The “friendliness” of the overall business environment is an important consideration in
location selection and information is available to offer objective insight for this
assessment.
The first phase in selecting a location is determining what regions of the country are
experiencing substantial growth.
A corporation formed and chartered in Kansas is considered a domestic corporation
when doing business in Kansas, and a foreign corporation when doing business in
Missouri.
Learning the habits and the customs of the cultures in which they do business is
essential for small business managers trying to go global.
Ethical behavior has no impact on a company’s bottom line.
Studies have found that customers value convenience and easy access to goods and
services.
Of the 27 million businesses in the U.S., about 40 percent are family owned and
managed.
A cash budget is based on the cash method of accounting, meaning that cash receipts
and cash disbursements are recorded in the forecast only when ________ is expected to
take place.
A) the transaction is predicted
B) a credit sale
C) the cash transaction
D) projections are
Entrepreneurs can find the right match based on trends, their products or services, and
the appropriate target markets through ________.
A) expecting “more of the same” for the future
B) looking back and not forward
C) following their intuition
D) market research
When analyzing the labor supply, a small business is concerned only with the level of
education and training of the labor force in the area.
Perhaps the ideal source of financing the purchase of an existing business is ________.
A) a venture capitalist
B) the Small Business Administration
C) the seller of the business
D) an insurance company
The demographic attributes of successful entrepreneurs are ________.
A) limited to specific ages, genders, and ethnic backgrounds
B) uncertain and have not been fully studied or analyzed
C) are key predictors that determine how long the business will survive
D) highly diverse relating to age, gender, and ethnicity
Mini-Case 11-2: Bowden Brake Service (Part B)
One day while you are in Bowden Brake Service getting your brakes repaired, Jim
storms into his office, slamming doors and shouting about the local financial
institutions. After a few minutes of building your courage, you approach Jim and ask
him what the problem is. He shouts, “It’s the financial institutions in this town! Not one
of them will lend me the money I need to expand my business. They all said I needed to
take a closer look at my financial position before I consider expanding. One of them
said something about ratio analysis. I know a lot about cars and brakes, but what is ratio
analysis?”
You tell Jim you will perform a ratio analysis for the business if he gives you a free
brake job. Jim provides you with the following financial statements.
Which of the following is an assumption of break-even analysis?
A) Fixed expenses remain constant for all levels of sales volume.
B) Variable expenses change in direct proportion to changes in sales volume.
C) Changes in sales volume have no effect on unit sales price.
D) All of the above
A solid business plan ________.
A) forces potential entrepreneurs to look at their business idea in the harsh light of
reality
B) requires a potential entrepreneur to assess the venture’s chances of success more
objectively
C) helps prove to outsiders, such as potential lenders and investors, that a business idea
can be successful
D) All of the above
Your friend has decided to conduct market research to assist in making informed
decisions for her/his small business. What should you recommend as the first step in the
market research process?
A) Collect data
B) Define the objective
C) Design the research
D) Determine the relevant information
________ sets behavioral boundaries for decision makers.
A) Strategic plan
B) Strategy
C) Social responsibility
D) Financial plan
________ ratios indicate how efficiently the small firm is being managed.
A) Liquidity
B) Profitability
C) Leverage
D) Operating
Which of the following is notone of the three major advantages to establishing an
international location?
A) Lower production costs
B) Need for smaller staff
C) Lower marketing costs
D) Development of an intimate knowledge of customer preferences
The focus of which of the following step in the creative process is to transform the idea
into reality?
A) Implementation
B) Preparation
C) Illumination
D) Verification
When a firm sells goods or services on credit, the owner needs to remember that for
cash budgeting purposes ________.
A) the sale may be immediately posted as if it has been collected
B) the sale should be recorded in the month it was made
C) she/he must account for a delay between the sale and the actual collection of the
proceeds
D) such a transaction counts as a cash disbursement
Entrepreneurs can increase their chances for success if they ________.
A) know their business in depth and develop a solid business plan
B) manage their financial resources and understand financial statements
C) learn to manage people and keep in touch with how they react to stress and balance
their health needs with the needs of the business
D) All of the above
Laurette has entered into a contract with Jackson to purchase his retail music shop.
Jackson’s lease on the existing building (which is in an excellent location) has five years
remaining. If Laurette wants the lease to be part of the business sale ________.
A) she should include a clause in the sales contract in which Jackson agrees to assign to
her/his rights and obligations under that lease
B) she should notify the landlord of Jackson’s assignment of the lease agreement to her
C) A and B are correct.
D) None of the above. Because Jackson does not actually own the building, he can
transfer no rights to it to Laurette.
Optional product pricing involves selling the base product at ________.
A) what may be a ‘standard” margin and selling the options or accessories at a higher
markup
B) a high markup, with the accessories at a competitive price
C) one price with deep discounts on accessories
D) a high margin with the accessories offered as a part of the bundle
Low capital requirements, cost advantages that are not related to company size, and the
lack of brand loyalty are considerations regarding the ________.
A) threat of new entrants to the industry
B) threat of substitute products
C) bargaining power of buyers
D) rivalry among companies competing in the industry
The young, job-creating small companies are known as ________.
A) “assertive”
B) “antelopes”
C) “aggressive”
D) “gazelles”
________ is one indication that a small business may be undercapitalized.
A) A current ratio below 1:1
B) A quick ratio above 2:1
C) A debt-to-net worth ratio above 1:1
D) A net sales-to-working capital ratio equal to 3:1