The executive summary in a business plan should come
a. at the beginning.
b. at the end.
c. following the finance section.
d. following the marketing section.
Pure risk, as stated in the textbook, is
a. a chance all entrepreneurs take.
b. a probability that adverse conditions will result.
c. a condition in which there is a possibility that an adverse deviation from a desired
outcome will occur.
d. the uncertainty associated with a situation where only loss or no loss can occur.
Term loans are generally used to finance equipment with a useful life ________ the
loan’s term.
a. equal to
b. longer than
c. less than one-half
d. greater than one-half
Other assets would include all of the following except
a. startup costs.
b. patents.
c. copyrights.
d. inventories.
In many small businesses, the importance of people shows up in the direct relationship
between the attitude of its salespeople and
a. inventory growth.
b. sales revenue.
c. gross profits.
d. growth of the product line.
An effective business plan should seldom exceed _____ pages in length.
a. 10
b. 25
c. 40
d. 75
Susan Keller has seen her retail shop grow to the point that she has designated
supervisors for the office and two selling areas. Her shop’s stage of growth is called
a. one-person operation.
b. player-coach.
c. intermediate supervision.
d. formal organization.
Quality is defined by the American Society for Quality Control as
a. the characteristics of a product or service that affect its ability to satisfy the needs of
customers.
b. a series of activities designed to create excellence in a product or service.
c. a special rank designated for manufactured products that have less than one defect
per hundred.
d. any output that meets the specific standards of a society.
Inspiring Toys, a small manufacturer of educational toys, is formulating a budget for
next year’s promotional activities. The company decides to budget $40,000 for
promotional expenses (5 percent of the current year’s $800,000 in sales). Inspiring Toys
is using the _____ method of budgeting.
a. spending as much as the competition
b. what it will take to do the job
c. percentage of sales
d. what can be spared
A legal agreement between two parties in a franchise arrangement is referred to as a
a. master license.
b. franchise contract.
c. requirements contract.
d. franchise consent draft.
Which of the following legal forms of an organization allows owners to contribute no
capital but still play a part in managing the business and share in its profits?
a. S corporation
b. C Corporation
c. Partnership
d. Sole proprietorship
An inspection plan that judges products as acceptable or unacceptable, good or bad, is
known as
a. a 100 percent inspection plan.
b. an attribute inspection.
c. a variable inspection.
d. an inspection sampling plan.
A corporation’s board of directors
a. is the governing body for corporate activity.
b. directly manages the corporation.
c. determines the taxability of dividends.
d. usually designs the organizational structure of the firm.
An example of an idea for a new startup from an accidental discovery is
a. a coin collector, who bought and sold coins for years to build a personal collection,
deciding to become a coin dealer.
b. a furniture salesperson seeing the possibility of opening a new furniture store in a
different area of the city.
c. a sharpshooter, who shot holes in a pair of her boyfriend’s jeans during an argument,
hearing him get complimented on the way they look.
d. a purposeful exploration to find a new idea.
When Jean Romano lost her job at Deepcanyon.com, she
a. felt the firm lacked integrity how it managed its employees.
b. sued the firm for being summarily dismissed without explanation for cause.
c. started her own successful employment agency based on her experience there.
d. believed that the firm dealt fairly with her regarding the closure of the business.
An issue in setting inspection standards and procedures is
a. design tolerances.
b. attribute allowances.
c. reduction of momentary disruptions.
d. achieving production closure.
Techniques used to collect primary data are often classified as _____ and _____
methods.
a. internal/external
b. observational/questioning
c. exploratory/descriptive
d. focus/comprehensive
Marketplace Farms is a regional cooperative of apple and orange growers. In order to
compete against larger regional growers, Marketplace Farms relies on low-cost migrant
workers instead of machines and inexpensive packaging processes. (That is, it uses
individual hand-packaging instead of assembly lines.) Marketplace Farms is relying on
a
a. price-based strategy.
b. marketing-based strategy.
c. efficiency-based strategy.
d. cost-based strategy.
By conforming to ISO 9000, a small manufacturing firm should achieve improvements
in
a. sales to Wal-Mart.
b. export sales.
c. product design.
d. quality of incoming raw materials.
Marie will account for the costs incurred by a her firm in producing its products (e.g.,
materials, machinery, etc.) as a part of its
a. general overhead expenses.
b. costs of manufacturing.
c. cost of goods sold.
d. manufacturing overhead expenses.
Proprietary information and regulatory protection represent
a. entry barriers.
b. exit barriers.
c. competitive barriers.
d. mobility barriers.
Helen Artz is planning to open a high-fashion clothing store for young professional
women. She knows that the fixtures she acquires for the store should be
a. economical.
b. elegant.
c. practical.
d. feminine.
Based on William A. Sahlman’s suggestions, which of the following is a question about
competitors that should be answered by the business plan?
a. Are there ways to co-opt potential or actual competitors by forming alliances?
b. How easily can new competitors enter the industry?
c. Do small businesses have special advantages when competing in the industry?
d. What is the average size of competitors?
Financial ratio analysis is likely to be used to compare a company’s performance to
a. that of larger firms.
b. that of smaller firms.
c. that of firms that have been particularly successful.
d. industry norms.
Which of the following is not an asset used to calculate net operating working capital?
a. Accruals
b. Accounts receivable
c. Cash
d. Inventories
Temptations and pressures to act unethically are such that small firms are
a. less vulnerable than large firms.
b. more vulnerable than large firms.
c. as vulnerable as large firms.
d. not subject to the temptations and pressures facing large firms.
Issuing stock rather than increasing debt does not
a. limit the potential rate of return to owners.
b. dilute owners’ voting control.
c. reduce financial risk.
d. limit the firm’s capacity to meet its financial obligations.
An example of a current asset is
a. land.
b. inventories.
c. equipment.
d. buildings.
The first step in projecting the firm’s income involves calculating
a. the interest expense for each year.
b. estimated income taxes.
c. total cost of goods sold.
d. sales projections.
Small business service organizations that are patterned after the Agricultural Extension
Service and are affiliated with universities are
a. student consulting team programs.
b. Small Business Development Centers.
c. business incubators.
d. SCORE.
Stephanie Kellar used a(n) ________ to gather information that helped her successfully
launch her innovative eyelash curler.
a. door-to-door survey
b. in-store coupon
c. student marketing research team
d. Usenet newsgroup
In a business plan, the facilities and location of the proposed venture are described in
the
a. executive summary.
b. management plan.
c. operating plan.
d. product and service plan.
A SWOT analysis can be described best as
a. a means of assessing the firm’s industry situation.
b. an assessment of the internal strengths and weakness of the firm.
c. a dynamic analysis of the firm’s current situation.
d. a concise overview of the firm’s strategic situation.
When bankers look for evidence of whether a business will be able to repay a loan, they
usually base their assessment of this on
a. what the firm has done in the past.
b. what the owner says the firm will do in the future.
c. the opinion of investment analysts.
d. the business plan of the enterprise.
Compared to the single-entry system, an advantage of the double-entry bookkeeping
system is that
a. no math errors go undetected.
b. it is better suited to firms that want to grow.
c. it doesn’t have to be self-balancing.
d. it is easier to use.
F.O.B. origin, freight collect, is a delivery term that shifts all responsibility for freight
costs to the buyer.
What are the four basic factors that determine how a firm is financed?
Unethical business behaviors take place in every country, but some countries must deal
with more serious forms of illegal business activity than others.
Preventive maintenance is intended to reduce the occurrence of human injury.
The need for effective management becomes greater as the business expands.
A business plan is a legal document.
One of the benefits of becoming a franchisee is sharing profits with the franchisor.
You Make the CallSituation 2
Paul Layer is the owner of Aspen Funeral Alternatives in Albuquerque, New Mexico.
Aspen is located in a converted restaurant with fluorescent lights, and its chapel has
chairs, not pews. “It looks more like your insurance company or local business office,
rather than a funeral home,” Layer says.
Aspen has adopted a strategy of discounted prices for funeral products and services. Its
Web site (http://www.aspenfuneral.com) promotes low-cost alternatives with no fancy
facilities, no limousines, and no hearses. A general price list, covering Aspen’s
professional services, use of its facilities, and caskets, is posted on the site.
Sources: Lorrie Grant, “Funeral Stores Sell Inevitable in Style,” USAToday, May 30,
2001, p. 3B; and http://www.aspenfuneral.com, June 8, 2004.
Question 1 What psychological concepts of consumer behavior are relevant to
marketing this service? Be specific.
Question 2 How can the stages of consumer decision making be applied to a person’s
decision to use a particular funeral home?
Question 3 What types of CRM could be used by this type of business?
Only large corporations can afford to be socially responsible.
You Make the CallSituation 1
The driving force behind Cannon Arp’s new business was several bad experiences with
his cartwo speeding tickets and four minor fender-benders. Consequently, his insurance
rates more than doubled, which resulted in Arp’s idea to design and sell a bumper
sticker that read “To Report Bad Driving, Call My Parents at . . . .” With a $200
investment, Arp printed 15,000 of the stickers, which contain space to write in the
appropriate telephone number. He is now planning a promotion to support his strategy
of distribution through auto parts stores.
Question 1 What role, if any, should personal selling have in Arp’s total promotional
plan?
Question 2 Arp is considering advertising in magazines. What do you think about this
medium for promoting his product?
Question 3 Of what value might publicity be for selling Arp’s stickers? Be specific.
The public sale of a firm’s common stock is regulated by the Securities and Exchange
Commission.
Personal property includes any property other than real property, including buildings,
machinery, equipment, furniture, fixtures, stock, and vehicles.
Explain what is meant by elastic demand and inelastic demand. Use products to
illustrate each type of demand.
Private placement is the selling of stock only to selected individuals.
In relationship selling, a salesperson must exhibit professional etiquette in all contacts
with customers, since this will determine the success of the sale.
Customer satisfaction is all about providing extraordinary services to the buyer.