The five stages of the creative process include preparation, incubation, insight,
evaluation, and elaboration.
Answer:
Prior entrepreneurial experience, relevant industry experience, and networking are
attributes that strengthen the chances of a founder’s success.
Answer:
It is more likely that an entrepreneur will get a new business idea through a strong-tie
than a weak-tie relationship.
Answer:
Almost all firms partner with others to make their business models work.
Answer:
All businesses have the potential to be aggressive growth firms.
Answer:
An idea is a favorable set of circumstances that creates a need for a new product,
service, or business.
Answer:
A trademark consisting primarily of a surname, such as Jones or Smith, is typically not
protectable.
Answer:
Similar to a board of directors, an advisory board possesses legal responsibility for the
firm.
Answer:
Virtually all studies have concluded that firm-specific factors are more important than
industry-specific factors in terms of firm profitability.
Answer:
An individual who is team oriented is typically a good candidate to be a franchisee.
Answer:
A tagline is a phrase that a business uses to reinforce its position in the marketplace.
Answer:
Established firms with an entrepreneurial emphasis are proactive, innovative, and
risk-taking.
Answer:
The primary opportunity available to firms in fragmented industries is consolidation.
The most common way to do this is through a geographic roll-up strategy, in which one
firm starts acquiring similar firms that are located in different geographic areas.
Answer:
The federal Economic Espionage Act, passed in 1996, criminalizes the theft of trade
secrets.
Answer:
In a business format franchise, the franchisor provides a formula for doing business to
the franchisee along with training, advertising, and other forms of assistance.
Answer:
Business format franchises typically allow franchisees substantial flexibility in how
they run their individual franchise units.
Answer:
The pro forma income statement shows the projected flow of cash into and out of the
company during a specified period.
Answer:
Most entrepreneurial firms try to grow and see it as an important part of their ability to
remain successful.
Answer:
The passion that entrepreneurs have typically stems from the potential financial rewards
that are associated with an entrepreneurial career.
Answer:
Sustained growth is defined as growth in both revenues and employees over an
extended period of time.
Answer:
Patents, trademarks, copyrights, and licenses are the four key forms of intellectual
property.
Answer:
A spin-in occurs when a large company divests itself of one of its smaller divisions and
the division becomes an independent company.
Answer:
A competitor analysis, which is a detailed analysis of a firm’s competitors, should be
included in the market analysis section of its business plan.
Answer:
The proper sequence in selecting a target market and positioning strategy is (1) craft a
unique positioning strategy, (2) select a target market, and (3) segment the market.
Answer:
Entrepreneurs are motivated primarily by money.
Answer:
According to Penrose, entrepreneurial services generate new market, product, and
service ideas.
Answer:
The term “window of opportunity” is a metaphor describing the time period in which a
firm can realistically raise money.
Answer:
The first step in a competitor analysis is to determine who the competition is.
Answer:
The four main characteristics of successful entrepreneurs are: passion for the business,
execution intelligence, product/customer focus, and tenacity despite failure.
Answer:
The pro forma financial statements are the heart of the operations section of a business
plan.
Answer:
There are three common sources of “personal” financing for a startup firm: personal
funds, friends and family, and bootstrapping.
Answer:
New product development involves designing, producing, and selling new products as a
means of increasing firm revenues and profitability.
Answer:
Certification marks are similar to ordinary trademarks, but they are used to identify the
services or intangible activities of a business rather than a business’s physical product.
Answer:
The Google AdWords program allows advertisers to buy ads that will be shown on
other Web sites instead of Google’s Home Page.
Answer:
A business format franchise typically connects a single manufacturer with a network of
dealers or distributors.
Answer:
Founding teams that have worked together before, as opposed to teams that are working
together for the first time, have an edge.
Answer:
Paul Hempken just spoke to an investor, who is interested in his business idea. Paul
offered to send the investor a copy of his full business plan, but the investor asked for a
short overview of the business plan instead. What portion of his business plan should
Paul send the investor?
A) marketing plan
B) executive summary
C) elevator pitch
D) company description
E) operations plan
Answer:
A firm’s ________ reflects the results of its operations over a specified period and
shows whether it is making a profit or is experiencing a loss.
A) statement of cash flows
B) income statement
C) forecast
D) balance sheet
E) operating budget
Answer:
A firm’s profit margin, or return on sales, is computed by dividing:
A) net income by net sales
B) gross profit by net sales
C) net income by gross profit
D) net income by cost of sales
E) operating income by gross profit
Answer:
________ growth strategies rely on establishing relationships with third parties, such as
mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising.
A) External
B) Domestic
C) Outside
D) Distant
E) Peripheral
Answer:
________ reflect past performance and are usually prepared on a quarterly and annual
basis.
A) Chronological financial statements
B) Ad-hoc financial statements
C) Historical financial statements
D) Concurrent financial statements
E) Pro forma financial statements
Answer:
Betty Collins has been a Ford dealer for the past 20 years. Betty owns a:
A) business format franchise
B) product and trademark franchise
C) business design franchise
D) product plus franchise
E) product and business format franchise
Answer:
Which of the following is true regarding common stock and preferred stock?
A) Preferred stock is rarely issued.
B) Common stock is rarely issued.
C) Common stock is issued more broadly than preferred stock.
D) Preferred stock is issued more broadly than common stock.
E) Common stock and preferred stock are issued in the same amount.
Answer:
Windspire is starting a firm in the small-scale wind-generated power industry. This
industry is still so new that no standard operating procedures have been developed.
Small-scale wind-generated power is an example of a(n) ________ industry.
A) mature
B) declining
C) emerging
D) global
E) fragmented
Answer:
A form of intellectual property protection that grants to the owner of a work of
authorship the legal right to determine how the work is used and to obtain the economic
benefits from the work is referred to as a(n):
A) assurance document
B) patent
C) trade secret
D) brand
E) copyright
Answer:
The Savvy Entrepreneurial Firm feature in Chapter 15 focuses on Wahoo’s Fish Taco, a
franchise organization that offers Mexican food mixed with Brazilian and Asian flavors.
According to the feature, one of things the founders of Wahoo did that has contributed
to its success is:
A) elect to make Wahoo’s a relatively slow growth system, focusing on branding and
service quality rather than rapid growth
B) elect to make Wahoo’s a nationwide system, operating in all 50 states
C) elect to make Wahoo’s an extremely affordable system to buy into, with a $9,000
original franchise fee and an ongoing royalty of only 2 1/2 percent.
D) elect to make Wahoo’s a niche franchise that is only available in theme parks and
food courts of malls
E) elect to make Wahoo’s a fast growth system to establish a clear first-mover
advantage in its niche
Answer:
Clothing boutiques and specialty shops often start because there is a need for a
particular product but large retailers like Wal-Mart and Costco can’t sell enough of the
item to stock it on their shelves. If a clothing boutique started to sell designer clothes or
clothing for hard-to-fit people because the clothing wasn’t being offered by a larger
retailer, the best way to describe how that idea was recognized is:
A) finding a gap in the marketplace
B) brainstorming
C) observing trends
D) solving a problem
E) talking to consumers
Answer:
The ________ section of the business plan addresses the basic logic of how profits are
earned in the business.
A) Economics of the Business
B) Operations Plan
C) Executive Summary
D) Design and Development plan
E) Market Analysis
Answer:
An ________ is conducted to determine the intellectual property a company owns.
A) intellectual property audit
B) intangible materials audit
C) academic property inventory
D) intellectual materials inventory
E) intangible property inventory
Answer:
Which of the following statements about advisory boards is incorrect?
A) The fact that a corporation has a board of directors does not preclude it from
establishing one or more advisory boards.
B) An advisory board can be established for general purposes or can be set up to
address a specific issue or need.
C) Similar to a board of directors, an advisory board has legal responsibility for the firm
in certain areas.
D) An advisory board is a panel of experts who are asked by a firm’s managers to
provide counsel and advice on an ongoing basis.
E) A growing number of startups are forming advisory boards.
Answer:
A supplier is a company that:
A) purchases a company’s products
B) helps a firm put together its network of contacts
C) provides startups with funding
D) provides startups with business advice
E) provides parts or services to another company
Answer:
The high failure rate among new ventures is due in part to the liability of newness,
which refers to the fact that new companies often falter because:
A) they are underfunded and the founders of the firms don’t move quickly enough to put
together boards of directors and boards of advisors that can provide them direction and
advice
B) the founders of the firms underestimate the complexities involved with starting a
new business and the firms lack a “track record” with outside buyers and sellers
C) the people who start the firms can’t adjust quickly enough to their new roles and the
firms lack a “track record” with outside buyers and sellers
D) the people who start the firms can’t adjust quickly enough to their new roles and they
are underfunded
E) the founders of the firms underestimate the complexities involved with starting a
new business and they don’t move quickly enough to establish business partnerships
Answer:
The Savvy Entrepreneurial Firm feature in Chapter 8 focuses on a scenario involving
the selection of a new CEO for New Venture Fitness Drinks. The lesson learned from
the feature was:
A) compare a firm’s financial ratios against its primary competitors and industry norms
to fairly assess how well a firm is performing financially
B) income statements are more effective in assessing how well a firm is performing
financially than are balance sheets and statements of cash flow
C) the most powerful instrument for understanding how well a firm is performing
financially is the statement of cash flows
D) ratio analysis is ineffective
E) look at multiple years of an income statement rather than a single year to fairly
assess how well a firm is performing financially
Answer:
A ________ is something that takes on a physical form, such as an MP3 player or a
laptop computer. A ________ is an activity or benefit that is intangible, such as an
airplane trip or advice from an attorney.
