The son or daughter begins to function as a part-time employee in a family business
during the
a. pre-business stage.
b. introductory stage.
c. introductory functional stage.
d. early succession stage.
An understanding of the present value of a future dollar is important when one is using
a. the payback period method.
b. discounted cash flow techniques.
c. the accounting return on investment technique.
d. the investment outlay valuation technique.
In resolving differences among family members in a family business, the entrepreneur’s
spouse most typically functions as
a. arbitrator.
b. mediator.
c. director.
d. coach.
Explain the strengths of each of the following as a source of employees: (a) walk-ins,
(b) schools, (c) public employment offices, (d) private employment agencies, (e)
executive search firms, (f) employee referrals, (g) Internet recruiting, (h) help-wanted
advertising, and (i) temporary help agencies.
Investors who read business plans can be described as
a. one-minute investors.
b. two-hour investors.
c. half-day investors.
d. weekend investors.
An entity or individual granted the right to conduct business according to specified
methods and terms of another party is known as a
a. franchisor.
b. franchisee.
c. franchise.
d. licensee.
The viewpoint expressed in the textbook is that social responsibility should be
recognized by
a. manufacturing firms in particular, since they tend to pollute more.
b. businesses that operate in communities with greater social needs.
c. small businesses.
d. any firm that wants to make profits quickly.
The sales forecasting procedure in which the forecaster begins with a variable that has a
very large scope and then systematically works down to the sales forecast is known as
the
a. breakdown process.
b. buildup process.
c. chain-linkage method.
d. bottom-up method.
The terms 3/10, net 30 offer
a. a 3 percent discount on purchases paid for within 30 days.
b. a 30 percent discount on purchases paid for within 30 days.
c. a 3 percent discount on purchases paid for within 10 days.
d. a 30 percent discount on purchases paid for within 10 days.
A local building inspector suggested to a small business owner that a generous “tip”
would help speed up the process of gaining approval for some new construction. The
power of a small business firm to resist such pressure is
a. greater than that of a big business.
b. less than that of a big business.
c. equal to that of a big business.
d. dependent on the type of construction.
SCORE refers to
a. the grade assigned to a small firm by the SBA.
b. the management knowledge possessed by an entrepreneur.
c. a group of retired executives who act as consultants to small firms.
d. an alliance of small firms for the purpose of bidding on government contracts.
Experience has shown that an effective plan should
a. be very long.
b. be encyclopedic in detail.
c. be brief.
d. emphasize budgets above all else.
Activities easily outsourced by small businesses include
a. payroll administration.
b. research and development.
c. quality control.
d. top-level decision making.
The primary outside users of business plans are
a. suppliers.
b. investors and lenders.
c. customers.
d. government agencies.
Which of the following does not describe a method of determining promotional
expenditures?
a. Matching industry forecasts
b. Spending as much as the competition
c. What can be spared
d. What it will take to do the job
Upon the death of the majority stockholder in a corporation, direct control may pass to
a. an heir’s dependents.
b. an executor.
c. the founder of the firm.
d. employees as directed by an employee stock ownership plan.
Karl Milgram is concerned that many employees who successfully passed their
employment test later perform poorly on the job. He believes the employment test lacks
a. applicability
b. interpretability.
c. reliability.
d. validity.
Identifying all buyers in a market’s submarkets and then adding up the estimated
demand is known as the _____ sales forecasting approach.
a. breakdown process
b. buildup process
c. chain-ratio method
d. bottom-up
One of the factors that influences the choice between debt and equity is the
a. returns anticipated from the enterprise.
b. risk of nationalization.
c. degree of control the owners hope to retain.
d. state of the owners’ estate plan.
Accounts receivable financing might include
a. pledging receivables and factoring.
b. loaning money against receivables and aging accounts receivable.
c. providing cash discounts and charging interest on delinquent accounts.
d. aging accounts receivable and using the most effective methods for collecting
overdue accounts.
Valerie Weatherspoon has been described as a “free spirit.” She has tolerated but seldom
appreciated parental, academic, or even job authority. The factor most likely to lure her
to entrepreneurship is
a. profit opportunities.
b. freedom to operate independently.
c. enjoyment of doing what she likes to do.
d. satisfaction in serving the community through the business.
In his study of good-to-great companies, Jim Collins found that the great companies
first
a. “got the bus out of the barn.”
b. “took the bus to the right mechanics.”
c. “got the right people on the bus.”
d. “got the bus in high gear early on.”
