One of the most successful diversification strategies is to diversify into unrelated
products or unrelated markets to spread the risk.
The return on investment ratio measures the ability of the firm to repay long-term debt
using current assets.
An acquisition is the purchase of a company, or part of a company, in which the
acquired company ceases to exist independently.
International entrepreneurship is the process of an entrepreneur conducting business
activities across national boundaries.
Many profitable firms fail because of lack of cash.
When making decisions about pricing strategy, the entrepreneur should consider only
costs directly associated with the product and ignore overhead.
Sara Blakely has amassed a net worth of over $1 billion.
The question “What is this technology all about?” is a comprehension question.
Cash flow is the result of subtracting expenses from sales.
The U.S. Department of Justice frequently issues guidelines for different types of
mergers.
The executive summary section is only meant to highlight key factors and motivate the
person holding the plan to read it in its entirety.
Venture capitalists demand high rates of return for their investment in the new venture.
Entrepreneurs, because of their lack of understanding of intellectual property, ignore
important steps that they should have taken to protect these assets.
Forward integration occurs when the firm acquires one of its suppliers.
When products cannot be easily differentiated, the entrepreneur is forced to charge a
lower price than the competition.
For the venture capitalist, the executive summary is an important part of the business
plan.
Replacement value is used only by insurance companies and in very unique
circumstances.
Developing standardized forms and procedures for recurring events would be an
example of the principle of reanalysis.
An evaluation of cultural changes is irrelevant to the venture and should not be included
in the business plan.
A utility patent grants the owner protection from anyone else making, using, and/or
selling the identified invention and generally reflects protection of new, useful, and
unobvious processes.
When compared to the costs of carrying excess inventory, the cost of lost sales is
insignificant and should be ignored.
Business angels find many of their deals through friends, investment bankers, business
brokers and other business associates.
The quiet period is a 90-day period in going public when company information that will
help increase stock price should and can be released.
It is recommended that the entrepreneur limit the number of marketing goals to no more
than four.
A narrow scope strategy is better than a broad scope strategy in an environment high in
uncertainty.
If the legal system of the country the global entrepreneur is dealing with does not have
a good track record, it is not possible for the contract to contain any agreement that
contract disputes will be heard in the courts of a different country or home country.
An updated marketing plan should be prepared by the entrepreneur every two years.
Cash flow is the same thing as profit.
If a venture is not a manufacturing firm, an operations plan is not necessary.
Entrepreneurs doing business in the former U.S.S.R. should be aware that barter, or
third-party arrangements, are commonplace.
The objectives of the General Agreement on Tariffs and Trade was to liberalize trade by
eliminating or reducing tariffs.
It is recommended that an entrepreneur avoid using the Internet as a resource for
finding information to write a business plan because the information found there is
often incorrect and unreliable.
Steve Hafner founded Orbitz travel before founding Kayak a company that allows the
user to view opportunities from multiple travel sites such as Orbitz, Expedia, and
Priceline.
In the test market stage of product planning, the refined product idea is tested to
determine customer acceptance.
When conducting research on a new entry:
A.the more information the entrepreneur has, the more difficult it is to focus on the
consumer.
B.the entrepreneur must rely upon surveys more that market knowledge.
C.extensive research is expensive in terms of time and money.
D.lesser prior knowledge is advantageous since it minimizes the risk of entrepreneurial
bias.
An ESOP:
A.is a device to transfer the business to a small group of key loyal employees.
B.eliminates the need to perform a complete valuation of the venture.
C.motivates employees because they realize they are working for themselves.
D.removes the need for a continuous performance appraisal.
Which of the following would be an advantage of an acquisition?
A.Established customer base
B.Customer familiarity with location
C.Existing employees
D.Period of acquisition deal
The opportunity recognition process contains all of the following except:
A.work experience
B.reformation
C.entrepreneurial alertness
D.networks
Fixed operating expenses include all of the following except:
A.Rent
B.Utilities
C.Raw Materials
D.Depreciation
This problem-solving method involves developing new ideas by thinking without
constraints.
A.Value analysis
B.Attribute listing
C.Big-dream approach
D.Brainwriting
Exchanging stock or something else for existing debt under Chapter 11 bankruptcy is
called:
A.amendment.
B.extension.
C.composition settlement.
D.substitution.
If the new venture is not a manufacturing operation, but a retail store or service, a new
section of the business plan is required which is called the:
A.organizational plan.
B.operational plan.
C.production plan.
D.executive summary.
