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True / False
1. Risk is a fact of life, but a company's exposure to risk decreases as the venture grows.
a.
True
b.
False
2. The common practice of outsourcing the upstream activities of the business - raw materials, manufacturing, assembly,
and inventory - provides many advantages with little risk to the entrepreneur.
a.
True
b.
False
3. It is extremely difficult to calculate with any degree of accuracy the probability that a given risk will occur.
a.
True
b.
False
4. The U.S. Chamber of Commerce reports that piracy costs the United States alone over $250 billion annually and
750,000 lost jobs every year.
a.
True
b.
False
5. Early in the operation of the business, it is important to identify a qualified attorney familiar with the industry to handle
any potential product liability claims.
a.
True
b.
False
6. Companies that rely heavily on Internet-based systems will want to get advice about securing a cyber insurance policy.
a.
True
b.
False
7. Over half of family-owned businesses do not continue into the second generation.
a.
True
b.
False
8. Harvest entrepreneurs start and build a venture for the purpose of selling it.
a.
True
b.
False
9. The consolidation play has become a way for many small business owners to realize the wealth they created in their
business.
a.
True
b.
False
10. Expansion is a naturel by-product of a successful startup.
a.
True
b.
False
Multiple Choice
11. ____ refers to situations where a probability of the risk occurring and its potential impact can be calculated because at
least some of the variables involved in the decision can be controlled.
a.
Voluntary bankruptcy
b.
Risk
c.
Uncertainty
d.
Liquidation
e.
None of these choices
12. Traditional risk management proponents have typically adopted a/an ____ that sees risk as a physical property that has
associated probabilities of occurrence.
a.
objectivist view
b.
subjectivist view
c.
historical view
d.
Bayesian view
e.
None of these choices
13. During startup, the entrepreneur’s main concerns are to ensure sufficient startup capital, _____, and design a way to
deliver the product or service.
a.
Add human resources
b.
Seek customers
c.
Market the product
d.
Manage cash flow
e.
Innovate
14. ____ plans help a growing business deal with events that regularly - and often without much warning - disrupt the
equilibrium of the firm.
a.
Risk assessment
b.
Contingency
c.
Liquidation
d.
Bankruptcy
e.
Succession
15. Which of the following is not involved in risk assessment?
a.
Identifying the potential risks associated with the venture
b.
Calculating the probability the risks will occur
c.
Assigning a level of importance to the losses
d.
Calculating the overall loss risk
e.
Securing a knowledgeable attorney
16. ____ are used to protect a company against potential risk that can't be prevented.
a.
Buffer strategies
b.
Process improvement strategies
c.
Contingency strategies
d.
Objectivist strategies
e.
Supply chain strategies
17. The overall ____ is simply the product of the probability of occurrence times the cost of the impact to the business
times the level of significance of that impact.
a.
liquidity
b.
equity
c.
risk of loss
d.
cost to the business
e.
cost benefit analysis
18. Smaller businesses for sale often use the services of ____.
a.
investment bankers
b.
investment advisors
c.
financial attorneys
d.
business brokers
e.
None of these choices
19. A license agreement is a grant to someone else to use the company’s _____ and exploit it in the marketplace by
manufacturing, distributing or using it to create a new product.
a.
Supplier
b.
Distribution
c.
Marketing plan
d.
Customer base
e.
Intellectual property
20. With a/an _____ strategy, either the company gains control of some or all of its suppliers or it becomes its own
supplier by starting another business from scratch or acquiring an existing supplier that has a successful operation.
a.
Modular
b.
Forward
c.
Backward
d.
Expansion
e.
Diversification
21. A firm entering a _____ market in an established industry with an innovative product can experience rapid rates of
growth.
a.
Technology
b.
Slow growth
c.
Niche
d.
Diversified
e.
Local
22. Bankruptcy under ____ consists of the liquidation of the assets of the business and the discharging of most types of
debt.
a.
Chapter 7
b.
Chapter 11
c.
voluntary circumstances
d.
involuntary circumstances
e.
Chapter 13
23. A reorganization of the finances of the business so that it can continue to operate and begin to pay its debts is a/an
____.
a.
Chapter 7 reorganization
b.
voluntary bankruptcy
c.
Chapter 11 reorganization
d.
involuntary bankruptcy
e.
Chapter 13 liquidation
24. It is an unfortunate fact of life that some entrepreneurs must exit their business through ____.
a.
liquidation
b.
purchase agreement
c.
buy-sell agreements
d.
ESOP
e.
phased sale
25. In a/an ____, the entrepreneur has the ability to cash out a portion of his or her investment and still manage the
business for an agreed-upon time when the business is sold at a prearranged price.
a.
consolidation
b.
buy-sell agreement
c.
asset sale
d.
phased sale
e.
ESOP
26. ____ purchase a product at a discount off list, sell it and handle collections, solving the problem of cultural differences
in transactions.
a.
Brokers
b.
Agents
c.
ETCs
d.
Intermediaries
e.
Freight forwarders
27. By focusing on what the entrepreneur does best, and letting others do the rest, the _____ strategy helps the business
grow more rapidly, keeps unit costs down, and turns out products more quickly.
a.
Vertical integration
b.
Alliance
c.
Horizontal integration
d.
Diagonal leverage
e.
Circular integration
28. Strategies that take the business into the international arena are _____ strategies.
a.
Global
b.
Diversified
c.
Intensive growth
d.
Integrative growth
e.
Conglomerate
29. To prepare the best defense against a cash flow crisis, the entrepreneur must be continually committed to all of the
following except ____.
a.
leveraging financing
b.
producing goods of exceptional quality
c.
controlling the cost of overhead
d.
having a contingency plan in place
e.
controlling the cost of production
30. When sales decline and positive cash flow starts looking like a memory, entrepreneurs often go ____.
a.
to their banker/lender
b.
to their accountant
c.
into action
d.
into a period of denial
e.
to friends and family
31. An integral part of a team-based approach to organizational management is ____.
a.
contingency planning
b.
management by objectives
c.
cross-training
d.
employee empowerment
e.
human resource management
32. According to Pasmore and Torres, the second step in succession planning is ____.
a.
announcement of the process
b.
transition
c.
execution of the search
d.
situation assessment
e.
key-person insurance
33. Most product liability insurance covers all of the following except ____.
a.
cost of defense
b.
personal injury
c.
property damage
d.
lost sales
e.
None of these choices; that is, all are usually covered
34. The cost of hiring an employee is becoming so high that many companies are solving the problem by ____.
a.
using employment agencies
b.
subcontracting work
c.
hiring management consultants
d.
downsizing operations
e.
raising prices
35. Once the business has successfully passed through the rapid growth phase and is able to effectively manage the
financial gains of growth, it will have reached _____.
a.
A break-even state of revenues
b.
Stable growth and maintenance of market share
c.
The cost of goods sold
d.
Its maximum retained earnings and net income
e.
Global growth
36. Failure at the rapid growth stage for an entrepreneur may be due to all of the following except:
a.
Uncontrolled growth
b.
Lack of cash
c.
Insufficient management expertise
d.
Public offering of the company
e.
Lack of delegation of control and accountability
37. By forcing entrepreneurs to consider multiple outcomes and possibilities, contingency plans help a growing business
deal with all of the following except ____.
a.
downturns and upturns in the economy
b.
new regulations
c.
changes in customer tastes and preferences
d.
exit strategies
e.
litigation
38. The immediately precipitating cause that forces a corporation into bankruptcy is ____.
a.
failure to pay debt
b.
failing to assess risk
c.
shifts in demand
d.
supplier problems
e.
None of these choices
39. Groups of hackers that act in the national interests of the country that sponsors them to provide nearly constant attacks
on the national security infrastructure of countries are known as ____.
a.
cyber militia
b.
cyber risk
c.
hacker militia
d.
security risks
e.
None of these choices
40. "What skills and experience does the second generation need to acquire?" and "What is the second generation's
expectation for the future of the business, and is it congruent with the company's vision?" are two of the questions that
should be examined to start the process of ____ planning.
a.
long-range
b.
short-range
c.
succession
d.
operational
e.
contingency
Subjective Short Answer
41. List the four stages of growth in a new venture, and briefly describe them.
42. List the steps involved in choosing an intermediary.
43. What are the four steps to determining overall loss risk?
44. An effective contingency plan will answer what important questions?
45. What is Chapter 11?
46. What is Chapter 7?
47. List some events that cause a company to go bankrupt.
48. List some supply chain risks.
49. Define and explain process improvement strategies.
50. Why is succession planning important?
