Business Essentials, 12e (Ebert/Griffin)
Chapter 3 Entrepreneurship, New Ventures, and Business Ownership
1) Which entity is defined as independent and has little influence on its market?
A) Corporation
B) Joint venture
C) Small business
D) Partnership
E) Government agency
2) The U.S. Department of Commerce considers a business “small” if it has fewer than how
many employees?
A) 10
B) 50
C) 100
D) 500
E) 1,500
3) Which of the following industry groups is the fastest growing segment of small business
enterprise?
A) Manufacturing
B) Wholesaling
C) Retailing
D) Transportation
E) Services
4) Which of the following types of venue is favored by small-business retailers?
A) Superstore
B) Catalog showroom
C) Specialty shop
D) Department store
E) Studio workroom
5) Why is it difficult to compare relative job growth for different-sized businesses?
A) Sourcing up-to-date employment figures is difficult.
B) Many small businesses experience rapid unreported growth.
C) Spheres of influence overlap between the small and big business sectors.
D) Staff size of small businesses tends to change faster than staff size of big businesses.
E) It is hard to determine the cutoff point at which a small business becomes a large business.
6) Which of the following can assist a small business and helps to determine standards based on
industry?
A) The U.S. Department of Commerce
B) The Small Business Administration
C) A franchise
D) Venture capitalist
E) The Small Business Development Center
7) When an investor is not interested in owning their own business, why do they need to
understand entrepreneurship?
A) To understand why someone would want to work so hard for a small return
B) To determine the key characteristics of success
C) To understand how to convert a great idea to a profitable idea
D) To assess the market potential for up-and-coming businesses
E) To learn how to set up a business plan
8) In a small business, who determines prices for wholesalers and customers?
A) Customers
B) Franchise owners
C) Market forces
D) Small business administration
E) Small business owners
9) The contribution a small business on the U.S. economy is measured based on its impact to
which economic systems?
A) Bank loans, and contributions to big business
B) International trade, interest rates, and the service industry
C) Bank loans and innovation
D) The service industry, the stock market, and job creation
E) Job creation, contributions to big business, and innovation
10) The Small Business Administration is the government agency charged with owning small
businesses.
11) Small businesses produce more patents per employee than large patenting firms.
12) Most businesses in the United States are large businesses with more than 500 employees.
13) Major innovations are most likely to come from large corporations.
14) The Small Business Administration (SBA) may consider a business with as many as 1500
employees to be small as long as it has low annual revenues.
15) How is the U.S. economy affected by small businesses?
16) Which of the following BEST defines those who assume the risk of business ownership?
A) Entrepreneurs
B) Customers
C) Corporate partners
D) The Small Business Administration
E) Banks
17) What is the process of seeking business opportunities under conditions of risk?
A) Investment
B) Entrepreneurship
C) Leadership
D) Diversification
E) Growth
18) What term is most closely associated with enterprises that pursue entrepreneurship with the
goal of independence from working for someone else with a reasonable degree of financial
security?
A) Vision
B) New ventures
C) Small business
D) LLC
E) Dominance
19) When an entrepreneur has the goals of growth and expansion, with the vision of turning the
business into a large business, what term is used when referring to the business?
A) Visionary
B) Small Business
C) Diversification
D) Start-up
E) Expansionist
20) People who assume the risk of business ownership with a primary goal of growth and
expansion are called entrepreneurs.
21) Most successful entrepreneurs have a strong desire to be their own bosses.
22) Explain entrepreneurship and describe key entrepreneurial characteristics.
23) What does an entrepreneur use to summarize his or her business strategy for a proposed new
venture?
A) Success chart
B) Director’s guideline
C) Financial blueprint
D) Business plan
E) Balance sheet
24) What is considered to be a significant disadvantage of owning a franchise?
A) Start-up costs
B) Operational guidelines
C) Difficulty obtaining loans
D) Double taxation
E) Competition
25) What is the MOST important source of money for new business start-ups?
A) Banks
B) The SBA
C) Personal resources
D) Government grants
E) Venture capital
26) Who constitutes the membership of SCORE?
A) Retired executives
B) Venture capitalists
C) Company officers
D) Commercial lenders
E) Successful entrepreneurs
27) What does a start-up company need in order to estimate the required size of a plant, store, or
office, inventory levels, and size of staff?
A) Sales forecast
B) Tax estimate
C) Business objective
D) Stock options
E) Funding source
28) What is the major drawback of accepting venture capital?
A) Sharing company control
B) Having to pay high interest rates
C) Limiting expansion
D) Facing a short repayment period
E) Having to write proposals
29) Which of the following are groups of small investors seeking to make profits on companies
with rapid growth potential?
A) Community banks
B) Venture capital companies
C) Equity managers
D) Government securities dealers
E) Stock brokers
30) Which of the following is federally licensed to borrow money from the Small Business
Administration to invest in or lend to small businesses?
A) SCORE
B) SBICs
C) SBDC
D) FDIC
E) SEC
31) Which of the following helps entrepreneurs gain skills that are essential for running a
business?
A) ESOP
B) SBIC
C) SEC
D) LLC
E) SBA
32) Which distinctive competency must an entrepreneur identify when attempting to enter a
market segment that is not currently being exploited?
