The ideal period of life for starting a business is
a. between the mid-20s and mid-30s.
b. during the 20s.
c. between the late 20s and early 40s.
d. between 40 and 55.
In a line organization, each employee has
a. one supervisor.
b. two supervisors.
c. three supervisors.
d. an indefinite number of supervisors.
Which of the following sayings would best summarize the relationship between social
responsibility and small firm performance?
a. Crime pays.
b. Nice guys can finish first.
c. A bird in the hand is worth two in the bush.
d. Better to be the head of a chicken than the tail of a cow.
Trade-credit agencies collect credit information on business firms and consumers in a
given area.
The federal government provides funds to small businesses through
a. venture capital companies.
b. the Small Business Administration.
c. business angels.
d. the Securities and Exchange Commission.
Popularity, use of cash flows rather than accounting profits, and failure to consider the
time value of money characterize
a. the payback period technique.
b. discounted cash flow techniques.
c. the investment outlay valuation technique.
d. long-term investment analysis.
A key characteristic of a partnership is that each partner
a. must contribute capital to the business.
b. shares in company assets upon the dissolution of the partnership.
c. is capable of legally contracting.
d. must manage the business.
Entrepreneurs should base their market assessments, production schedules, inventory
policies, and personnel decisions on
a. techniques of observation.
b. qualitative analysis.
c. intuition alone.
d. the sales forecast.
The hallmarks of business integrity include all of the following EXCEPT:
a. duplicity.
b. reliability.
c. honesty.
d. fairness.
A loan covenant is very unlikely to require
a. provision of timely and complete information.
b. salary limitations.
c. a personal guarantee.
d. a fixed business strategy.
Businesses that operate in the home
a. can increase profits by decreasing costs.
b. require customer traffic.
c. are called family businesses.
d. are less common today than they were 10 years ago.
Resources are best described as
a. those basic inputs that a firm uses to conduct its business.
b. only those features that are visible and easy to quantify.
c. the firm’s lending capacity.
d. capabilities that can be exploited.
Special-purpose equipment is generally difficult for small manufacturers to use unless
a. the plant has mostly short production runs.
b. the plant produces a standardized product in a large enough volume.
c. the plant is set up in a process layout.
d. the plant can be used for multiple purposes.
Attractiveness of a target market _________ as the time required to breakeven in the
market _________.
a. increases, decreases.
b. increases, increases.
c. decreases, decreases.
d. is unchanged, decreases.
For small service or retail businesses, the top priority in location decisions is
a. personal preference.
b. resource availability.
c. customer accessibility.
d. environmental conditions.
The export strategy option involves
a. the sale of goods from abroad in the home country.
b. the sale of products produced in the home country to customers in another country.
c. the purchase of the right to manufacture and sell a firm’s product in overseas markets.
d. the authorized use of intellectual property.
A manager of a small plumbing company is thinking about installing a total quality
management (TQM) program. If TQM is installed, the manager should be aware that
a. costs cannot be allowed to limit quality goals.
b. quality must become a very important goal of the business.
c. ISO 9000 will be the controlling criterion.
d. reengineering is the most direct route to effective TQM.
A primary benefit deriving from the strength of family relationships is the willingness
of family members to
a. adopt new operating methods when needed.
b. act generously in compensating nonfamily employees.
c. sacrifice salaries and dividends when necessary.
d. emphasize short-run profits.
Doug’s BOP on his fishing guide business excludes property losses due to the wakes of
other fishing boats. This is an example of the _______ approach to property insurance.
a. foreseen risk
b. reasonable-person standard
c. named-peril
d. insurance-to-value
A competitor would likely use a _______ pricing strategy for a gaming console
intended to compete directly with Sony’s Playstation gaming console.
a. follow-the-leader
b. penetration
c. variable
d. prestige
Handyman Hardware, a small community-based store, offers its consumers the option
of using credit. Creditworthy individuals are able to use the “HH Credit Card” for all
purchases up to a credit limit of $1,000. Consumers are required to pay at least 20
percent of their outstanding balance at the end of each month. A two percent finance
charge is assessed on the unpaid balance at the end of each billing cycle. Handyman
Hardware is employing _____ in its business.
a. open charge accounts
b. installment accounts
c. revolving charge accounts
d. selective accounts
The ‘spending as much as the competition” method
a. can be used to duplicate the promotional efforts of close competitors.
b. should never be used.
c. depends on past experiences.
d. should be used to introduce a unique, new product.
Regardless of the method used to interpret financial statements, this should be able to
answer the following question:
a. Does the firm have the capacity to meet its long-term financial commitments?
b. Is the firm producing adequate operating profits on its short-term investment?
c. How is the firm financing its assets?
d. Is the firm generating sufficient returns on sales to cover its liabilities?
In a business plan, discussion of the management plan should detail
a. the proposed venture’s organizational structure.
b. profiles of employee needs during the first three years of operation.
c. the projected growth of the proposed venture.
d. the intended distribution of ownership in the firm.
One function of a Better Business Bureau is to
a. survey businesses in a community to determine which are ethical.
b. take legal action against businesses for unethical conduct.
c. provide customers with free buying guidelines and information about local
companies.
d. advertise against unethical business practices.
The consulting resources of universities are made available to small business firms by
a. student consulting team programs.
b. SCORE.
c. business incubators.
d. management consultants.
Salvatore intended from the start that his small pasta firm would sell its products in
overseas market, some would say the business
a. was intentionally internationally diverse.
b. was sure to succeed.
c. was “born global.”
d. had no choice but to move forward with plans for internationalization.
Exiting or harvesting encompasses
a. merely selling and leaving a business.
b. the creation of future options.
c. the establishment of a benchmark for firm risk.
d. capturing future profitability.
When a small firm is launched with cross-border activities in mind, some would say the
business
a. is internationally diverse.
b. has been “born global.”
c. is sure to succeed.
d. has no choice but to move forward with plans for internationalization.
A firm’s marketing philosophy determines how strategic marketing activities are used to
achieve
a. efficiency.
b. customer response.
c. desirable thought patterns.
d. business goals.
Which of the following is a recognized segment of the general environment?
a. The industry segment
b. The global segment
c. The information segment
d. The human factors segment
S corporations are taxed as
a. proprietorships.
b. partnerships.
c. C corporations.
d. domestic corporations.
The _____ shows the results of a firm’s operations over a period of time, usually one
year.
a. income statement
b. balance sheet
c. statement of cash flow
d. statement of financial position
All of the following are considered attractive characteristics of franchising except
a. higher success rates than for alternative methods.
b. entrepreneurial independence.
c. financial and training assistance.
d. operating benefits.
What four variables drive the amount of profit a company earns?
Most small firms pass on the costs of environmental regulation to customers.
Trademark and service mark are legal terms indicating the exclusive right to use a
brand.
Some cash receipts are not, and never become, revenue.
You Make the CallSituation 2
John Kowalski, of Aliquippa, Pennsylvania, is the man behind the Load Hog, a device
that enables pickup truck beds to function like dump trucks. The Load Hog evolved
from a product originally introduced by an Australian importer back in 1992. After
years of product development by Kowalski, the Load Hog, with a price tag of $350,000,
exhibits virtually no trace of the Australian product.
Kowalski and his wife, Carol, have promoted the Load Hog to truck dealers as an
after-market product. They have exhibited at outdoor-vehicle and specialty-equipment
shows and have sold around 400 of the units by mail order. More recently, they have
launched a Web site (http://www.loadhog.com).
Source: Leigh Buchanan, “Pickup Artist,” Inc., Vol. 23, No. 8 (June 2001), pp. 68″73.
Question 1 Do you think there may be other channels of distribution that Kowalski
might use? If so, what are they?
Question 2 What other related products might be added to the product mix?
Question 3 What do you think about the choice of the name for the device?
Accounting return on investment equals the average annual after-tax profits per year
divided by the average book value of the investment.
You Make the CallSituation 1
Steve Jones is the 35-year-old owner of a highly competitive small business, which
supplies temporary office help. Like most businesspeople, he is always looking for
ways to increase profit. However, the nature of his competition makes it very difficult
to raise prices for the temps’ services, while reducing their wages makes recruiting
difficult. Jones has, nevertheless, found an areabad debtsin which improvement should
increase profits. A friend and business consultant met with Jones to advise him on credit
management policies. Jones was pleased to get this friend’s advice, as bad debts were
costing him about 2 percent of sales. Currently, Jones has no system for managing
credit.
Question 1 What advice would you give Jones regarding the screening of new credit
customers?
Question 2 What action should Jones take to encourage current credit customers to pay
their debts? Be specific.
Question 3 Jones has considered eliminating credit sales. What are the possible
consequences of this decision?
What are the specific services that an advertising agency can provide?
Raw materials represent one input into the operations process.
International firms often have to deal with the problem of counterfeit goods, but foreign
licensing can help to shield the small business from this threat.
Importing is the “flip side” of exporting.
In Stage II of leadership succession, the introductory stage, the successor becomes
acquainted with the family business by playing on the business’s premises or around its
equipment.
Serendipity is a term describing a new product idea resulting from deliberate search
activities.
You Make the CallSituation 1
In 2005, Carter Dalton purchased the Baugh Company. Although the firm has
consistently earned profits, little cash has been available for other than business needs.
Before purchasing Baugh, Dalton thought that cash flows were generally equal to
profits plus depreciation. However, this does not seem to be the case. The industry
norms for the financial ratios and the financial statements (in thousands) for the Baugh
Company, 2004″2005, follow.
Question 1 Why doesn”t Dalton have cash for personal needs? (As part of your
analysis, measure cash flows, as discussed in Chapter 10.)
Question 2 Evaluate the Baugh Company’s financial performance, given the financial
ratios for the industry.
According to the Nutrition Labeling and Education Act of 1990, food products
addressed must have a standard nutrition label, listing the amount of calories, fat, salt,
and nutrients contained.
Though it is not really related to quality, employee performance is an important factor
to the small business.