Before beginning the business plan, the entrepreneur should define the venture’s goals
and objectives. These goals should be:
A.general and broad.
B.feasible.
C.guaranteed.
D.unique.
The SBA 7(a) loan program has a maximum loan amount of $5 million.
The largest percentage of venture capital funding is invested in:
A.seed capital.
B.start-up capital.
C.expansion funds.
D.acquisition funds.
The _________ is the written statement of marketing objectives, strategies, and
activities to be followed in the business plan.
A.marketing plan
B.marketing mix
C.marketing system
D.marketing structure
Which type of ownership is the most expensive to start?
A.Corporation
B.General partnership
C.Limited partner
D.Sole proprietorship
Which of the following is not a purpose of the Bankruptcy Act of 1978?
A.ensure a fair distribution of assets to creditors.
B.protect debtors from unfair depletion of assets.
C.protect debtors from unfair demands by creditors.
D.protect creditors from undue delay of money.
_________ are both government sources of information that might be helpful in
gathering the information needed to start a business.
A.Mergent and The Industrial monitor
B.NAICS and SIC codes
C.Business Source Complete and Small Business News
D.The Euromonitor and Business Source Complete
Identify the basic formula of a balance sheet and give an example of an item that might
fall under each major component of the formula.
If the new venture is a manufacturing operation a(n) __________ in the business plan is
necessary.
A.ownership plan
B.quality control plan
C.production plan
D.partnership agreement
Most established R&D limited partnerships:
A.allow a minimum amount of equity dilution.
B.are successful.
C.increase, to some extent, the risks involved in the venture.
D.have weak financial statements due to lack of outside capital.
Marketing research begins with:
A.setting the advertising budget.
B.definition of objectives or purpose.
C.identifying direct marketing strategy.
D.collecting a list of primary and secondary sources of information.
The due diligence phase of the venture-capital process includes:
A.outlining the principle terms.
B.a detailed review of the company’s history.
C.preparation of an investment memorandum.
D.a preliminary study of the business plan.
Which of the following statement is(are) true?
A.Most countries have laws and court procedures protecting intellectual property such
as those in the United States.
B.Civil laws tend to be relatively nonspecific.
C.Laws of a country regulate the manner in which business transactions are executed.
D.Global entrepreneurs cannot specify in the contract that any contract disputes will be
heard in the courts of another country.
Cash flow:
A.results from the differences between cash receipts and cash payments.
B.is the result of subtracting expenses from sales.
C.is the same as profit.
D.is the sum total of all sales at a point in time.
Explain what problems an entrepreneur might avoid by using bootstrap financing
instead of outside capital.
In what form of business is it most difficult to change your taxable year?
A.sole proprietorship
B.partnership
C.corporation
D.LLP
A _____ can raise capital through bonds, stock and debt.
A.sole proprietorship
B.partnership
C.corporation
D.LLP
Which of the following would be an application of funds?
A.Decrease in assets.
B.Increase in turnover.
C.Paying dividends.
D.Increase in liabilities.
A _____________ summarizes all the projected sources and applications of funds
available to the venture and how these funds will be disbursed.
A.Pro forma income statement
B.Pro forma sources and applications of funds statement
C.Break-even analysis
D.Cash flow statement
Which of the following is not a qualitative technique an entrepreneur can use to
evaluate the asking price of an LBO?
A.The competitive position of the firm
B.The uniqueness of the firm’s offerings
C.Price-earnings ratio
D.The abilities of management and other key personnel
Which is NOT a leadership characteristic of a corporate entrepreneur according to the
text?
A.Flexibility and vision
B.Persistence
C.Encourages teamwork
D.Encourages colleagues to follow hierarchy
When products cannot be easily differentiated:
A.there is little room for price variations from the competition.
B.a skimming price strategy is appropriate.
C.a higher price can be charged.
D.the lowest possible price must be charged.
Dividing net profit by total assets shows a firm’s:
A.current ratio.
B.debt ratio.
C.net profit margin.
D.return on investment.
The ____ is calculated by dividing accounts receivable by average daily sales.
A.current ratio
B.average collection period
C.debt ratio
D.return on investment
All of the following are benefits of an ESOP except:
A.the company can deduct contributions to an ESOP.
B.it offers a planned exit in writing.
C.it offers a unique incentive to employees.
D.it is relatively simple to establish.
A focus group should consist of:
A.6-8 potential customers
B.10-12 potential customers
C.14-16 potential customers
D.18-20 potential customers