A) The ability to identify new markets
B) The ability to identify niche markets
C) The ability to differentiate themselves from others in the market
D) The ability to gauge prices to get the highest return without driving away customers
E) The ability to move quickly to take advantage of new opportunities
33) What is first mover advantage?
A) The concept that the first in the market will make the most money
B) The concept that a firm who exploits an opportunity before others has an advantage
C) The concept that there is an advantage in leaving a market when it becomes flooded
D) The concept that large organizations cannot take advantage of an opportunity as quickly as an
entrepreneur
E) The concept that there is more risk being first, but also more reward, if successful
34) What is the first step in becoming an entrepreneur?
A) Deciding to proceed
B) Formulating a business plan
C) Identifying distinctive competencies
D) Searching for capital to invest
E) Implementing plans and opening
35) Which key element of a business plan will determine inventory, size of space required, and
number of employees needed?
A) Financial planning
B) Comparing existing businesses
C) Sales forecasting
D) Setting goals and objectives
E) Identifying strategies and how to implement them
36) What is the advantage to starting a business from scratch instead of buying an existing
business?
A) There is a proven ability to attract customers.
B) Profit is generated sooner.
C) There is a stronger relationship with lenders and other stakeholders.
D) There are no ill-effects from the previous owner.
E) There is a clearer picture of what to expect in terms of start-up.
37) Where can a new business owner go to seek help and learn from other institutions and
disciplines?
A) The Service Corps of Retired Executives (SCORE)
B) The Small Business Development Center (SBDC)
C) Small business investment companies (SBICs)
D) Venture capitalist
E) Minority Enterprise Small Business Investment Companies (MESBICs)
38) A business plan demonstrates how an entrepreneur’s business strategy will be implemented.
39) Loans are the most important sources of money for new businesses.
40) Lending institutions are more likely to help finance the purchase of an existing business
rather than the start-up of a business from scratch.
41) A group of small investors who invest money in companies in return for partial ownership is
known as a small-business development company.
42) Small-business investment companies (SBICs) may be sponsored by the federal government.
43) The Small Business Development Center provides micro loan programs for members.
44) Discuss four sources of financing for starting up a small business.
45) Why might an entrepreneur wish to purchase an existing business rather than start one from
scratch?
46) What are the advantages and disadvantages for a franchisee?
47) What is the MOST effective way for an entrepreneur to become a competent manager?
A) Working alone
B) Relying on luck
C) Getting a college degree
D) Being open to opportunities
E) Working for a successful company first
48) Which of the following represents the fastest-growing segment of minority business
ownership?
A) African Americans
B) Asians
C) Hispanics
D) Pacific Islanders
E) Europeans
49) Which of the following is the MOST significant recent trend in small-business start-ups?
A) Entrepreneurs who cross over from big business
B) Increased opportunities for minorities
C) Increased opportunities for women
D) Emergence of e-commerce
E) Global economic downturn
50) Which of the following factors MOST contributes to small business failure?
A) Managerial incompetence or inexperience
B) Bad product design
C) Legal problems
D) Time spent raising capital
E) Personnel issues
51) A new business should have enough capital to operate at least how many months without
earning a profit?
A) 1
B) 2
C) 4
D) 6
E) 9
52) Franchisees may be obligated to contribute a percentage of sales to parent corporations.
53) The number of minority-owned businesses has decreased in recent years.
54) Many new businesses are started by people who have left big corporations.
55) The failure rate among small businesses has been increasing in recent years.
56) Neglect is a major factor that contributes to small business failure.
57) Which of the following types of businesses is MOST common in the United States?
A) Sole proprietorships
B) General partnerships
C) Cooperatives
D) Corporations
E) Limited partnerships
58) In which business sector are cooperatives still important?
A) Manufacturing
B) Automotive
C) Public utilities
D) Agriculture
E) Health care
59) Which of the following legal forms of business is owned and usually operated by a single
person who is responsible for its debts?
A) Cartel
B) Corporation
C) General partnership
D) Sole proprietorship
E) Limited partnership
60) What is a major drawback of sole proprietorships?
A) Short-term focus of shareholders
B) Work flexibility
C) Low start-up costs
D) Unlimited liability
E) Structured hours
61) Which of the following will force a sole proprietorship to be legally dissolved?
A) Sales exceed $1 million.
B) The partners reorganize the firm’s structure.
C) Earnings are less than $500,000.
D) The owner donates profits.
E) The owner dies.
62) What resources does a sole proprietorship primarily depend on?
A) The corporation
B) Foreign investors
C) Capital markets
D) Those of the owner
E) A committed clientele
63) What type of business has two or more owners who share in the operation of the firm and are
financially responsible for its debts?
A) Corporation
B) Partnership
C) Cooperative
D) Conglomerate
E) Nonprofit
64) What is the MOST common type of partnership?
A) Limited partnership
B) Corporate partnership
C) General partnership
D) Sole partnership
E) Cooperative partnership
65) Who invests all of the funds needed for a business but plays no role in its management?
A) Silent partner
B) Sole proprietor
C) General partner
D) Principal
E) Director
66) What is the MOST important advantage of general partnerships?
A) The unlimited liability of the partnership
B) The ability to grow with the addition of new talent and money
C) The ease of implementing an effective control system
D) The increased role of luck
E) The need for minority partners