Some cities have put restrictions or outright bans on the use of outdoor ads.
Usually, trade credit from vendors is expensive, and small business owners should
avoid it.
A straight business sale may be worst for a seller who wants to step down and turn over
the reins of the company to someone else.
Buildings under three stories high or with less than 3,000 square feet per floor do not
have to have elevators.
When a government imposes a quota on a particular imported good, the effect is to raise
the price customers must pay for that good.
If two parties exchange promises to form a contract, valuable consideration exists.
Typically, slow payers represent great risk to many small businesses.
The wise small business owner should strive to stretch out his/her payables as long as
possible without damaging the company’s credit rating.
Focus strategies, unlike Porter’s other generic strategies, are without risk because they
tend to combine elements of all three strategies.
When asked what they want from a business they deal with, most customers say
convenience.
It is possible for a small business to win a lawsuit but still go out of business due to the
costs of the suit.
Many entrepreneurs discover they work fewer hours (less than 45 hours a week) as new
business owners than they did as middle managers in large corporations.
ESOPs are simply another version of LBOs, used to buy companies from their owners.
Odd pricing is a form of psychological pricing.
One of the first and most fundamental decisions an entrepreneur faces is choosing a
form of ownership.
The small firm’s net sales to total assets ratio measures how many dollars in sales the
business makes for every dollar of working capital.
Home-based businesses represent nearly 50% of all newly created small businesses.
Truly customer-oriented companies seek to go beyond customer satisfaction, striving
for customer astonishment.
Kant’s categorical imperative advises managers to take only those actions that a
disinterested panel of professional colleagues would view as proper.
The goal of countertrading is to help offset the capital drain from the foreign country’s
purchases.
A cash budget is based on the accrual method of accounting.
Qualifying for merchant status is relatively easy for most small businesses.
In today’s competitive marketplace, an entrepreneur should not expect that every vendor
be able to demonstrate that they operate a continuous improvement process.
Nearly all business owners think that their heirs will need to sell part or all of the
business to satisfy estate taxes.
47% of small business owners rely on banks as their source of start-up capital.
Hiring both part-time and freelancers rather than full-time workers saves on both the
cost of salaries and employee benefits.
If a banker requires the current loan on a business to be paid at the time of the sale to
the new owner, the banker will require a due-on-sale clause in the agreement.
Both a buyer and a seller cannot have an insurable interest in the same goods.
When a franchisee buys a franchise, he/she is purchasing the expertise and the business
experience of the franchisor.
Revolving loan funds (RLFs) combine private and public funds to make loans to small
businesses, often at below-market interest rates.
The executive summary should contain which of the following information?
A) A brief statement of the financial needs of the business and what the money would
be used for
B) A short description of potential buyers
C) A brief history of the business
D) A complete description of your business
The American Collector’s Association has found that only about ________ of accounts
over 90 days delinquent will be paid voluntarily.
A) 5%
B) 10%
C) 2%
D) 13%
Pareto’s Law (also called the 80/20 Rule), states that:
A) 20 percent of a company’s quality problems comes from just 80 percent of all
causes.
B) 80 percent of accounts receivable comes from 20 percent of customers.
C) 80 percent of a company’s quality problems arise from just 20 percent of all causes.
D) 20 percent of a company’s revenue comes from just 80 percent of all customers.
Mary and Ted are discussing starting a new business and are asking themselves a series
of questions like; “What is the worst that could happen if we fail?” “How likely is that
to happen?” They are assessing which potential drawback of small business ownership?
A) The long hours and hard work involved
B) The risk of losing their entire investment
C) The lower quality of life they’ll experience
D) The uncertainty of their income
An interstate trucking firm would be most concerned with which selection criterion at
the state level?
A) Business climate
B) Proximity to markets
C) Proximity to raw materials
D) Wage rates
The most popular form of business ownership is the:
A) sole proprietorship.
B) partnership.
C) corporation.
D) S-corporation.
Effective management of inventory begins with:
A) developing an accurate sales forecast.
B) setting realistic inventory turnover objectives.
C) determining what level of safety stock to maintain.
D) establishing purchasing procedures.
When taking a company public, investment bankers look for:
A) a leading position in a stable market.
B) 3 to 5 years of audited financial statements.
C) a strong record of revenues.
D) a moderate growth rate.
An above-average inventory turnover indicates that the business:
A) has an illiquid inventory.
B) is healthy, with a salable inventory.
C) needs to review its pricing policies.
D) has below-average performance and is facing bankruptcy if not corrected quickly.
Entrepreneurs seem to be characterized by:
A) a desire for money.
B) an inability to organize but strong conceptual skills.
C) a desire to work alone because of weak management skills and a need for control.
D) a high energy level.
The process of gathering information about the company, valuing the company, and
performing a detailed review of all records, agreements, and compliance is called:
A) a letter of intent.
B) nondisclosure.
C) valuation.
D) due diligence.
By engaging in ________, entrepreneurs can support and promote a charity and raise
their company’s visibility at the same time.
A) relationship marketing
B) advertising
C) personal selling
D) cause marketing
We Love Pets manufactures a pet carrier that is known to suddenly come apart if the pet
shakes itself at the same time the owner picks the carrier up. It seems the combination
of actions make the hinge pins fall out. WLP could be liable under:
A) negligent manufacturing.
B) failure to warn.
C) implied warranty to perform.
D) negligent design.
The grapevine in most organizations is:
A) almost always incorrect in its content.
B) nonexistent in organizations where management communicates face to face and by
memo.
C) the first place employees hear about major organizational changes.
D) generally only used by troublemakers and gossips within the organization.
Most often, small business owners ________their goods and services, believing that
________ prices are the only way they can achieve a competitive advantage.
A) over price; high
B) under price; low
C) over price; low
D) under price; high
The most common form of secured credit is:
A) accounts receivable financing.
B) inventory financing.
C) floor planning.
D) discounted installment contracts.
________ thinking is narrowly focused and limited by the status quo.
A) Flexible
B) Intuitive
C) Creative
D) Myopic
A company’s AIDS policy should include:
A) an open communication policy where all employees will be informed if someone
becomes ill.
B) a continuation of employee benefits as any other employee would have.
C) process for dismissal of the affected employee.
D) All of these
Uniform delivered pricing is a variation of:
A) opportunistic pricing.
B) leader pricing.
C) geographic pricing.
D) multiple pricing.
Radio:
A) is the one medium that customers spend the most time paying attention to.
B) can reach nearly any target market.
C) is very susceptible to “zapping.”
D) is the most expensive advertising medium in terms of relative costs.
If the small business owner wants to demonstrate that the company is serious about its
responsibility toward employees, he/she should:
A) focus on creating the maximum return on investment.
B) listen to employees and involve them in decision making.
C) begin a reengineering effort to improve productivity.
D) decrease the cultural diversity in his/her company.
In general, in negotiations and acquisitions of a business, the buyer seeks to:
A) get the business at the lowest price possible.
B) negotiate favorable payment terms, preferably over time.
C) Both A and B
D) None of the above
Bill and Henry are discussing the volume of cash that has been coming into and going
out of their business during the accounting period. They are discussing:
A) profit.
B) net income.
C) accounts receivable and payable.
D) cash flow.
To avoid myopic thinking, creative companies include ________ in creative problem
solving or idea generation sessions.
A) nonexperts
B) experts
C) industry specialists
D) industry generalists
Effective leaders exhibit certain behaviors. An example would be:
A) behave with integrity in all situations and at all times.
B) look into future.
C) communicate with employees.
D) All of the above
Something of legal value that the parties exchange as part of a bargain.
A) Contract
B) Legality
C) Agreement
D) Consideration
When filing with the SEC, the initial registration statement:
A) prohibits a “road show.”
B) is filed without share price, proceeds, or commissions listed.
C) signals the time to sign the formal underwriting agreement.
D) is generally accepted without corrections by the SEC.
Joe is examining the percentage of total funds in a business provided by its creditors.
He is working with the ________ ratio.
A) current
B) quick
C) debt
D) turnover
Tom was a financial consultant who liked to work with his hands, especially in making
furniture. He quit his rat race financial job to start a small custom furniture business.
After struggling for several years, he closed it and went back to financial services. Tom
discovered that there was a big difference between making furniture for himself and
running a customer furniture manufacturing business. Tom’s business failed because of:
A) uncontrolled growth.
B) poor financial control.
C) his lack of experience.
D) an inability to access start-up capital.
Jane is arguing with Joan about how much cash on hand their small retail outlet needs
as they prepare their cash budget. Jane feels that with the Christmas season coming up,
their busiest time, they need more cash handy. Joan feels they don’t because their sales
volume will be up significantly. Jane and Joan are discussing which step of the cash
budgeting process?
A) Determining an adequate minimum cash balance
B) Forecasting sales
C) Forecasting cash receipts
D) Forecasting cash disbursements
When presenting the business plan it is important to:
A) show enthusiasm for the venture.
B) use visual aids.
C) avoid technical jargon.
D) do all of these.
Most “angel” investments:
A) are for growth or fixed capital.
B) are for between $10,000 and $2,000,000.
C) come from international or foreign investors.
D) are seeking a high and quick return on their investment.
A(n) ________ attempts to minimize taxes on a family business passed from one
generation to the next by creating two classes of stockone for the parents (preferred
stock), whose value is locked in, and another for the children (common stock), whose
value reflects the market value of the business.
A) grantor-retained annuity trust
B) estate freeze
C) trust
D) buy/sell agreement
The fastest growth rate in franchises is among:
A) traditional areas of franchising, where costs are from $2,500 to $250,000.
B) innovative, nontraditional franchisers with fresh approaches.
C) gas stations and fast foods.
D) hotel/motels and retail outlets.