When it comes to gaining access to resources, a traditional motivation for going global
has been to
a. take advantage of unique features of the local market.
b. find raw materials.
c. change the shape of the product life cycle.
d. serve the local community through the business.
Peter Herring, a 32-year-old American, has decided to use set up an import/export
business with friends in Thailand that he met in his MBA program. One good source of
valuable information and advice about starting and maintaining the business would be
the
a. Small Business Administration.
b. Office of Export Trade.
c. International Export Board.
d. Foreign Service Office.
The basis of the perceptions of entrepreneurs and investors about a new venture
a. are very different.
b. are somewhat different.
c. are somewhat the same.
d. are identical.
A busy owner-manager is trying to cope with the problem of excessive time pressure
that requires her to work 60 to 70 hours per week. She should realize that this work
schedule is
a. light, because 50 percent or more of all owner-managers work 80 hours or more per
week.
b. fairly typical, because many owner-managers work this amount or more each week.
c. heavy, because more than one-half of all owner-managers work a normal 40 to 45
hour week.
d. unusually heavy, because most owner-entrepreneurs function as idea people, leaving
the details to others and working only 20 to 30 hours per week on average.
The key to strong management in a new firm is
a. balance, with each member having competence in at least one area.
b. financial competence of the chief executive.
c. a strong marketing manager.
d. close friendship among all members of the team.
Business interruption insurance covers
a. lost income.
b. shoplifting.
c. debts to suppliers.
d. defective products.
The life cycle of receivables begins with which of the following stages?
a. A credit sale
b. The processing of an invoice by a customer
c. Funds remittance
d. Collection
A 32-year-old manager lost his job because of cutbacks in staff, so he immediately
made plans to open his own business. For him, the loss of a job was
a. a window of opportunity.
b. a loss of self-confidence.
c. a precipitating event.
d. evidence of an external locus of control.
Highlights from various sections of a business plan appear in the
a. financial plan.
b. general company description.
c. executive summary.
d. operating plan.
A focus strategy is best described as
a. an attempt to compete directly with industry giants.
b. a domestic marketing strategy.
c. a strategy that isolates the firm from market forces.
d. targeting the high end of a market.
Most startup investors limit their investing to firms that offer potentially high returns
within a one-to-three-year period.
Explain the purpose, nature, and distinctive features of reengineering.
A cost-based strategy requires a firm to create and sustain differentiation in the
marketplace.
Every applicant is credit worthy to some degree.
Legal commitments of an existing business are not a factor that needs to be evaluated
by a prospective buyer.
Perhaps the easiest way to break into international markets is to use a trade
intermediary.
The term entrepreneur is understood in this text to refer only to founders of small
businesses.
Customer satisfaction is not the means to achieving a certain goalit is the goal.
You Make the CallSituation 3
The owner of a small food products company was confronted with an inventory control
problem involving differences of opinion among his subordinates. His accountant, with
the concurrence of his general manager, had decided to “put some teeth” into the
inventory control system by deducting inventory shortages from the pay of route drivers
who distributed the firm’s products to stores in their respective territories. Each driver
was considered responsible for the inventory on his or her truck.
When the first ‘short” paychecks arrived, drivers were angry. Sharing their concern,
their immediate supervisor, the regional manager, first went to the general manager and
then, getting no satisfaction there, appealed to the owner. The regional manager argued
that there was no question about the honesty of the drivers. He said that he personally
had created the inventory control system the company was using, and he admitted that
the system was complicated and susceptible to clerical mistakes by the driver and by
the office. He pointed out that the system had never been studied by the general
manager or the accountant, and he maintained that it was ethically wrong to make
deductions from the small salaries of honest drivers for simple record-keeping errors.
Question 1 What is wrong, if anything, with the general manager’s approach to making
sure that drivers do not steal or act carelessly? Is some method of enforcement
necessary to ensure careful adherence to the inventory control system?
Question 2 Is it wrong to deduct from drivers’ paychecks shortages documented by
inventory records?
Question 3 How should the owner resolve this dispute?
Most employee-oriented risks are not insurable.
The major difference between cash-basis accounting and accrual-basis accounting lies
in when the firm recognizes revenue and profits.
Customer relationship management means the different things to different people.
Sales promotion refers to promotional techniques other than personal selling or
advertising.
Because sales forecasts revolve around specific target markets, the market should be
defined as precisely as possible.
Many entrepreneurs have a sense of gratitude for the benefits they have received from
living in a capitalist system, so they feel the need to give something back to society,
both with their time and with their money.