. The best way to learn about running a business is by getting hands-on experience. You
should quit school and put your dream into action.
B. Take courses related to small business management and look for a job with a successful
businessperson, preferably in your field of interest.
C. Since every business is unique, don’t worry about advice from others. Go to a bank, get
a business loan, and live your dream.
D. Starting and managing a small business requires little more than common sense. If your
idea is unique, hard work will guarantee your success.
Feedback: College courses will allow Carrie to interact with others interested in small
businesses, including experienced entrepreneurs, whose advice can be invaluable. Perhaps the
best way to learn about running a small business is to get some experience by serving as an
apprentice for a successful business.
247.
Chapter 06 – Entrepreneurship and Starting a Small Business
Greg benefited from his experience working for an established private company that
provided innovative lighting for large music venues. Although confident that he could
start his own lighting business, he had limited capital to buy the necessary equipment
needed to successfully compete with established companies. Which of the following
strategies would best help Greg achieve his goal of business ownership?
A. Begin by offering to take over management of his employer’s business, allowing the
owner to enjoy some leisure time
B. Consider working for a major corporation, live modestly, and save until he has
sufficient funds to start his business
C. Enroll in the closest university and apply for student loans
D. Open his business and trust that his work experience will bring him success even with
insufficient capital
Feedback: Small-business owners work long hours and rarely take vacations. After many
years, they may want to enjoy some leisure time, but feel trapped by the need to always be
there. This offers an opportunity for aspiring entrepreneurs to learn all about a particular
business and perhaps share in the profits while at the same time help the owner realize a better
work – life balance.
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253. Entrepreneurs seeking financial support from bankers and potential investors should:
A. be vague regarding their creative business plan to avoid having their idea stolen.
B. seek the bankers’ and investors’ assistance in developing their business plan.
C. create a detailed business plan to help the bankers and investors understand why this
business will succeed.
D. ask for a relatively small amount of capital initially, postponing a full funding request
until the investors better understand the business concept.
254. Bankers and potential investors are likely to read ___________ first.
A. the executive summary
B. the marketing plan
C. the qualifications of the management team
D. the analysis of the competition
255. After personal savings, the next largest source of capital for entrepreneurs is from:
A. large multinational banks.
B. the Small Business Administration.
C. state and local governments.
D. friends and family.
256.
Chapter 06 – Entrepreneurship and Starting a Small Business
________ are private individuals who invest their own money in potentially hot new
companies before these firms become larger, publicly traded companies.
A. Leveraged buyout specialists
B. Angel investors
C. Venture investors
D. Corporate raider investors
257. Due to the credit crunch during the recession of 2008, many small businesses found
that _____________ were more willing to lend money to smaller operations.
A. large corporations
B. credit card companies
C. international banks
D. smaller, community banks
258. A firm or individual providing financial capital to small businesses in exchange for an
ownership stake in the company is called a:
A. corporate raider.
B. takeover specialist.
C. financial capitalist.
D. venture capitalist.
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265. To be considered part of a market, an individual must:
A. be a registered buyer.
B. have made a purchase within the past 30 days.
C. know the names and addresses of two or more sellers.
D. have both a willingness to buy and the financial resources needed to buy.
266. Small business owners often struggle in attracting qualified workers. Which of the
following contributes to this problem?
A. Bosses in small firms tend to be disrespectful to the workers
B. Owners will not often listen to ideas suggested by the workers
C. Employee relations are especially poor in small firms
D. Many jobs in small firms have low pay and few benefits
267. Employees of small businesses often have greater job satisfaction than do employees
of larger firms. One reason for this difference in job satisfaction is that employees of small
businesses often:
A. earn higher wages.
B. receive more vacation time.
C. get more respect from their bosses.
D. have more job security and better fringe benefits.
268.
Chapter 06 – Entrepreneurship and Starting a Small Business
A new business that sets up a(n) _____________ from the start is saving itself time and
grief later.
A. angel investment network
B. good accounting system
C. detailed supplier network
D. vertical marketing system
269. Small businesses must seek advice from outside experts. In order to put together
official documents such as leases, contracts, and partnership agreements, it is important to
seek the advice of __________.
A. a friend who has already started a business
B. a competitor in a similar business
C. an attorney
D. a marketing expert
270. A(n) ____________ is a valuable source of information regarding techniques to
reduce a firm’s exposure to risk.
A. insurance agent
B. accountant
C. liability assessor
D. union business agent