A) product, service
B) service, component
C) component, service
D) formation, service
E) service, product
Answer:
According to the textbook, Google, Facebook, and Zynga are examples of ________
firms.
A) lifestyle
B) salary-substitute
C) industry-standard
D) entrepreneurial
E) standard-of-living
Answer:
All businesses that plan to use a fictitious name, which is any name other than the
business owner’s name, need a(n):
A) unreal business name permit
B) fabricated business name permit
C) invented business name permit
D) conjured business name permit
E) fictitious business name permit
Answer:
According to the textbook, although a board of directors has formal governance
responsibilities, its most useful role is to:
A) provide guidance and support to the firm’s managers
B) submit papers on behalf of the firm to the SEC
C) represent the firm in public relations activities
D) conduct the firm’s annual meeting
E) provide funding to the firm
Answer:
According to the textbook, Nucor in steel, JetBlue in airlines, and Cirque du Soleil in
circuses are examples of entrepreneurial firms who are exploiting opportunities in
________ industries.
A) fragmented
B) emerging
C) declining
D) global
E) mature
Answer:
Stacey Wills, who is at heart a craftsperson, recently started a firm to manufacturer a
new innovative food blender. Stacey’s desire is to sell her food blender to as many
people as possible, because she firmly believes in the merits of her product. Stacey’s
story best illustrates which of the following characteristics, or attributes, of a successful
entrepreneur?
A) product/customer focus
B) execution intelligence
C) tenacity despite failure
D) a desire to please consumers
E) a desire to gain financial rewards
Answer:
A(n) ________ is a snapshot of a company’s assets, liabilities, and owners’ equity at a
specific point in time.
A) income statement
B) statement of cash flows
C) effectiveness statement
D) balance sheet
E) efficiency statement
Answer:
According to the textbook, from the franchisor’s point of view, the primary
disadvantage of franchising is that:
A) it is not legal in 11 states
B) an organization allows others to profit from its trademark and business method
C) franchise organizations consistently makes less money than alternative forms of
business ownership
D) it typically takes longer to grow an organization via franchising than
company-owned stores
E) the franchisees, rather than the franchisor, typically makes most of the money
Answer:
Which of the following was not a contributing factor to GiftZip’s early success?
A) It was becoming increasingly affordable to launch an online business.
B) positive PR
C) angel investor funding
D) People were becoming increasingly comfortable buying online.
E) The gift card market was growing.
Answer:
The first step in the formal sales process described in the book is:
A) qualify the lead
B) make the sales presentation
C) prospect for sales leads
D) meet objections and concerns
E) make the initial contact
Answer:
Cash plus items that are readily convertible to cash, such as accounts receivable,
marketable securities, and inventories are classified as ________ on a firm’s balance
sheet.
A) other assets
B) intermediate term assets
C) temporary assets
D) current assets
E) fixed assets
Answer:
Which of the following items would typically be protected by a form of intellectual
property protection other than trade secret statutes?
A) financial forecast
B) product formula
C) a company’s tagline
D) logs of sales calls
E) employee roster
Answer:
Most business plan writers interpret or make sense of a firm’s historical and/or pro
forma financial statements through:
A) ratio analysis
B) assumptions analysis
C) scenario analysis
D) proportion analysis
E) relative analysis
Answer:
According to Chapter 1, investors often cite the ________ as their most important
criterion in the decision to fund new ventures.
A) financial position of the new venture
B) strength of the industry the new firm is entering
C) strength of the new venture’s marketing plan
D) strength of the business idea
E) strength of the entrepreneur
Answer:
The Good Housekeeping Seal of Approval is an example of a(n):
A) collective mark
B) shared mark
C) service mark
D) certification mark
E) assessment mark
Answer:
Kate Harrison is in the process of launching an educational services firm. She plans to
incorporate the firm. Because the firm will be incorporated, Kate is legally required to
have a:
A) board of investors
B) board of advisors
C) customer advisory board
D) board of directors
E) panel of advisors and peers
Answer:
Which of the following statements is incorrect regarding the economic impact of
entrepreneurial firms in the United States?
A) Small businesses outperform their larger counterparts in terms of patent activity.
B) Small firms are providers of a significant share of the innovations that take place.
C) According to a Kauffman Foundation survey, 92% of Americans say entrepreneurs
are critically important to job creation.
D) Small businesses employ just less than half of all private sector employees.
E) Small businesses are the creators of most new jobs.
Answer:
Financial management deals with two thingsmanaging a company’s finances and:
A) operations management
B) inventory control
C) raising money
D) production management
E) supply chain management
Answer: