If a firm’s debt-to-equity ratio gets too high, it may have trouble meeting its obligations
and securing the level of financing needed to fuel its growth.
Answer:
A referent account is an early user of a firm’s product who is willing to give a
testimonial regarding his or her experience with the product.
Answer:
Several studies have shown that prior experience in an industry helps entrepreneurs
recognize business opportunities.
Answer:
Fortunately, if three of the four components of a firm’s business model are in place, the
firm has a high probability of success.
Answer:
Studies show that more than one individual starts 80 to 90 percent of all new firms.
Answer:
Elaboration is the stage of the creative process during which the idea is put into its final
form.
Answer:
A company’s accounts receivable is money owed to it by its customers.
Answer:
Franchisees are often required to pay into a national or regional advertising fund, even
if the advertisements are directed at goals other than promoting the franchisor’s product
or service.
Answer:
A firm’s target market is the limited group of individuals or businesses that it goes after
or tries to appeal to.
Answer:
Venture capitalists are individuals who invest their personal capital directly in startups.
Answer:
If the buyers are concentrated and they buy from a large number of suppliers, then the
bargaining power of buyers is increased.
Answer:
A brand is the set of attributespositive or negativethat people associate with a company.
Answer:
Historically, commercial banks have been viewed as an excellent source of financing
for startup firms.
Answer:
The franchise agreement, or contract, is the document that consummates the sale of a
franchise.
Answer:
For most new ventures, the business plan is a dual-purpose document used both inside
and outside the firm.
Answer:
An intellectual property audit is conducted to determine the intellectual property a
company owns.
Answer:
A concept statement should be two-three pages long.
Answer:
The major categories of assets listed on a balance sheet include current assets, fixed
assets, and other assets.
Answer:
Because of the weaknesses associated with advertising, most startups do not advertise
their products broadly.
Answer:
Aging of baby boomers, the increasing diversity of the workplace, and increasing
interest in healthy foods and “green” products are important economic trends.
Answer:
First Screen is a template for completing industry analysis
Answer:
It is important for an entrepreneur to select an attorney as early as possible when
developing a business venture.
Answer:
In an acquisition, the surviving firm is called the acquirer, and the firm that is acquired
is called the target.
Answer:
A copyright is 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.
Answer:
The four components of an effective business model include: core strategy, strategic
resources, partnership network, and customer interface.
Answer:
A competitive analysis grid is a tool for organizing the information a firm collects about
its competitors.
Answer:
Trade secret disputes arise most frequently when one firm alleges that a trade secret
claimed by another firm is common knowledge, and can therefore be used by anyone.
Answer:
A sources and uses of funds statement is a document that lays out specifically how
much money a firm needs, where the money will come from, and what the money will
be used for.
Answer:
Markets can be segmented in a number of ways, including by product type, price point,
distribution channel used, and customers served.
Answer:
Unfortunately, statistics show that there is very little interest in entrepreneurship among
young entrepreneurs in the United States.
Answer:
Many new businesses are successful by taking advantage of fads.
Answer:
More people are willing to serve on a company’s board of directors than board of
advisors.
Answer:
Crowdfunding is a financial transaction whereby a business sells its accounts receivable
to a third party at a discount in exchange for cash.
Answer:
Innovation is the process of creating something new, which is central to the
entrepreneurial process.
Answer:
Industry/target market feasibility is an assessment of the overall appeal of the industry
and the target market for the product or service being proposed.
Answer:
A patent is a grant from the federal government conferring the rights to exclude others
from making, selling, or using an invention for the term of the trademark.
Answer:
A trade secret is any formula, pattern, physical device, idea, process, or other
information that provides the owner of the information with a competitive advantage in
the marketplace.
Answer:
Which of the following is an advantage of growth by means of external growth
strategies?
A) clash of corporate cultures
B) increased business complexity
C) loss of organizational flexibility
D) antitrust implications
E) economies of scale
Answer:
Match the business model component with its explanation:
A) core strategy/how a firm structures and nurtures its partnerships
B) customer interface/how a firm acquires and uses its resources
C) strategic resources/how a firm acquires and uses its resources
D) partnership network/how a firm competes
E) core strategy/how a firm interfaces with its customers
Answer:
Match the financial term with its proper definition.
A) forecasts/depict relationships between items on a firm’s financial statements
B) forecasts/written report that quantitatively describes a firm’s financial health
C) budgets/itemized forecasts of a company’s income, expenses, and capital needs
D) financial ratios/written report that quantitatively describes a firm’s financial health
E) financial statements/an estimate of a firm’s future income and expenses
Answer:
Match the business plan with its appropriate emphasis:
A) summary business plan, works best for companies who are at the point where they
need funding or financing; serves as a “blueprint” for the company’s operations
B) operational business plan, works best for companies in the early stages of
development that want to “test the waters” to see if investors are interested in their idea
C) full business plan, works best for companies in the early stages of development that
want to “test the waters” to see if investors are interested in the idea
D) summary business plan, is meant primarily for an internal audience; works best as a
tool for creating a blueprint for a company’s operations and providing guidance to
operational managers
E) summary business plan, works best for companies in the early stages of development
that want to “test the waters” to see if investors are interested in their idea
Answer:
The Partnering for Success feature in Chapter 10 focuses on TechStars and Y
Combinator: A New Breed of Start-Up Incubators. TechStars is headquartered in
________ while Y Combinator is headquartered in ________.
A) the Silicon Valley, Chicago
B) Boulder, CO, New York City
C) Austin, TX, New York City
D) the Silicon Valley, Austin, TX
E) Chicago, Boulder, CO
Answer:
The First Screen feasibility analysis template included in Chapter 3 is called “First
Screen” because:
A) it is the first feasibility analysis template created
B) it is the first and most important step in the opportunity recognition process
C) it is the first step in a sequence of several steps that must be completed before a
business idea is deemed to be feasible
D) feasibility analysis is an entrepreneur’s initial or first pass at determining the
feasibility of a business idea
E) it is the first of several ‘screens” that a business idea must pass through before it is
considered to be feasible
Answer:
Susan Spector is in the process of putting together the business model for her startup
and is currently working on her core competencies and strategic assets. Which of the
components of her business model is Susan working on?
A) core strategy
B) strategic resources
C) partnership network
D) customer interface
E) feasibility analysis
Answer:
The ________ stage of the organizational life cycle is the startup phase, where a
business determines what its core strengths and capabilities are and starts selling its
initial product or service.
A) introduction
B) launch
C) ramp-up
D) early growth
E) continuous growth
Answer:
Which of the following was not identified in the textbook as one of the common
mistakes that entrepreneurs make regarding intellectual property?
A) not fully recognizing the value of their intellectual property
B) not properly identifying all their intellectual property
C) not properly registering their Internet domain names
D) not using their intellectual property as part of their overall plan for success
E) not taking sufficient steps to protect their intellectual property
Answer:
According to a recent FTC report, instances of problems between franchisors and their
franchisees tend to be:
A) prevalent practices
B) isolated occurrences
C) There have been no reported problems between franchisors and their franchisees.
D) prevalent practices for product and trademark franchise systems and isolated
occurrences for business format franchise systems
E) isolated occurrences for product and trademark franchise systems and prevalent
practices for business format franchise systems
Answer:
John Petersen is thinking about starting a firm in the specialty chemical industry. In the
industry analysis John has been conducting, one thing he has noticed is that the
specialty chemical industry is characterized by the following factors: high supplier
concentration, high switching costs for buyers when they switch from one supplier to
another, and no attractive substitutes for the products that most of the suppliers provide.
These factors concern John because they tell him that the profitability of the specialty
chemical industry is suppressed by the:
A) threat of substitutes
B) bargaining power of buyers
C) rivalry among existing firms
D) bargaining power of suppliers
E) threat of new entrants
Answer:
The Partnering for Success feature in Chapter 9 focuses on iConclude, a company that
set up a customer advisory board. The main point of the feature is:
A) the proper time to set up a customer advisory board is just after a business has been
launched
B) the members of a firm’s customer advisory board should be as diverse as possible
C) a customer advisory board can be a good source of new product or service ideas
D) the main purpose of a customer advisory board is to assess customer satisfaction
E) setting up a customer advisory board before a business is launched can be a useful
way of getting feedback while a product is being developed
Answer:
Economic forces impact the opportunities available to entrepreneurs. Which of the
following alternatives reflects a set of economic forces that would be of interest to
entrepreneurs?
A) level of disposable income, new uses of old technologies, and new laws and
regulations
B) new technologies, consumer spending patterns, and new laws
C) interest rates, consumer spending patterns, and level of disposable income
D) social and cultural trends, level of interest rates, and what people think is “in”
E) new changes in political areas, new laws, and level of disposable income
Answer:
Which of the following statements is not true regarding the attributes of the founder or
founders of a firm?
A) Evidence suggests that important entrepreneurial skills are enhanced through higher
education.
B) Founders with prior entrepreneurial experience are more likely to avoid costly
mistakes.
C) Founders with experience in the same industry as their new ventures will typically
have “blinders” on and are typically not as effective as founders new to the industry.
D) Founders with broad social and professional networks have an advantage.
E) New ventures that are started by a team rather than an individual have an advantage.
Answer:
For a business to be successful in the early growth stage of the organizational life cycle,
two important things must happen:
A) the founder or owner of the business must start transitioning from his or her role as
the hands-on supervisor to a more managerial role and increased formalization must
take place
B) a decision must be made whether the owner-manager and the current management
team is capable of taking the business further and the organization must start laying the
groundwork for future growth
C) increased formalization must take place and the business must achieve price stability
D) a decision must be made whether the owner-manager or the current management
team is capable of taking the business further and business partnerships must be
established
E) the founder or owner of the business must start transitioning from his or her role as
the hands-on supervisor to a more managerial role and the business must be cash flow
positive
Answer:
The SBIR is a ________, meaning that firms that qualify have the potential to receive
more than one grant to fund a particular proposal.
A) two-phase program
B) three-phase program
C) six-phase program
D) nine-phase program
E) twelve-phase program
Answer:
To test resource sufficiency, a firm should list the ________ most critical non-financial
resources that it will need to move its business idea forward and determine if those
resources are available.
A) 1 to 2
B) 3 to 5
C) 6 to 12
D) 10 to 16
E) 15 to 25
Answer:
The Partnering for Success feature in Chapter 3 focuses on the task of finding the right
business partner. According to the feature, which of the following is an incorrect
rule-of-thumb in finding a business partner?
A) Know the skills and experiences you need in a partner.
B) Make sure you and your partner’s work habits are compatible.
C) Make sure you and your partner have common goals and aspirations.
D) Pick a partner that is similar rather than different from you in terms of skills,
abilities, and functional background.
E) Hire a lawyer to negotiate the partnership agreement.
Answer:
If a business enhances the quality of a product, makes it more convenient to use,
improves its durability, or makes it more up to date, any one of those initiatives fall
under the category of:
A) increasing the market penetration of an existing product or service
B) extending product lines
C) geographic expansion
D) licensing
E) improving an existing product or service
Answer:
A ________ sets forth the rights and duties of the general partners and limited partners,
along with the details of how the partnership will be managed and eventually dissolved.
A) partnership accord
B) restricted partnership agreement
C) business partnership agreement
D) limited partnership concurrence
E) limited partnership agreement
Answer:
Michael Jones owns a Web design firm. The way Michael prices his products is to
determine what consumers are willing to pay, and then he backs off a bit to provide a
cushion. The method that Michael used to determine his prices is called:
A) predatory pricing
B) technical pricing
C) cost-based pricing
D) competitive-based pricing
E) value-based pricing
Answer:
Which of the following was not identified as one of the four main financial objectives
of a firm?
A) stability
B) efficiency
C) timeliness
D) liquidity
E) profitability
Answer:
The primary opportunity existing for startups in emerging industries is to:
A) consolidate the industry and establish industry leadership as a result of doing so
B) win customers by placing an emphasis on service and process innovation
C) pursue a niche strategy, which focuses on a narrow segment of the industry that
might be encouraged to grow through product or process innovation
D) capture a first-mover advantage
E) pursue a cost reduction strategy, which is accomplished through achieving lower
costs than industry incumbents through process innovation
Answer:
Jason Graham’s startup, which is in the electronics industry, was launched on January 1,
2009. However, prior to its formal launch, Jason spent many hours working on his
business, particularly during the feasibility analysis stage. The time and effort that
entrepreneurs put into their venture, that can’t be easily measured from a financial point
of view, is referred to as:
A) effort equity
B) intangible equity
C) sweat equity
D) worry equity
E) fret equity
Answer:
According to the textbook, which of the following is not a cost that is typically
associated with buying a franchise?
A) intellectual capital fees
B) capital requirements
C) continuing royalty payment
D) advertising fees
E) initial franchise fee
Answer:
The What Went Wrong? feature in Chapter 6 focuses on Joost, a company that launched
in 2006 as a premier online video service that aggregated and streamed premium video
online. Joost failed just three years after it launched. According to the feature, Joost’s
most critical mistake dealt with subtle aspects of its business model. In particular, its:
A) core strategy wasn’t focused
B) pricing model was misguided
C) partnership network never came together
D) customer interface was poorly conceived
E) customer service strategy was poorly executed
Answer:
________ costs are the costs a company incurs as it makes sales.
A) Static
B) Irregular
C) Balanced
D) Variable
E) Flexible
Answer:
________ are an estimate of a firm’s future income and expenses, based on its past
performance, its current circumstances, and its future plans.
A) Calculation statements
B) Forecasts
C) Statements of cash flow
D) Financial statements
E) Prediction statements
Answer:
In the context of strategic alliances, ________ feature cooperation in research and
development, engineering, and manufacturing.
A) administrative alliances
B) directorial alliances
C) marketing alliances
D) organizational alliances
E) technological alliances
Answer:
According to the textbook, a well-managed business that finds its products and services
are mature often:
A) replaces its board of directors to breathe new life into the firm
B) looks for licensing opportunities
C) looks for partnering or acquisition opportunities to breathe new life into the firm
D) looks for new managerial talent to breathe new life into the firm
E) looks for international business opportunities
Answer:
Peggy Owens owns a store that sells exercise equipment. Each January 1, she makes a
very accurate account of all her merchandise and products waiting to be sold that are in
her store. On January 1, Peggy is taking account of her store’s:
A) long-term assets
B) owners’ equity
C) accounts payable
D) accounts receivable
E) inventory
Answer:
Which of the following is not one of the four factors identified in the textbook as
critical in selecting a form of business ownership?
A) the cost of setting up and maintaining the legal form
B) the number and types of investors involved
C) accounting considerations
D) tax considerations
E) the extent to which personal assets can be shielded from the liabilities of the business
Answer:
A(n) ________ is the pooling of interests to combine two or more firms into one. A(n)
________ is the outright purchase of one firm by another.
A) acquisition, merger
B) merger, acquisition
C) licensing agreement, acquisition
D) joint venture, strategic alliance
E) strategic alliance, joint venture
Answer:
Which of the following is not one of the four elements that constitute a firm’s marketing
mix?
A) price
B) promotion
C) passion
D) place (or distribution)
E) product
Answer:
Describe the difference between strong-tie and weak-tie relationships. Is it more likely
that an entrepreneur will get new ideas through strong-tie or weak-tie relationships?
Answer:
What is a brand? How does a new firm develop a brand?
Answer:
When is franchising appropriate (from the business owner’s point of view)? Provide an
example of when franchising is appropriate and when it is inappropriate.
Answer:
What is a founders’ agreement? Describe the purpose of a buyback clause and why it’s
important?
Answer:
What is SCORE? What is its role in helping a firm fill out its new venture team?
Answer:
What is an elevator speech? How did it get its name?
Answer:
Describe the three primary reasons that people become entrepreneurs and start their
own firms.
Answer:
What is meant by the term “bootstrapping”? Provide several examples of the ways that
entrepreneurs bootstrap to raise money or cut costs?
Answer:
Describe the internal growth strategy of new product development. Why is it a
competitive necessity in some industries that entrepreneurial firms focus on this form of
growth?
Answer:
What is the difference between a heterogeneous and a homogeneous founding team?
Which type of team has the advantage?
Answer:
Describe what is meant by a “general partnership” and a “limited partnership.” Describe
the major difference between the two.
Answer:
What is the purpose of market segmentation? How are markets typically segmented?
Can a company segment its market on more than one dimension?
Answer:
What is the organizational life cycle and why is it important?
Answer:
What is intellectual property? Why is it called “intellectual” property? Why is
intellectual property such an important issue for entrepreneurial firms?
Answer:
Describe what licensing is. What type of intellectual property can be licensed? Identify
the two types of licensing pursued by entrepreneurial firms.
Answer:
Why is it important for a firm to have a well-thought-out business model?
Answer:
Describe the purpose of the income statement, the balance sheet, and the statement of
cash flows.
Answer: