The management team and company structure section of a business plan is one of the
lesser read sections.
Answer:
Licensing is the granting of permission by one company to another company to use a
specific form of its intellectual property under clearly defined conditions.
Answer:
The people who buy franchises from master franchisees are typically called
employee-franchisees.
Answer:
A market penetration strategy involves actions taken to increase the sales of a product
or service through greater marketing efforts or through increased product capacity and
efficiency.
Answer:
The three types of competitors a business will face are direct competitors, indirect
competitors, and future competitors.
Answer:
A firm’s business model resides within its own boundaries.
Answer:
A firm’s operating leverage is an analysis of its debt versus its equity.
Answer:
For financial feasibility analysis, a very detailed and comprehensive financial analysis
is required.
Answer:
Venture capital is money that is invested by venture capital firms in startups and small
businesses with exceptional growth potential.
Answer:
The limited liability corporation is a form of business organization that is rapidly losing
popularity in the United States.
Answer:
SCORE is a for-profit organization that provides consulting services to small
businesses.
Answer:
Corporations are organized as either C Corporations, T Corporation, or subchapter S
corporations.
Answer:
Over the past 10 years, the demographic makeup of entrepreneurial firms has remained
fairly stable in the United States and around the world.
Answer:
In the majority of cases, a franchisee pays a royalty based on a percentage of weekly or
monthly net income.
Answer:
A utility patent can be obtained for a new product or process or the “idea” for a new
product or process.
Answer:
A noncompete agreement prevents an individual from competing against a former
employer for a specific period of time.
Answer:
Pro forma financial statements are projections for future periods based on forecasts and
are typically completed for 2 to 3 years into the future.
Answer:
A disadvantage of a general partnership is that the liquidity of each partner’s investment
is low.
Answer:
A firm’s target market is the limited group of individuals or businesses that it goes after
or tries to appeal to.
Answer:
Financial management deals with two things: raising money and managing a company’s
finances in a way that achieves the highest rate of return.
Answer:
Sometimes firms are compelled to grow to accommodate the growth of a key customer.
Answer:
Franchising is a form of business organization in which a firm that already has a
successful product or service licenses its trademark and method of doing business to
other businesses in exchange for an initial franchise fee and an ongoing royalty.
Answer:
The Franchise Disclosure Document contains a total of 23 categories of information
that give a prospective franchisee a broad base of information about the background and
financial health of the franchisor.
Answer:
Companies ultimately try to combine their core competencies and strategic assets to
create a sustainable competitive advantage.
Answer:
Incubation is the stage of the creative process during which an idea is subjected to
scrutiny and analyzed for its viability.
Answer:
Typically, the seed money that gets a company off the ground comes from a commercial
bank.
Answer:
Growth usually decreases rather than increases the challenges involved with cash flow
management.
Answer:
The major difference between a general and a limited partnership is that a limited
partnership includes two classes of owners: general partners and limited partners.
Answer:
Approximately 80 percent of the 9,000 banks in the United States participate in the
SBA Guaranteed Loan Program.
Answer:
According to reliable statistics, 9 out of 10 businesses fail in their first few years of
existence.
Answer:
Merchandise and character licensing is the licensing of a recognized trademark or brand
that the licensor typically controls through a registered:
A) trade secret or copyright
B) patent or copyright
C) trademark or patent
D) patent or trade secret
E) trademark or copyright
Answer:
A ________ 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.
A) patent
B) copyright
C) trademark
D) trade secret
E) certification mark
Answer:
The term ________ refers to initiatives, such as Netflix in movie rentals and Zipcar in
car sharing, which revolutionize how products are sold in an industry.
A) product model modernism
B) business model innovation
C) feasibility analysis innovation
D) value innovation
E) opportunity innovation
Answer:
A(n) ________ strategy involves making additional versions of a product so that it will
appeal to different clientele.
A) product line extension
B) geographic expansion
C) improving an existing product or service
D) strategic alliance
E) market penetration
Answer:
Which of the following is an example of an external growth strategy?
A) market penetration
B) product line extension
C) strategic alliance
D) new product development
E) geographic expansion
Answer:
Which of the following statements regarding business licenses and permits is incorrect?
A) Most business licenses and permits can wait until after a business is launched to be
obtained.
B) A business license can be obtained at the city clerk’s office in the community where
the business will be located.
C) If a business will be run out of a home, a home occupation business license is often
required.
D) Some business licenses are hard to get.
E) The business licenses and permits that are needed vary by city, county, and state.
Answer:
Which of the following is one of the “red flags” listed in the textbook that raises
questions about one or more aspects of a company’s business plan?
A) takes several days or weeks to complete
B) founders that have their own money at risk
C) defining the market size too broadly
D) less than 50 pages long
E) directed towards both an external and an internal audience
Answer:
The main difference between the SBIR and the STTR programs is that the STTR
program requires the participation of:
A) an attorney
B) a venture capitalist
C) researchers working at universities or other research institutions
D) a certified public accountant
E) a government agency in conducting the research
Answer:
According to the textbook, which of the following statements is accurate regarding the
importance of industry versus firm-specific factors as it pertains to firm profitability?
A) Virtually all the studies have concluded that industry-specific factors are more
important than firm-specific factors.
B) Virtually all the studies have concluded that firm-specific factors are more important
than industry-specific factors.
C) Virtually all the studies have concluded that industry-specific factors are of almost
no importance.
D) Virtually all the studies have concluded that firm-specific factors are of almost no
importance.
E) Virtually all the studies have concluded that firm-specific factors and
industry-specific factors are of equal importance.
Answer:
Which of the following set of characteristics places a startup in the strongest position to
apply for equity funding?
A) weak cash flow, high leverage, low-to-moderate growth, unproven management
B) strong cash flow, low leverage, audited financials, good management, healthy
balance sheet
C) unique business idea, strong cash flow, low-to-moderate growth, broad market
D) strong cash flow, high leverage, low-to-moderate growth, unproven management
E) unique business idea, high growth, niche market, proven management
Answer:
Kendell Adams owns a software development company. When he first launched his
firm, he was careful to hire employees who had the experience he was looking for, were
good matches for the positions he had available, and could be properly supervised. As
Kendell’s firm has grown, and his need for employees has increased, he is finding that it
is increasingly difficult to find employees who have the qualifications he is looking for,
are good matches for the positions he has available, and fit within the supervisory
framework he has developed. Kendell is dealing with an issue referred to as:
A) adverse hazard
B) adverse selection
C) complicated hazard
D) ethical hazard
E) moral selection
Answer:
In the context of competitor analysis, ________ are companies that are not yet direct or
indirect competitors but could move into one of these roles at any time.
A) stable competitors
B) roundabout competitors
C) impending competitors
D) approximate competitors
E) future competitors
Answer:
Tiffany Smith owns a barbecue restaurant. One expense that Tiffany watches closely is
the cost of propane, which she uses to heat her ovens. The more barbecue food Tiffany
sells, the more it costs her for propane on a monthly basis. For Tiffany, the cost of
propane is a(n):
A) variable cost
B) secondary cost
C) resultant cost
D) fixed cost
E) irregular cost
Answer:
A master franchisee, in addition to having the right to open and operate a specific
number of locations in a particular area, also has the right to:
A) stop making royalty payments if its sales decline
B) sell products made by companies other than the franchisor
C) offer and sell the franchise to other people in its area
D) use its own operating manuals to run its franchise outlets
E) stop making royalty payments if it is losing money
Answer:
A ________ is a group of organizations with similar needs that band together to create a
new entity to address those needs.
A) joint venture
B) network
C) consortia
D) strategic alliance
E) trade association
Answer:
According to a recent PricewaterhouseCooper’s survey (cited in the textbook) of
rapid-growth entrepreneurial firms, ________ of the 350 firms surveyed sell in
international markets.
A) 15%
B) 25%
C) 46%
D) 77%
E) 90%
Answer:
Which of the following statements about copyrights is incorrect?
A) Businesses typically possess a treasure trove of copyrightable material.
B) A musical composition that is written down is copyrightable.
C) Copyrightable material may be in tangible or intangible form.
D) The 1976 Copyright Act governs copyright law in the United States.
E) A copyright is a form of intellectual property protection.
Answer:
The amount of money consumers pay to buy a product is its:
A) price
B) fee
C) value
D) cost
E) charge
Answer:
Economies of scale occur when:
A) increasing production lowers the average cost of each unit produced
B) increasing production increases the average cost of each unit produced
C) decreasing production lowers the average cost of each unit produced
D) decreasing production increases the average cost of each unit
E) increasing production increases the fixed cost of doing business
Answer:
Some industries, like the athletic shoe industry, are dominated by a small number of
firms with strong brands. These industries are difficult to break into without spending
heavily on advertising. The barrier to entry that the firms in these types of industries
have erected is referred to as:
A) government and legal barriers
B) capital requirements
C) product differentiation
D) cost advantages independent of size
E) access to distribution channels
Answer:
According to the textbook, the three numbers that receive the most attention when
evaluating an income statement are:
A) depreciation, interest income, and income tax expense
B) cost of sales, gross profit, and operating expenses
C) net sales, cost of sales, and operating expenses
D) gross profit, net sales, and incomes tax expense
E) gross profit, other income, and net income
Answer:
In regard to patent activity (issuance), which of the following statements is correct?
A) Small businesses outperform their larger counterparts.
B) Small businesses underperform their larger counterparts.
C) Small businesses and large businesses are relatively equal.
D) Small businesses are not active in patent activity.
E) Large businesses are not active in patent activity.
Answer:
To avoid making a hasty judgment, a franchisee may not purchase a franchise for
________ from the time the Franchise Disclosure Document is received.
A) 1 day
B) 3 days
C) 10 days
D) 14 days
E) 30 days
Answer:
According to Penrose, the set of opportunities a firm feels it is capable of pursuing is
referred to as the:
A) creative field of potential
B) productive opportunity set
C) prolific potential
D) passionate opportunity set
E) dynamic opportunity options
Answer:
The three reasons startups need funding are:
A) cash flow challenges, capital investments, and lengthy product development cycles
B) business research, cash flow challenges, and costs associated with building a brand
C) bonuses for members of the new venture team, attorney fees, and lengthy product
development cycles
D) attorney fees, capital investments, and marketing research
E) bonuses for members of the new venture team, marketing research, and personnel
costs
Answer:
According to the textbook, the single most important thing the founders of an
entrepreneurial venture can do is:
A) start a board of advisors
B) establish business partnerships
C) make money
D) select a limited liability corporation as opposed to an S-corporation
E) establish a strong ethical culture for their firms
Answer:
Market leadership occurs when:
A) a firm is the number one or the number two firm in an industry or niche market in
terms of net profits
B) a firm is one of the top five firms in an industry or market niche in terms of sales
volume
C) a firm earns twice as much as its closest competitor
D) a firm sells twice as much as its closest competitor
E) a firm is the number one or the number two firm in an industry or niche market in
terms of sales volume
Answer:
A board of directors has three formal responsibilities: appoint the officers of the firm,
oversee the affairs of the corporation, and:
A) conduct the annual meeting
B) provide funding for the firm
C) submit the firm’s annual report to the stockholders
D) declare dividends
E) write the firm’s strategic plan
Answer:
Which of the following statements is incorrect regarding the executive summary of a
business plan?
A) It is a short overview of the entire business plan.
B) In many instances an investor will first ask for a copy of a firm’s executive summary
and will request a copy of the full business plan only if the executive summary is
sufficiently convincing.
C) It is arguably the most important section of the business plan.
D) It should not exceed two single-spaced pages.
E) The executive summary is the first thing that should be written in preparing a
business plan.
Answer:
According to the textbook, international new ventures are:
A) businesses that have employees located in three or more countries
B) businesses that sell products in five or more countries
C) businesses that, from inception, seek to derive significant competitive advantage by
using their resources to sell products or services in multiple countries
D) businesses that are headquartered in a foreign country and export their products to
the United States
E) new ventures that export at least one-third of their products to foreign countries
Answer:
In general, industries are more attractive when:
A) the majority of the threats are high
B) the majority of the threats are low
C) the threat of each of the forces is neutralneither low nor high
D) the threat of each of the five forces is high
E) the threat of each of the five forces is low
Answer:
Kent Williamson owns a firm that manufacturers and sells electrical supplies. He is
currently trying to grow his firm through licensing and strategic alliances. Kent is
pursuing a(n):
A) domestic growth strategy
B) external growth strategy
C) subsidiary growth strategy
D) internal growth strategy
E) secondary growth strategy
Answer:
The What Went Wrong? feature in Chapter 5 focuses on Eclipse Aviation. What was
Eclipse Aviation’s goal?
A) to create a new segment in the private jet industry called very light jets.
B) to create a more affordable line of private two-seat and four-seat propeller planes
C) to create ultra-luxurious private jets
D) to create a low-cost airline to compete head-to-head with Southwest Airlines
E) to create a new segment in the passenger jet industry called very heavy jets
Answer:
According to our textbook, which of the following is not a quality to look for in
prospective franchisees?
A) individual, rather than team-oriented
B) ability to follow instructions
C) experience in the industry in which the franchisee operates
D) ability to operate with minimal supervision
E) adequate financial resources and a good credit history
Answer:
Describe the purpose of a nondisclosure agreement. Provide an example of when a
nondisclosure agreement kicks in.
Answer:
What are the primary day-to-day challenges involved with growing a firm? Briefly
describe each challenge.
Answer:
What is meant by the term “piercing the corporate veil”? How can the corporate veil be
pierced?
Answer:
Explain the difference between internal and external growth strategies. Provide
examples of each.
Answer:
List and briefly describe three specific steps that an entrepreneurial organization can
take to build a strong ethical culture.
Answer:
What is a copyright? What is protected by a copyright?
Answer:
What is a trademark? Why are trademarks important?
Answer:
What are forecasts? What role do they play in the preparation of pro forma financial
statements?
Answer:
Describe what a joint venture is. Identify the two types of joint ventures.
Answer:
Describe the four main characteristics of successful entrepreneurs.
Answer:
What is the difference between a product and trademark franchise and a business format
franchise? Which type of franchise is most common for entrepreneurial firms?
Answer:
What is a skills profile and what is it used for?
Answer:
Identify the five competitive forces that determine industry profitably. Explain the
purpose of analyzing these forces?
Answer:
What is competitive intelligence? What are some of the ways that a firm can ethically
obtain information about its competitors?
Answer:
What is industry analysis? Why is it important for a new venture to complete a
thorough analysis of the industry it is entering?
Answer:
What is a tagline? Provide an example of a popular tagline, and discuss why you think
it has been effective?
Answer:
What is gumshoe research and why is it important?
Answer: