Chapter 06 – Entrepreneurship and Starting a Small Business
Chris is an angel investor. This means that he:
A. invests his money in new businesses with potential for growth, hoping for a good
return on his investment if they go public.
B. creates business incubators for startup Web-based firms.
C. invests in non-profits that plan to change their status when they double in size.
D. he comes to the rescue of firms who default on their bank loans.
Feedback: Angel investors are private individuals who invest their own money in potentially
hot new companies before they go public.
287. Samantha recently applied for a microloan from the SBA. Although several criteria are
important, the Small Business Administration’s decision to grant or deny the loan will
largely depend upon
A. her credit history and the collateral she can offer.
B. her age, since microloans are only available to senior citizens.
C. her previous record of business success.
D. the soundness of her business plan, and her integrity.
Feedback: Microloans are awarded on the basis of the borrowers’ integrity and the soundness
of their business ideas.
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290. Ming’s three employees have been with her since she started Employment Recruiters,
Inc., nearly 10 years ago. As she contemplates the staffing for her new branch office, she
senses that none of these three are ready to manage the office. Faced with this difficult
situation, she should:
A. appoint one of the three anyway to show that she appreciates their loyalty and
commitment.
B. run the new branch herself and appoint one of the three to take over the original office.
C. hire a new employee to manage the office since this could be detrimental to the
business.
D. appoint all three to the new branch and let them run it using a “team” approach.
Feedback: Appointing unqualified people to management positions can be a serious business
mistake. As difficult as it may be, the entrepreneur best serves him/herself and the business if
they gradually recruit and groom employees for management positions.
291.
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After Kate graduated from college, her grandfather created a bookkeeping position for her
in his furniture retail business. Her older brother is in charge of purchasing inventory for
the stores, yet often the store runs out of popular furniture or become overstocked with
pieces that must be marked down to be sold. Kate is confident that her brother is more
suited for handling accounting and finance, and she has a pulse on what sells and how
much sells. Although she has spoken with her grandfather about it a couple of times, he
seems reluctant to change. As the founder of the business, he may:
A. find it difficult to remove family members from positions, even if it is not good for the
business.
B. find it difficult to retrain Kate for the job, and even though his business is losing
opportunities, he will stay the course.
C. he knows that profit margins have declined, and he doesn’t care.
D. have a bigger picture of things, and not feel the need to respond to a family member’s
request.
Feedback: Attitudes such as “You can’t fire family” or “You must hire them because they’re
family” can frustrate all employees, family and non-family. A business is best served if the
best workers are recruited and groomed for management positions.
292. As a small business owner, Tanika can’t afford to provide her employees with the high
wages and benefits offered by big corporations. One way to retain her employees and
create a high level of motivation would be to:
A. constantly communicate with them that “at least they have a job.”
B. adopt a policy of promoting workers who have been employed the longest.
C. empower her employees to develop their own ideas.
D. hire only family members, since they are more loyal.
Feedback: Many small firms motivate workers by creating challenging jobs and treating them
respectfully.
293.
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After retiring as a telecommunications executive, Chad joined SCORE. As a SCORE
counselor Chad will:
A. provide venture capital funds for aspiring small businesspeople.
B. visit high schools to advise students who are thinking about starting their own business.
C. help in the research and development of new products for entrepreneurs to market.
D. provide consulting services to small businesses for free.
Feedback: An important source of information for small businesses is the Service Corps of
Retired Executives (SCORE). This SBA office has volunteers from industry, trade
associations, and education who counsel small businesses at no cost (except for expenses).
294. The size of the world market is:
A. 500 million
B. 6.9 billion
C. 5 million
D. 10 trillion
295. According to the U.S. Department of Commerce, a ________ of small businesses
export their goods.
A. small percentage
B. large percentage
C. decreasing number
D. decreasing percentage
296.
Chapter 06 – Entrepreneurship and Starting a Small Business
Increased participation in small business exporting owes credit to _________.
A. political constituents who have made in-roads abroad
B. large events such as the Olympics that have brought attention to the potential in world
markets
C. technological advances such as the Internet and PayPal for safely fulfilling orders
D. partnerships that small businesses have formed with large businesses
297. One of the hurdles small businesses face when deciding to export is:
A. financing is often difficult to find.
B. overseas buyers prefer dealing with large corporations.
C. smaller companies must wait in line after large companies to qualify for tariffs.
D. American products are perceived as inferior.
298. One reason why many U.S. small businesses are not involved in exporting is:
A. there is a limited market for their products.
B. the government’s new homeland security programs limit opportunities for small
businesses.
C. many of these firms do not know how to get started.
D. U.S. products are perceived as inferior.
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306. Not everyone dreams of owning their own business. Identify and describe at least
three attributes of successful entrepreneurs.
307. What is an entrepreneurial team? What benefits does a team offer compared to an
individual entrepreneur?
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308. List and discuss at least three causes of small business failure.
309.
Chapter 06 – Entrepreneurship and Starting a Small Business
Discuss the benefits exporting offers to small businesses. Given these benefits, why don’t
more small firms sell in international markets?
310. Discuss several ways the Small Business Administration assists entrepreneurs.
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311. Given Peppy’s willingness to accept the risks of opening and running Peppy’s
Pizzazzeria, he is clearly an example of a(n):
A. arbitrageur.
B. intrapreneur.
C. gambler.
D. entrepreneur.
Feedback: An entrepreneur is someone who accepts the risks of starting and managing a
business.
312.
Chapter 06 – Entrepreneurship and Starting a Small Business
Peppy remains confident and enthusiastic even though his colleagues have poked fun at
his ideas. This shows that Peppy is:
A. self-disciplined.
B. self-nurturing.
C. self-generating.
D. auto-inspirational.
Feedback: People who are self-nurturing are able to believe in their own ideas, even when
others do not, and to re-fuel the fires of their own enthusiasm.
313. Peppy is confident that Peppy’s Pizzazzeria will be a success, but only if he has
enough money to do things right. Since Peppy has very little personal wealth, he knows he
must obtain financial assistance. In order prepare for meetings with bankers and potential
investors, Peppy should:
A. hire a public relations firm to develop promotional materials.
B. develop a business plan.
C. read a book on entrepreneurship.
D. create a partnership contract.
Feedback: A business plan, which provides a detailed description of the new business, is
mandatory when meeting with bankers and investors.
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314. Peppy has inquired about the possibility of obtaining a microloan from the SBA. This
type of loan is awarded primarily on the basis of the:
A. borrower’s integrity and the soundness of the business idea.
B. amount of collateral the borrower can pledge.
C. borrower’s credit history and record of previous business success.
D. age of the borrower, since only senior citizens qualify.
Feedback: A microloan from the SBA is awarded on the basis of the borrower’s integrity and
the soundness of the borrower’s business idea.
315. Peppy knows a lot about marketing, but not much about the legal or financial aspects
of starting a new business. He wants to consult with a lawyer and accountant, but his
budget is tight with all of the expenses involved in getting Peppy’s Pizzazzeria up and
running. Peppy should:
A. delay talking with a lawyer and accountant until the business has established a positive
cash flow for at least one year.
B. trust his basic instincts and try to put it together without the advice of lawyers and
accountants.
C. consult with a lawyer and accountant even though the budget is tight.
D. immediately hire full time lawyers and accountants for his staff.
Feedback: Entrepreneurs starting new businesses seldom can afford to have full time lawyers
and accountants as employees, but it is critical that they obtain professional legal and
accounting advice.
316.
Chapter 06 – Entrepreneurship and Starting a Small Business
Due to the fact that Peppy has worked in the field of marketing for a large corporation,
A. there is no need to consider an entrepreneurial team for start-up due to the fact that all
other management functions are served by marketing.
B. he can skip any marketing research steps that the SBA recommends.
C. he knows that the type of business he wants to start may be difficult to develop, but it
has a tremendous amount of security due to its promise of long term survival.
D. he plans to put together an entrepreneurial team of experts that will complement his
expertise.
Feedback: An entrepreneurial team is a group of experienced professionals from various
business disciplines. Team members bring different skills to the entrepreneurial venture. Their
skills usually complement each other.
317. As a former classmate of Peppy’s at the nearby university, you remind him what you
both learned in your small business management class several years ago:
A. restaurants are easy to start-up, but difficult to keep going.
B. restaurants are probably the most difficult type of business to start-up, due to the labor
intensive aspects of the business.
C. experts believe that restaurants have a high profit potential, due the fact that there is not
much direct competition.
D. restaurants are easy to start-up and have great profit potential.
Feedback: The easiest businesses to start (like restaurants) have the greatest potential for
failure. The easiest to keep alive are difficult to get started (like manufacturing).