Market leadership occurs when a firm is one of the top ten firms in an industry or niche
market in terms of sales volume.
Answer:
A buying intentions survey is used to gauge customer interest in a product or service.
Answer:
By studying a product’s value chain, an organization can identify ways to create
additional value and assess whether it has the means to do so.
Answer:
It is usually easier for a corporation to raise investment capital than a sole
proprietorship or a general partnership because the shareholders are not liable beyond
their investment in the firm.
Answer:
The information that is gathered by a firm to learn about its competitors is referred to as
tactical intelligence.
Answer:
In a scale joint venture, the partners collaborate at a single point in the value chain to
gain economies of scale in production of distribution.
Answer:
Historically, the vast majority of SBIR Phase 1 proposals are approved.
Answer:
There are three reasons that most firms need to raise money during their early life: cash
flow challenges, capital investments, and lengthy product development cycles.
Answer:
The royalty fees a franchisee pays are usually around 10 percent of gross income.
Answer:
Brainstorming sessions are designed to move slowly, so ideas can be presented and
evaluated.
Answer:
Small businesses outperform their larger counterparts in terms of patent activity
(issuance).
Answer:
In a link joint venture, the position of the parties is not symmetrical, and the objectives
of the partners may diverge.
Answer:
According to the results of the GEM 2010 survey, about 1 out of every 13 American
adults is actively engaged in starting a business or is the owner/manager of a business
that is less than 3 1/2 years old.
Answer:
The three ways to identify an opportunity include observing trends, solving a problem,
and finding gaps in the marketplace.
Answer:
Target is an example of an organization that is perfectly suited for franchising, but it
doesn’t franchise.
Answer:
Of the 27.5 million businesses in the United States, women, minorities, seniors, and
young people increasingly own a smaller number of them.
Answer:
According to Penrose, managerial services generate new market, product, and service
ideas, while entrepreneurial services administer the routine functions of the firm and
facilitate the proper execution of new opportunities.
Answer:
The number one reason that people become entrepreneurs is to be their own boss.
Answer:
The first rule in making oral presentation is to follow instructions.
Answer:
A firm’s future competitors are its most important ones.
Answer:
The number one characteristic shared by successful entrepreneurs is passion for the
business.
Answer:
A company’s product/market scope defines the products and markets on which it will
concentrate.
Answer:
The SBIR and STTR programs are two important sources of early stage funds for
technology firms.
Answer:
Which of the following statements is incorrect regarding franchising?
A) Franchising is growing in popularity in the United States.
B) There are some instances in which franchising is not appropriate.
C) New technologies are often introduced through franchise systems.
D) Franchising, by its very nature, involves the sharing of knowledge between a
franchisor and a franchisee.
E) The failure rate for franchise systems is relatively high.
Answer:
Franchising is a form of business ownership in which a firm that already has a
successful product or service licenses its trademark and method of doing business to
another business in exchange for:
A) an initial franchise fee and an ongoing royalty
B) a one-time franchise fee
C) an equity position in the new business
D) an ongoing royalty
E) an initial franchise fee and an equity position in the new business
Answer:
Shelly Brunner owns a sports themed restaurant which is located in an upscale business
district in Chicago. One advantage that Shelly has is that she bought the lot she built her
restaurant on 25 years ago when lots in the area were selling for $50,000. Shelly knows
that several potential competitors have looked at bare lots near his business but haven’t
been willing to pay the asking prices, which are as high as $500,000. Which of the six
major sources of barriers to entry is causing a disincentive for new firms to enter
Shelly’s industry?
A) capital requirements
B) economies of scale
C) product differentiation
D) government and legal barriers
E) cost advantage independent of size
Answer:
Sharon Simms is a very capable computer engineer. Recently, she noticed a problem
that computer engineers have, and thought of a solution to the problem that might
represent an opportunity for a new software product. Sharon’s idea for a new software
product is an example of a(n) ________ discovery.
A) chance
B) serendipitous
C) traditional
D) conventional
E) opportune
Answer:
A board of directors is typically made up of both:
A) junior and senior directors
B) inside and outside directors
C) experienced and inexperienced directors
D) novice and expert directors
E) paid and unpaid directors
Answer:
Which of the following was identified in the textbook as an advantage of participating
in strategic alliances and joint ventures?
A) risk and cost sharing
B) loss of organizational flexibility
C) partners’ cultures may clash
D) risk becoming dependent on a partner
E) loss of proprietary information
Answer:
An opportunity has four essential qualities:
A) attractive, timely, durable, and anchored in a product, service, or business that
creates or adds value for its buyer or end user
B) practical, opportune, appropriate, and anchored in a product, service, or business that
is efficient and effective
C) realistic, striking, timely, and anchored in a product, service, or business that is
timely
D) attention-getting, attractive, timely, and anchored in a product, service, or business
that creates or adds value for its buyer or end user
E) attractive, durable, resilient, and opportune
Answer:
The What Went Wrong? feature in Chapter 1 focuses on Clearly Canadian, a company
that introduced a line of fruit-flavored bottled water in the early 1990s. The main
takeaway from the feature is that:
A) if a firm says it’s capitalizing on an environmental trend, solving a problem, or
filling a gap in the marketplace, it has to deliver on its promises
B) if a firm is basing its business idea on solving a problem, its solution must be better
than solutions that are currently available
C) if a firm is capitalizing on an environmental trend, it must be a trend that will stay in
place for a minimum of 3-5 years for the opportunity to be sustainable
D) brainstorming is an effective technique for generating business ideas
E) focus groups are an effective technique for generating business ideas
Answer:
Which of the following was not identified in the textbook as an attribute of an effective
board member?
A) strong personal and professional networks
B) unknown in their field
C) investment and/or operating experience
D) ability and willingness to mentor the CEO and the top managers of the firm
E) pattern recognition skills
Answer:
Industries that sell products to seniors, such as the eyeglass industry and the hearing aid
industry, are benefiting from the aging of the population, which is an important:
A) environmental trend
B) business trend
C) commerce trend
D) statutory trend
E) competitive trend
Answer:
According to the textbook, prior entrepreneurial experiences:
A) is one of the poorest predictors of future entrepreneurial performance
B) is one of the most consistent predictors of future entrepreneurial performance for
entrepreneurs under 50 years of age but not for entrepreneurs over 50 years of age
C) is one of the most consistent predictors of future entrepreneurial performance
D) is one of the most consistent predictors of future entrepreneurial performance in
service firms but not in manufacturing firms
E) has no relationship to future entrepreneurial performance
Answer:
The Savvy Entrepreneurial Firm feature in Chapter 9 focuses on how business founders
overcome a lack of business experience. Which of the following was not mentioned as a
practical way for a new business founder to overcome a lack of business experience?
A) hiring consultants from a major consulting firm, like Bain & Company or McKinsey
& Company
B) taking on a partner that has business experience
C) getting help from a Small Business Development Center
D) joining a Meetup group
E) participating in online forums
Answer:
In the context of a firm’s statement of cash flows, ________ include cash raised during
the period by borrowing money or selling stock and/or cash used during the period by
paying dividends, buying back outstanding stock, or buying back outstanding bonds.
A) investing activities
B) financing activities
C) operating activities
D) liquidity activities
E) capital activities
Answer:
According to a study sponsored by the SBA Office of Advocacy, only ________ of all
firms are “gazelles” or rapid growth firms at any given time.
A) 3%
B) 7%
C) 12%
D) 19%
E) 27%
Answer:
Which of the following is not an individual, group or institution that normally reads a
company’s business plan?
A) board of directors
B) potential alliance partners and major customers
C) state and local government officials
D) key recruits for jobs with the new firm
E) rank-and-file employees
Answer:
Bill and Megan Tempelton are planning to open a smoothie restaurant near a large
soccer complex in Greeley, Colorado, and need $75,000 to get started. They have
$15,000 of their own money, which leaves $60,000. After getting turned down by a
couple of banks, they decided to turn to their relatives and acquaintances for help.
Fortunately, they were able to raise the money through a gift from Bill’s grandfather, a
loan from Megan’s parents, and a small investment by Bill’s best friend in college,
Kevin. The money that an entrepreneur raises in this manner is referred to as:
A) friends and family
B) bootstrapping
C) networking money
D) compassion money
E) legacy money
Answer:
________ means that as the number of employees a firm needs increases, it becomes
increasingly difficult for it to find the right employees, place them in appropriate
positions, and provide adequate supervision.
A) Moral hazard
B) Adverse selection
C) Adverse hazard
D) Complex hazard
E) Complex selection
Answer:
In a ________, the voting stock is held by a small number of individuals and is very
thinly or infrequently traded.
A) public corporation
B) private corporation
C) narrow corporation
D) cautious public corporation
E) closely held corporation
Answer:
In regard to business models, which of the following statements is incorrect?
A) There is a standard business model that most firms follow.
B) A firm’s business model is inherently dependent on the collection of resources it
controls and the capabilities it possesses.
C) It is dangerous for a company to assume that it can be successful by simply copying
the business model of another firm.
D) A firm’s business model is its plan or diagram for how it competes.
E) It is often difficult to determine what another firm’s business model is.
Answer:
Which of the following is an example of how to encourage creativity at the
organizational level?
A) Maintain a ‘stiff” organizational culture with no room for different behaviors.
B) Elevate creativity’s importance throughout the organization.
C) Pigeonhole employees; keep them in the same job for years.
D) Make no attempt to hire creative people.
E) Promote a mentality suggesting that the best solutions to all problems have already
been found.
Answer:
James Quinn is starting a firm in the financial services industry primarily to pursue
financial rewards. According to the textbook, starting a business to make a lot of
money:
A) often fails to live up to its hype
B) is equally as satisfying as other reasons for starting a business
C) is the number one reason people start their own business
D) is the number two reason that people start their own business, right behind the lack
of better career prospects
E) does not rank among the top three reasons that people start their own business
Answer:
A ________ franchise is an arrangement under which the franchisor grants to the
franchisee the right to buy its products and use its trade name.
A) product and trademark
B) product extension
C) business format
D) production plus
E) business design
Answer:
According to the textbook, beyond their own funds, the second source of funds for
many new ventures is:
A) government grants
B) business angels
C) friends and family
D) banks
E) venture capital
Answer:
An event that prompts an individual to become an entrepreneur, such as losing a job,
inheriting money, or accommodating a certain lifestyle, is referred to as a(n):
A) prompting event
B) entrepreneurial prompt
C) initiating event
D) triggering event
E) kick-off event
Answer:
A(n) ________ is a group of firms producing a similar product or service, such as
electronic games, smartphones, or computers.
A) trade group
B) industry
C) business group
D) commerce group
E) conglomerate
Answer:
Which of the following statements is untrue regarding founding teams?
A) The members of heterogeneous teams are diverse in terms of their abilities and
experiences.
B) The members of homogenous teams are very similar in terms of their abilities and
experiences.
C) Teams that have worked together before have an edge.
D) Studies show that more than one individual starts 50 to 70 percent of all new firms.
E) It is generally believed that new ventures started by an individual have an advantage
over new ventures started by a team.
Answer:
Emily Wills owns a commercial printing company. Emily has more business than she
wants, in fact, she is presently turning away exciting new business opportunities
because it is expensive to hire new employees, and she knows that if she did hire new
employees it would take time for the new employees to be trained and to be socialized
into the culture of her firm. Emily’s inability to take advantage of the new business
opportunities that are coming her way is due largely to the:
A) business aptitude problem
B) entrepreneurial aptitude problem
C) commercial opportunity problem
D) business capacity problem
E) managerial capacity problem
Answer:
A(n) ________, in a business plan context, is a noteworthy event in the past or future
development of a business.
A) aspiration
B) intention
C) signpost
D) milestone
E) target
Answer:
The idea behind blogs is that they:
A) familiarize people with a business and help build an emotional bond between a
business and its customers
B) are an effective recruiting tool and they help businesses network with government
officials
C) help build an emotional bond between a business and its customers and are an
effective platform for product development
D) are an effective tool for product development and familiarize people with a business
E) are an effective tool for recruiting and they familiarize people with a business
Answer:
According to the textbook, entrepreneurs are:
A) gamblers
B) moderate risk takers
C) aggressive risk takers
D) forceful risk takers
E) minimal risk takers
Answer:
inDinero, the company profiled in the opening feature for Chapter 10, is described by
its cofounders as “the fastest way for small businesses to manage their finances.” Which
of the following is not true about inDinero’s founding story?
A) In 2009, inDineor’s founders applied to TechStars, which is a Boulder, CO-based
seed-stage fund/incubator, and were turned down.
B) The idea for inDinero originated in mid-2009 while its cofounders were still in
college.
C) In April 2010, the founders of inDinero applied to Y Combinator, an organization
that provides seed-stage funding, mentorship, and networking opportunities to
participants, and were turned down.
D) inDinero reportedly has over 15,000 users .
E) In late 2009 and early 2010, the founders of inDinero tried to raise angel funding and
were unsuccessful.
Answer:
The ________, which was drafted in 1979 by a special commission, attempted to set
nationwide standards for trade secret legislation.
A) Intangible Assets Protection Act
B) Fairness in Intellectual Property Act
C) Uniform Trade Secrets Act
D) Trademark & Copyright Act
E) Economic Espionage Act
Answer:
Which of the following is an example of intellectual property?
A) Microsoft’s headquarters in Redmond, Washington
B) Nike’s swoosh logo
C) the computer that you use
D) AirTran’s fleet of planes
E) the trucks that deliver White Wave soymilk to grocery stores
Answer:
In the context of computing the cost of sales, the common way to do this is to use the
percent-of-sales method, which is a method for expressing:
A) each expense item as a percentage of net sales
B) each expense item as a percentage of gross profit
C) each expense item as a percentage of net income
D) each expense item as a percentage of operating income
E) each expense item as a percentage of cost of sales
Answer:
An area franchise agreement allows a franchisee to own and operate a specific number
of outlets in a particular geographic area.
Answer: