Typical venture capitalists invest approximately ____ of their investment in later-stage
businesses.
a. one-fourth
b. one-half
c. three-fourths
d. nearly all
Leasing employees is a good alternative for small businesses because
a. leasing companies take care of much of the personnel paperwork.
b. leasing companies decide who gets promoted.
c. leasing companies charge the employees, not the small business.
d. small companies that use leasing companies are exempt from regulations such as the
Americans with Disabilities Act.
Bob’s Bistro and Come-by & Take-out are two restaurants located within one mile of
each other, but they operate within two separate city jurisdictions. Which of the
following best describes the legal and competitive situation for these two businesses?
a. Local environmental laws may prove discriminatory by forcing higher costs on one
competitor than the other.
b. Federal law may create a competitive advantage for one of these two restaurants.
c. The legal situation will not impact the competitive situation of these two businesses.
d. These two firms have equal chances of competing because they both tap the same
market.
While running a family business, a couple is experiencing a strain on family
relationships. Which of the following might be the most likely cause of the tension?
a. The wife holds the top position in the firm.
b. The husband started the business.
c. The roles of both parties are carefully defined.
d. They have a difference of opinion about a business matter.
The owner of a new venture wants to supplement the managerial talent of its
management team by drawing on outside assistance. Which of the following would be
the least likely source of help?
a. A commercial bank
b. A certified public accounting firm
c. An attorney
d. The Small Business Administration
Which of the following is not one of the limitations encountered by small businesses
when they forecast sales?
a. Entrepreneurial inexperience
b. Limited familiarity with the forecasting process
c. Deficient quantitative analysis skills
d. Lack of sources of current information about business trends
A parent might attempt to resolve a transfer of ownership by giving active children in
the firm’s management _________ stock and giving nonactive children ______ stock.
a. distributed, undistributed
b. growth, speculative
c. common, preferred
d. dowry, canonical
Which of the following is not one of the common harvest strategies used by small
businesses?
a. Releasing the firm’s cash flows to its owners
b. Offering stock to the public in an IPO
c. Completing a private placement of a stock
d. Inviting a friendly takeover
The United States Patent and Trade Office rejected Microsoft’s 1990 effort to gain
exclusive rights to the name Windows. This decision illustrates the fact that
a. copyright protection has its limits.
b. design patents do not cover computer software applications.
c. trade dress will not cover the “look and feel” of a product, as Microsoft claimed.
d. common-law rights do not always justify trademark protection over a generic term.
Damage to a building due to a tornado is a ___________ loss.
a. real property
b. personal property
c. consumer
d. uninsurable
You Make the CallSituation 1
Jeremy Shepherd is the founder of PearlParadise.com, in Santa Monica, California. His
jewelry business recognizes the importance of ensuring that customers keep them
coming back.
However, Shepherd is uncertain as to which customer retention techniques he should
use to develop a strong foundation of repeat customers. PearlParadise.com’s Web site
has the software capabilities to support customer interaction.
Source: Melissa Campanelli, “Happy Returns,”
www.entrepreneur.com/mag/article/0,1539,312420,00.htm, January 2004.
Question 1 What customer loyalty techniques would you recommend to Shepherd?
Question 2 What information would be appropriate to collect about customers in a
database?
Question 3 What specific computer-based communication could be used to achieve
Shepherd’s goal?
A strategic alliance is
a. an organizational relationship that links two separate businesses.
b. an unimportant organizational form in today’s business environment.
c. an attempt to duplicate efforts between two firms.
d. a strategy that, as a result of its unwieldy nature, is falling from practice.
You Make the CallSituation 4
Phil Damiani and Kenny Lee own and operate the Ooof Ball Company in Media,
Pennsylvania. For four years, they have been establishing a market for their bouncy
medicine ball, which is promoted as “building muscle while improving coordination.”
Their promotional task is continually handicapped by a minimal ad budget and an
unproven product. Both Dimiani and Lee believe that their major challenge is to bring
the product into the public eye and get people talking about it.
Question 1 What promotional techniques might be appropriate for this situation? Why?
Question 2 How important would a trade show exhibit be to this promotional effort?
Question 3 Do you believe word-of-mouth advertising would be important to this
product? Why or why not?
Which of the following is one of the seven sources of opportunities in the environment
recognized by Peter Drucker?
a. The unbelievable
b. The undeniable
c. The incongruous
d. The new
Assume that the physical property of a business is valued at $50,000. The company’s
commercial property policy contains a coinsurance clause with a stated percentage of
80 percent. The company insures the property for $30,000 (75 percent of the specified
minimum). The company incurs a fire loss of $20,000. How much of the loss will the
insurance company pay for?
a. $20,000
b. $15,000
c. $0
d. $10,000
BOP medical payments coverage provides payment for injuries sustained by
a. employees.
b. customers.
c. business owners.
d. all of these answers.
What type of idea accounts for the largest number of startups?
a. A technically new process
b. Performing an old function in a new and improved way
c. Using prior work experience as a basis for starting a new business
d. Providing customers with a product or service absent in their market but available
elsewhere
Slow-paying credit accounts
a. almost always help to build goodwill with customers.
b. yield advantages from carry-over effects.
c. tie up the seller’s working capital.
d. are rarely a problem for small businesses.
The right combination of advertising media depends on
a. the type of business.
b. customer income.
c. the ad agency.
d. the class of the customer.
Productivity improvements
a. are most likely in service operations.
b. may be enhanced by quality improvements.
c. are the result of a firm’s doing less with more.
d. are dependent on the standard of living.
A Better Business Bureau should
a. help enforce laws regulating conduct of local businesses.
b. promote ethical conduct on the part of business firms in the community.
c. provide free consumer education classes.
d. lobby for improved legislation to protect consumers.
One drawback of entrepreneurship is the
a. routine and boring work.
b. requirement that the business pay a minimum wage.
c. need to participate in civic activities.
d. risk of business failure.
A two year-old asset has a depreciable life of 10 years. Its initial purchase cost was
$450,000 and it is depreciated by 10 percent annually. What is the remaining
depreciable value of the asset?
a. $ 0.00
b. $90,000
c. $200,000
d. $360,000
Nina should use ___________ if she must cover operating expenses, subsequent price
reductions, and achieve a desired profit level.
a. markup pricing.
b. price lining.
c. break-even pricing.
d. cost-based pricing.
An employer who hires an employee through a public employment office pays the
employment office a fee of
a. nothingthis is a free service.
b. one month’s salary.
c. one-tenth of the employee’s yearly salary.
d. $250, the standard amount.
Which one of the following is not true with respect to pricing in a small business?
a. Continual price adjustments can be both costly to the seller and confusing to buyers.
b. In some situations, local, state, and federal laws must be considered when setting
prices.
c. Conducted properly, price determination is an exact science.
d. Systems of discounts are often used to adjust prices to meet a variety of market
needs.
Writing a business plan should be thought of as
a. the means to an end product.
b. an ongoing process.
c. an absolute essential to the startup of businesses.
d. a mental exercise.
Net cash flow
a. is the difference between cash inflows and outflows.
b. is the difference between revenues and expenses.
c. is the same as net profit.
d. has little impact on a firm’s financial well-being.
Which of the following best characterizes business valuation?
a. Valuation is almost a perfect science.
b. Since there are so many intangibles, valuation is mostly an art.
c. The buyer determines the value of a business.
d. Negotiation skills play an important part in valuation.
The market analysis section of the marketing plan should include
a. sales options.
b. a customer profile.
c. a statement of marketing tendencies.
d. a summary of market philosophies.
During an interview, an employer
a. can evaluate the appearance, job knowledge, intelligence, and personality of the
applicant.
b. can judge an applicant without any further research.
c. should do most of the talking.
d. should find out whether a young woman plans to stay home with her children when
they are born.
If Bill Bailey, owner of Cherokee Communications, had violated the covenants of his
loan agreement,
a. the loan payments would have been automatically rescheduled.
b. the loan interest rate would have increased to maximum legal rate.
c. the borrower’s liability would have become unlimited.
d. the lender could have declared the loan due in full immediately.
Economic benefits associated with maintaining relationships with current customers
include:
a. Acquisition costs for new customers are huge.
b. New customers spend more money than long-time customers.
c. Order processing costs are lower for new customers.
d. All of these.
Discounted cash flow techniques consider the time value of money.
Stewardship delegation focuses on results in judging the performance of a subordinate
in carrying out assigned tasks.
Explain the concept of family and business overlap in a family business.
The income statement shows the profit or loss from a firm’s operations over a given
period of time.
Sometimes an attorney can insert special clauses into a lease agreement that will allow
the lessee to exit the agreement under certain circumstances.
List the key elements that make up the financial plan component of the business plan
and identify important considerations in the construction of the financial plan.
You Make the CallSituation 1
In one small firm, the owner-manager and his management team use various methods to
delegate decision making to employees at the operating level. New employees are
trained thoroughly when they begin, but no supervisor monitors their work closely once
they have learned their duties. Of course, help is available as needed, but no one is there
on an hour-to-hour basis to make sure employees are functioning as needed and that
they are avoiding mistakes.
Occasionally, all managers and supervisors leave for a day-long meeting and allow the
operating employees to run the business by themselves. Job assignments are defined
rather loosely. Management expects employees to assume responsibility and to take
necessary action whenever they see that something needs to be done. When employees
ask for direction, they are sometimes simply told to solve the problem in whatever way
they think best.
Question 1 Is such a loosely organized firm likely to be as effective as a firm that
defines jobs more precisely and monitors performance more closely? What are the
advantages and the limitations of the managerial style described above?
Question 2 How might such managerial methods affect morale?
Question 3 Would you like to work for this company? Why or why not?
List and describe the critical resource considerations that should guide the location
decision?
Identify some of the advantages and disadvantages of a sole proprietorship.
A small business can facilitate the orientation process by providing an employee
handbook, which outlines the company’s practices and procedures.
Small businesses cannot offer cafeteria plans because they are too difficult to
implement.
A profitable company does not necessarily have positive cash flows.
Companies that lease employees to small businesses charge a fee of 1 to 5 percent of
payroll.
In order to safeguard business assets and prevent errors, accounting records should be
accurately maintained, transaction by transaction, by one individual.
The purpose of determining the value of a business is to provide a benchmark for use in
negotiating the purchase price of the business.
When a strategist divides the total market for a product or service into groups with
similar needs, so that each group is likely to respond to the same marketing strategy, he
or she is engaging in a practice called market segmentation.
Determining market potential is the process of locating and investigating buying units
that have purchasing power and needs that can be satisfied with the product or service
being offered.