53) Gaston knows he cannot be physically present at his new restaurant every hour it is open, so
he has decided to share management responsibility and profits equally with two others. Gaston
has formed a ________.
A) joint proprietorship
B) limited liability corporation
C) limited liability partnership
D) general partnership
54) Geneva needs additional capital to launch her business but does not want to share
management responsibility with partners. Neither does she want to pay the high taxes often
assessed on businesses. Her best option may be a(n) ________.
A) sole proprietorship
B) limited liability partnership
C) C corporation
D) S corporation
55) Hortense and a few of her family members want to launch a new venture but don’t want to
place their personal assets at risk. For this privilege they are willing to incur the higher taxes
associated with the ________ form of organization.
A) limited liability partnership
B) limited liability company
C) S corporation
D) C corporation
56) Hobart is at the point in his new venture that he needs to hire more people. He comes to you
for advice on the type of candidate he should seek. You tell him, “________.”
A) Find someone who can be groomed to take over the business when you are ready to retire
B) Offer each candidate a stake in the business and hire the one who accepts the offer
C) The important thing is to get people on board whose strengths complement your weaknesses
D) Look for people who are exceptionally capable and fit well with the entrepreneurial culture
57) Ignacio knows he cannot pay what the “big boys” pay, so he decides instead to emphasize the
________ his company offers.
A) health insurance benefits
B) retirement savings plan
C) learning opportunities and recognition
D) performance incentives
58) As her business grew and competitors entered the market, Inez knew she had to step up her
game. What had worked well when the company was brand new no longer enabled her company
to meet its goals. Inez realizes she must become a(n) ________ if her company is to continue to
grow and prosper.
A) change agent
B) better manager
C) visionary
D) charismatic leader
59) In a sole proprietorship, the founder keeps all the profits but must share management
responsibility with investors.
60) A sole proprietor’s personal assets are protected from any liability associated with the
business.
61) The minimum number of partners in a general partnership is three: two general partners and
at least one limited partner.
62) In a general partnership, all partners assume full responsibility for all debts of the business.
63) Limited liability partners have the right to inspect the business and make copies of company
records.
64) A C corporation can have no more than 50 owners who agree not to sell their stock.
65) One advantage of the C corporation is that the owners have complete protection from
liability related to business activity.
66) The profits of an S corporation are taxed as a partnership.
67) The limited liability company has advantages for the new venture that neither the C or S
corporation do.
68) In a limited liability company, profits are taxed as a partnership.
69) As a company grows, an informal, loose, and flexible atmosphere may not work well.
70) By the time the new company has grown to the point that the founder can no longer make all
the decisions, s/he is typically glad to hand off some of that responsibility.
71) The ability of small firms to successfully recruit appropriate employees is one of the most
important factors influencing organizational success.
72) Corporations look for candidates who match job requirements; entrepreneurs look for
candidates to fill skills gaps.
73) Because small businesses cannot usually compete with the salaries offered by large
corporations, they tend to focus on psychological rewards for their employees.
74) Organizations that support innovation tend to be smaller with fewer rules and resources.
75) Identify each of the six legal forms of organizations. Discuss the responsibilities of owners,
their liability, and the tax treatment of profits of each form.
76) Explain why it is difficult for a young business to recruit and retain employees.
77) Which one of the many personality traits of entrepreneurs appeared on two separate lists?
A) abundance of self-confidence
B) high energy level
C) persistent problem solver
D) moderate risk taker
78) “There is absolutely no reason why I, the founder of this enterprise, should be making the
choice of floor cleaner. The housekeepers know what works and what doesn’t. Let them choose.”
So said Juan, owner of Miller’s Office Cleaning. Juan’s comment indicates he believes in
________.
A) employee empowerment
B) self-direction
C) autonomy
D) problem solving
79) Juanita gathers her employees to solicit their opinions regarding big issues facing the young
business. After considering their input, Juanita makes the final decision. Juanita is engaging in
________.
A) employee empowerment
B) democratic management
C) participative management
D) autocratic management
80) Karl and his top managers set goals for the organization, then each department sets
supporting goals with their employees, who then set their personal performance goals. These
non-managerial employees are allowed to pursue their goals, within certain guidelines, using
their best judgement, knowledge, and skills. These employees are ________.
A) called delegates
B) fully empowered
C) being taken advantage of
D) knowledge workers
81) Sam Walton knew exactly how he wanted his business to operate. He saw WalMart as the
cost leader in the discount department store industry. He took every opportunity to emphasize his
corporate goals to his employees and became literally a cheerleader at store meetings. We would
consider Sam Walton to be a(n) ________ leader.
A) autocratic
B) charismatic
C) transactional
D) visionary
82) Karlee, a production worker, is working on a project with employees from accounting,
purchasing, engineering, and customer service. Karlee is part of a ________ team.
A) product launch
B) self-directed
C) cross-functional team
D) process improvement
83) The risk propensity is higher for entrepreneurs concerned with providing a family income
than for those whose primary goal is growth of the business.
84) Employee empowerment is an important motivational tool for entrepreneurs to use.
85) A first step into employee empowerment is to allow employees to vote on issues that pertain
to them.
86) Fully empowering employees means releasing budgetary control to them.
87) When fully empowered, employees enjoy a greater variety of work that is more interesting
and challenging.
88) According to Max DePree, leadership combines the unpredictability of the future with the
gifts of the individuals.
89) Having a visionary leader early in its history is good for a company.
90) Using employees in teams might provide some benefits to the organization but it is time-
consuming and costly; the costs outweigh the benefits.
91) In what ways does empowering employees benefit the entrepreneurial venture? How can
employees be empowered?
92) Lucien has just received an offer from a major retailer wanting to carry his products. But
Lucien doesn’t have enough production capacity to keep up with their demand. A question
common to entrepreneurs in his situation is “________”
A) Will my board of directors be supportive of this opportunity?
B) Will my existing customers be hurt if I accept this offer?
C) What are my competitors doing?
D) Where can I get the money I need for expansion?
93) Lucille’s venture is finally taking off. To make sure the business grows as she would like,
Lucille should consider ________.
A) hiring a consultant to help with major decisions
B) enticing management candidates away from her competitors
C) investing in extensive training for her employees
D) stepping down as CEO in favor of someone with more experience
94) When Michele had only three employees, she performed most of the records-keeping tasks
herself and kept a general idea of finances in her head. Now that her business has expanded, she
is having money problems. What should Michele do?
A) Reach out to the local business development organization for assistance.
B) Create and follow a set of financial controls.
C) Take a course in financial accounting at the local college.
D) Relinquish some of her other duties so she can focus on the money end of the business.
95) Michael has a sense that his business isn’t doing as well as it should but he isn’t sure what to
look for to confirm his suspicions. Which one of the following could be a signal that the business
is in trouble?
A) difficulty finding skilled candidates
B) tolerance of work incompetence
C) more work than the business can handle
D) long lead times for new orders
96) Ned has built his entrepreneurial venture into a successful business. Part of his original plan
was to build the business then sell it to another company that could take it to the next level of
success. In other words, Ned intends to ________ his business.
A) harvest
B) reap
C) relinquish
D) co-opt
97) Nadine is ready to retire after many years building her business. Another entrepreneur has
indicated an interest in buying it so Nadine must set a selling price. Which one of the methods
below should she use?
A) the selling price of a similarly situated business
B) the sum of all taxable incomes for all the years she was in business
C) the sum of all assets currently on the balance sheet less all liabilities (outstanding debt)
D) the amount of retirement savings Nadine needs
98) Finding people to support growth is an important issue for entrepreneurs.
99) Although important at every stage of the business life cycle, controls are especially important
during periods of growth.
100) When the entrepreneur is ready to exit the business, s/he should personally determine the
business value.
101) Why is it advisable for entrepreneurs to plan for growth? How can they do this?
102) How can downturns be managed successfully?