According to Peter Drucker, the means by which the entrepreneur either creates new
wealth-producing resources or endows existing resources with enhanced potential for
creating wealth is
a. creativity.
b. innovation.
c. capital spending.
d. collaborating with competitors.
Revenues from auction sites are derived for the most part from
a. banner ads.
b. listing fees and commissions on sales.
c. corporate sponsors.
d. investors.
Traditionally, marketing philosophies have been categorized as
a. consumer-oriented and market-oriented.
b. consumer-oriented, product-oriented, market-oriented, and volume-oriented.
c. consumer-oriented, market-oriented, sales-oriented, and process-oriented.
d. consumer-oriented, production-oriented, and sales-oriented.
Increasingly, small businesses are expanding internationally to
a. obtain raw materials.
b. gain access to skilled labor.
c. create job opportunities for domestic employees.
d. take advantage of government incentives.
The owner of a diesel engine business is planning on attending a seminar on
reengineering. The owner should realize that the seminar will probably feature
a. benchmarking.
b. attribute inspection.
c. ISO 9000.
d. analysis of basic processes.
Will Thompson is a salesperson for a small appliance store. In an attempt to locate
potential new customers, he decides to mail a survey to residents in selected
neighborhoods. Those individuals who return completed surveys will receive a phone
call from Thompson about the store’s products and current “deals.” Thompson is
gaining knowledge of potential customers through
a. customer-initiated contacts.
b. marketer-initiated contacts.
c. impersonal referrals.
d. personal referrals.
Karen Garcia is seeking references’ comments on applicants for jobs with her business.
The former employers and other parties she calls seem reluctant to do more than verify
dates of employment. A probable reason for their reluctance is that
a. records for former employees are filed away and not readily available.
b. the former employer may plan to recall the employee and wants to avoid losing her to
another employer.
c. respondents may fear litigation by former employees who fail to get jobs they seek.
d. requests of this kind simply take too much time for large company personnel
departments.
Which of the following typically is not found in a disclosure document?
a. The franchisor’s involvement in litigation
b. Key features of the franchisor’s experience
c. Details of the franchisor’s proprietary technology
d. The franchisor’s size
Which of the following is not a focus of modern CRM?
a. Customers rather than products
b. Changes in processes, systems, and culture
c. All channels and media involved in the marketing effort
d. Reductions in transactional relationships
The competitive advantage life cycle has three stages, including the __________ stage.
a. determination
b. distill
c. decline
d. delimit
Offering to relaunder a customer’s shirt at no charge to add additional starch is an
example of which key element in attaining customer satisfaction?
a. basic benefits
b. general support services
c. a recovery process
d. extraordinary services
Which of the following records shows what the firm owes, facilitates the taking of cash
discounts, and allows payments to be made when due?
a. Accounts payable records
b. Accounts receivable records
c. Cash records
d. Inventory records
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. usually avoidable.
In the information search and evaluation stage, the firm’s principal objective is to
establish evaluative criteria.
Amazon.com and other firms like it appear to be establishing customer relationships on
the Web
a. because these provide a positive cash flow to the company.
b. to measure the potential of market interest.
c. with the hope of cashing in on these at a later date.
d. with increasing ease.
A risk management program requires all of the following except
a. identification of risks.
b. evaluation of risks.
c. controlling risks.
d. assessment of industry risk standards.
Which of the following shows all receipts and disbursements and are necessary to
safeguard cash?
a. Accounts payable records
b. Accounts receivable records
c. Cash records
d. Inventory records
One of the major sources of early financing is
a. family members.
b. commercial banks.
c. business suppliers.
d. asset-based lenders.
Information Express is a privately owned and operated organization that collects credit
information on business firms. After the organization analyzes and evaluates the data, it
makes credit ratings available to client companies for a fee. Information Express is a
a. credit collection agency.
b. trade-credit agency.
c. financial credit agency.
d. credit bureau.
You Make the CallSituation 4
Paul McKinney is the owner and operator of a small restaurant located in the downtown
area of Oklahoma City, Oklahoma. McKinney is a college graduate with a major in
accounting. His ability to analyze and control costs has been a major factor in keeping
his five-year-old venture out of the red. The restaurant is located in an old but newly
remodeled downtown building. His business is based on high volume and low
overhead. However, space limitations permit seating of only 25 to 30 people at one
time. McKinney feels that customers stay too long after they”ve finished their meals,
thereby tying up seating. He has considered using a small flashing light at each table to
remind customers that it is time to move on. He realizes that this method may be too
obvious and may create customer dissatisfaction.
Question 1 What is your opinion of McKinney’s proposed flashing light system?
Question 2 What other suggestions can you make to help increase turnover? Why are
your ideas better?
Question 3 What kinds of sociological factors may bear on customers’ patronage of this
restaurant?
In the B2B model, the customers can best be described as
a. businesses.
b. consumers.
c. franchisees.
d. auction participants.
Which of the following accounting methods/systems recognizes revenue and expenses
only when cash is received or payment is made?
a. Single-entry system
b. Double-entry system
c. Accrual method
d. Cash method
Section 1244 stock somewhat protects the stockholder in a corporate failure
a. by guaranteeing its par value against corporate assets.
b. by converting to a redeemable bearer bond if the corporation fails.
c. because the loss may be treated as an ordinary tax-deductible loss.
d. because its value must be backed by Treasury securities.
A _______ shows the level that sales must reach before profitability is achieved.
a. break-even case
b. gross margin case
c. most likely (base case)
d. sales-to-profit case
As the Internet continues to grow, it is safe to assume that property rights will
a. become less difficult to protect.
b. become more difficult to protect.
c. become an irrelevancy of the past.
d. become universally assumable.
A verbal or symbolic means of identifying a product is referred to as a
a. brand.
b. trademark.
c. service mark.
d. trade dress.
The Gaylors’ succession plan for Al’s Formal Wear
a. was clearly developed and successful.
b. created frustrations for their four children.
c. was developed too late to save the firm from failure.
d. caused the firm to dissolve into two separate business entities.
In which of the following cases is the business best described as a family business?
a. The total investment comes from one owner.
b. The son works in the business part-time during the school year and full-time during
the summer.
c. The firm is extremely small, with less than $100,000 annual sales revenue.
d. The owner treats the business as a “cash cow,” using its income to pay college tuition
for her children.
You are considering becoming a franchisee with the Pots-R-Us franchise. You will only
be able to determine whether this is a legitimate franchise opportunity or a fraudulent
operator by
a. carefully investigating the company and its product(s).
b. finding out whether the company has an operational Web site.
c. researching the industry in which the franchisor is involved.
d. following your instincts”there is no substitute for intuition.
Hands-on experience with a product is possible with
a. coupons.
b. trade show exhibits.
c. specialty promotions.
d. personal selling.
The ABC method of inventory management is founded on the notion that
a. some inputs are more valuable or more critical to the firm’s operations than others.
b. inventory costs should be cut to an absolute minimum by reducing inventory on
hand.
c. a firm should know its economic order quantity at all times.
d. the cost of placing an order is a fixed cost.
In general, the most appropriate and effective product strategy to use in the initial stage
of a small business is the _____ product strategy.
a. one product/one market
b. one product/multiple markets
c. multiple products/one market
d. multiple products/multiple markets
After attending a total quality management (TQM) seminar, a small business owner
decides that her firm has a good customer focus and adequate tools and techniques. To
be assured of a really strong quality program, however, she knows that she must now
establish the proper
a. statistical quality control.
b. benchmarking.
c. marketing research.
d. organizational culture.
A firms should decide to make components (as opposed to buying them) when
a. it is considering adding plant capacity.
b. this decision would allow the firm to protect a secret design.
c. transportation costs are not a concern.
d. the quality demands of the firm’s customers are low.
The owner of a small bakery arranged a schedule for periodic inspections of equipment
used in the bakery. The owner is establishing a system of
a. reengineering.
b. quality management.
c. preventive maintenance.
d. benchmarking.
You Make the CallSituation 5
Craigen Corporation was sold to a financial buyer, who financed the purchase as a
leveraged buyout (LBO). The company’s financial structure before and after the sale is
as follows
Before the Sale After the Sale
Current liabilities $ 3,433,532 $11,018,041
Long-term liabilities 1,350,000 47,720,878
Deferred income taxes 569,736 1,742,165
Total liabilities $ 5,353,268 $60,481,084
Equity 12,948,456 6,789,340
Total liabilities and equity $18,301,724 $67,270,424
Question 1 The before-sale and after-sale numbers differ significantlythe total debt and
equity increased from $18.3 million to $67.3 million. In the typical LBO, what would
cause this increase?
Unfortunately, choosing a hometown location for personal reasons is illogical.
In small businesses, poor management is prevalent and inevitable.
You Make the CallSituation 1
Linda McMahan was getting numerous compliments on a handbag she carried to The
University of Texas events. She had purchased the handbag, which carried the UT
name, at a local store but felt the quality of the bag was poor. She and her sister-in-law,
Sue Craft McMahan, decided to become partners and produce and sell high-end
handbags emblazoned with the college logo.
The pair designed four different types of bagsa large totebag, a smaller bag, a
crescent-shaped handbag, and a “bolder” game-day bagall marked with The University
of Texas emblem. Early responses to the product line were overwhelming. They”ve now
set their sights on other big-name schools.
Source: Nichole L. Torros, “Smells Like School Spirit,” Entrepreneur, December 2003,
p. 132.
Question 1 What problems, if any, do you see with the use of the university’s brand?
Question 2 What strategy should they pursue to obtain cooperation from the university?
Question 3 What distribution options are likely to be used?
Cash budgets are concerned with dollars as they are received and paid out.
Inventory is a relatively permanent asset that is intended for use in the business rather
than for sale.
You Make the CallSituation 4
ChemiClean, a small specialty chemical company, sells private custom-label products
globally to wholesalers, retailers, and dealers. Overseas sales have been slow and this
year’s profits have declined precipitously from the previous year. Duster’s, one of the
ChemiClean’s largest overseas customers, placed an large order for wall-mounted hand
soap dispensers with its logo imprinted on the dispenser’s face. The customer is now
complaining that the color of the logo on the delivered dispensers does not match the
graphic standards used in its world-wide advertising campaigns. The customer is
demanding that ChemiClean make a $100,000 adjustment and it will keep the
dispensers. If ChemiClean makes the adjustment, it will make no profit on the sale. The
sales manager has reviewed the customer’s order and discovered that it contains no
exact specification for the color of the Duster’s logo.
Question 1 Is this a customer relations problem or an ethics problem for ChemiClean?
Question 2 Is Duster’s request reasonable? Is it ethical?
Question 3 How should ChemiClean respond to Duster’s demand for an adjustment?
Mobile bookkeepers may provide small firms with a faster, cheaper, and more
convenient approach to filling certain accounting needs.
During sales presentations, a salesperson should never admit product weaknesses to a
potential customer.
The Financial Plan section of a business plan should include balance sheets and income
statements on an annual basis and cash flow statements on a monthly basis, all
projected out 2-3 years.
If capital budgeting is so important, why do so few firms use the techniques the
textbook discusses, especially the better methods? (Mention the textbook’s premises in
developing your answer.)
A mechanic who starts an independent garage can best be thought of as an
opportunistic entrepreneur.
Typically, a thorough financial analysis will report both the average collection period
and accounts receivable turnover.
The central message of every CRM program is “Court customers for a one-time sale.”
In a healthy business, cash flow is typically even.
As in any exit strategy, the sale of a firm is solely about determining the value of a
company.
By creating an environment that encourages personal interaction, the leader of a small
firm can motivate employees and attract prospective employees.