The Uniform Franchise Disclosure Document (UFDD) is a document that every
franchisor is required by law to give prospective franchisees before any offer or sale of
a franchise.
Because the heart of the cash budget is the sales forecast, the cash budget is only as
accurate as the sales forecast on which it is based.
A quick ratio of more than 1:1 suggests that a small company is overly dependent on
inventory and future sales to satisfy its short-term debt.
An idea assessment answers the question, “Should we proceed with this business idea?”
Kant’s categorical imperative states that one should act in such a way that the action
taken under the circumstances could be a universal law or rule of behavior.
Most export merchants buy goods, often competing lines, from many domestic
companies and then sell them in foreign markets.
Launching an e-business is very different from launching a traditional off-line company.
A major advantage of a franchise contract is the national advertising campaign that
most franchisors provide free of charge for their franchisees.
Liquidity ratios help a business owner evaluate a small company’s performance and
indicate how effectively it employs its resources.
Entrepreneurs need to rely on left-brain thinking to generate innovative product,
service, or business ideas and use right-brain thinking to judge the market potential of
the ideas they generate.
A common cause of business failures is that owners neglect to forecast how much cash
their companies will need until they reach the point of generating positive cash flow.
One disadvantage of total quality management (TQM) is that its principles apply only
to manufacturers.
Ratio analysis is a useful managerial tool that can help business owners maintain
financial control over their businesses, but it is of no use to a business owner trying to
obtain a bank loan.
One of the advantages of a partnership over a proprietorship is the increased sources of
capital and credit it offers.
Which of the following characteristics for selecting a city would be of greatest interest
to a retail store selling fine china and collectibles?
A) Public services
B) Transportation
C) Zoning
D) Population characteristics
A corporation receives its charter from ________.
A) the federal government
B) the state
C) the board of directors
D) the stockholders
The Web is one of the most efficient ways of reaching both new and existing customers
and when properly promoted, a Web site can ________.
A) reduce a company’s cost of generating sales leads
B) be an affordable way to reach customers beyond your geographic area
C) provide an efficient method to provide information about a company and their
products
D) All of the above
Foreign distributors offer small businesses which of the following benefits?
A) A detailed knowledge of the local markets in which they sell.
B) The ability to cover a foreign sales territory thoroughly.
C) The ability to handle all of the marketing, distribution, and service functions in
foreign markets.
D) All of the above
An entrepreneurial ‘secret” for creating value in the marketplace is ________.
A) applying creativity and innovation to solve problems
B) creating new products and services
C) learning by doing
D) applying lessons learned from history
A ________ center combines the drawing strength of a large regional mall with the
convenience of a neighborhood shopping center.
A) neighborhood
B) power
C) theme or festival
D) lifestyle
A ________ is a document an exporter draws on a foreign buyer, requiring the buyer to
pay the face amount, either on sight or on a specified date, once the goods are shipped.
A) bank draft
B) letter of credit
C) repurchase agreement
D) trade acceptance
________ act as international sales representatives in a limited number of markets for
various noncompeting domestic companies, typically operating on a commission basis.
A) Manufacturers’ export agents
B) Export merchants
C) Resident buying offices
D) Foreign distributors
Which of the following statements concerning financing the purchase of an existing
business is true?
A) It is usually more difficult than securing financing for a start-up business.
B) Usually, the business seller is not a good source of financing.
C) The buyer should be able to make the payments on the loans out of the company’s
cash flow.
D) All of the above
To which governmental office must applications for patents be submitted?
A) The U.S. Patent and Trademark Office
B) The individual State Offices of Patent Development
C) The Federal Trade Commission
D) The Securities and Exchange Commission
Zoning is a system for mixing types of business and industrial activities to make
maximum efficient use of the area.
The job ________ design strategy adds more tasks to a job to broaden its scope.
A) simplification
B) enlargement
C) enrichment
D) rotation
Which form of ownership generally has the least ability to accumulate capital?
A) Partnership
B) Sole proprietorship
C) Corporation
D) S corporation
According to the American Collector’s Association, only ________ percent of accounts
more than 90 days delinquent will be paid voluntarily.
A) 5
B) 20
C) 45
D) 65
A company pledging its inventory, accounts receivables, or fixtures as collateral for a
loan is using ________.
A) floor planning
B) asset-based financing
C) trade credit
D) margin loan
Mini-Case 5-1: Finding a Competitive Advantage
Copreneurs Ed and Yolanda recently opened a vintage used car lot called Cherry Lane.
They sell antique and collectible cars on consignment for the owners at a fee of 30
percent of the selling price. The price is further reduced by 10 percent if a particular car
is not sold within the first 30 days. One of the first customers convinced Yolanda that
this was the only fair thing to do, and in an effort to provide something for “the cost
conscious buyer,” she provided what she thought was excellent customer service and
implemented the idea.
Ed and Yolanda feel Cherry Lane has an ideal location. It is located adjacent to the
city’s baseball stadium, alongside the freeway in the center of all the other car
dealerships. Although Cherry Lane has significant foot traffic, most people never make
offers to buy.
In an effort to increase sales, Ed and Yolanda are working on a new marketing strategy
that they believe should be quite different from the ‘shotgun” approach they had been
using over the last few months.
What is a competitive advantage? Does Cherry Lane have one? If so, what is it?
A business should provide the owner with a reasonable rate of return based upon
________.
A) the time and money invested in the business
B) industry averages
C) the capital borrowed from the bank
D) an acceptable annual salary
A leadership style in which a leader takes on the role of a servant first and the role of a
leader second is referred to as a ________ leader.
A) servant
B) passive
C) managerial
D) subservient
Generally, an industry is more attractive when companies in the industry have
________ switching costs to go from one supplier to another.
A) high
B) moderate
C) significant
D) low
The competitive test that a business plan must pass to attract financing from lenders and
investors involves proving ________.
A) that the company can gain a competitive advantage over its key competitors
B) that the business venture will provide lenders and investors a high probability of
repayment or an attractive rate of return
C) that a market for the company’s product or service actually does exist and that the
company can actually build it for the cost estimates included in the plan
D) that the industry in which the business will compete is growing faster than the
overall economy and has room for more competitors
Mini-Case 11-7: Sharps and Flats
Anthony Gray has been interested in music since he was old enough to sit at the piano.
He literally grew up with music, and he used his talent to earn his way through college.
Anthony has grown tired of his job at a large music house in Houston and is seriously
considering moving back to his hometown in Massachusetts to open his own small
music shop. In researching this venture, Anthony notices that he must include a
projected income statement in his loan application. Use the following statistics from
Robert Morris Associates’ Annual Statement Studies to answer the following
question(s).
Using Anthony’s target income of $23,000, construct a pro forma income statement for
Anthony’s proposed music shop.
You have been asked to explain how rivalry among companies competing in the
industry affects the attractiveness of the industry. How would you explain it?
Explain the role that commercial banks play in financing small businesses. What kinds
of loans do banks offer small companies?
What advantages do taking on a partner in a joint venture offer a small business in an
international business opportunity? Disadvantages?
Venture capital companies are an important source of equity funding for small
businesses. Discuss their policies, ownership control, and investment preferences
regarding funding small businesses.