In seeking personnel for key positions, small firms sometimes turn to recruiting
specialists called
a. temporary help agencies.
b. leasing companies.
c. attorneys.
d. headhunters.
Trade between the United States and Mexico has increased since the enactment of the
North American Free Trade Agreement. This factor is related to the _________ element
of the general environment.
a. technological
b. global
c. ecological
d. sociocultural
According to a study by the National Federation of Independent Business Foundation,
the most common source of new product ideas for small business startups is
a. prior work experience.
b. personal interests and hobbies.
c. a chance happening.
d. existing records of a business.
The three primary rewards or incentives for entrepreneurs are
a. independence, personal fulfillment, and profit.
b. love of country, independence, and freedom from long hours.
c. preserving the capitalistic system, an easy life, and financial rewards.
d. serving self, love of country, and independence.
One of the primary purposes of the federal Consumer Credit Protection Act is to
a. require creditors to specify how finance charges are computed.
b. grant certain rights to credit applicants regarding credit reports.
c. inform consumers about all forms of credit available to them.
d. specify what information a customer’s employer can release about him/her.
Attending a prayer breakfast is most likely an attempt to satisfy which category of
need?
a. physiological
b. psychological
c. spiritual
d. social
The effects of the harvesting process include
a. a reduction in time and energy.
b. an increased managerial focus.
c. an increase in momentum.
d. poor performance.
The value of privately held companies will usually be estimated based on
a. net income.
b. EBITDA.
c. operating income.
d. market capitalization.
Regarding partners in a small business, statistics reveal that the risk of disability is
__________ the risk of death.
a. greater than
b. less than
c. about the same as
d. correlated with
Fran and Bob Smithers (wife and husband) own and manage a cleaning service. A
potential advantage of this arrangement is that
a. differences of opinion about the business won”t carry over into family lives.
b. it affords the opportunity to share more of their lives.
c. the business isn”t likely to dissipate their energies.
d. they can count on working fewer hours in the business.
Its decision to produce flavored spring water ice cubes in response to requests from its
customers reflects Norway Ice Company’s _______ marketing philosophy.
a. production-oriented
b. sales-oriented
c. consumer-oriented
d. response-oriented
There is a limit to the possible social responsiveness of small businesses because they
must
a. make a profit to survive.
b. be responsive to their customers.
c. first of all be fair to their employees.
d. not harm the environment.
A group of shared characteristics, behaviors, and goals that a firm follows in a
particular business situation is known as a
a. business model.
b. strategic plan.
c. firm strategy.
d. business profile.
Business plan software packages
a. focus mostly on preparing slides to present the business concept to prospective
investors.
b. spawn creativity and flexibility on the part of the entrepreneur.
c. help an entrepreneur think through the important issues in starting a new company.
d. offer a simple formula that leads startups to success.
Once a product has been shipped internationally and the title has been transferred, the
exporter receives what is called a
a. international invoice.
b. bill of lading.
c. letter of confirmation.
d. letter of credit.
A printing shop owner believes that his business is running rather haphazardly and
wants to get it under control. The first step he should take is to
a. increase inspection.
b. set standards.
c. take corrective action.
d. draw up a strategic plan.
Which of the following is a tool for managing low severity, low frequency risks?
a. Loss prevention
b. Self-insurance
c. Contractual agreements
d. Risk retention
Regarding IPOs, the primary motivation of the issuing firm and that of the investment
banker are
a. the same-maximizing the price of the firm.
b. similar-completing the sale.
c. very different because they are compensated for different outcomes.
d. impossible to know since every deal is structured differently.
The payback period and accounting return on investment techniques
a. recognize the economic life of a project.
b. ignore the time value of money.
c. consider only the return for the first year of the investment.
d. are more difficult to use than the net present value method.
Traditionally, commercial property insurance has valued all property loss at
a. the depreciated value of the damaged or lost property
b. the undepreciated value of the damaged or lost property
c. the actual cash value of the damaged or lost property.
d. the purchase value of the damaged or lost property.
The owner of a small automobile garage has been advised to use an application form in
evaluating applicants. This will be most useful in discovering
a. arrest records.
b. general background information.
c. physical disabilities.
d. religious orientation.
Jim’s primary focus is on reengineering his workplace. His activities will eventually
a. find the proper time required for each work activity.
b. establish the standard cost for each work activity.
c. increase the quality level of products.
d. create substantial improvements in operations.
The entrepreneur’s spouse tends to function as worrier for the family business,
especially if
a. in-laws are employed in the firm.
b. a child is being groomed for future leadership.
c. the entrepreneur does not communicate sufficiently.
d. several children are interested in the business.
Michael Hammer and James Champy popularized an approach to management called
a. TQM.
b. reengineering.
c. continuous quality improvement.
d. work sampling.
The ethical standards of entrepreneurs
a. are unaffected by profit motives.
b. are affected by profit motives.
c. are seldom challenged by real-world events.
d. are higher overall than those of corporate managers.
A copyright provides protection for the duration of the creator’s life, plus
a. 25 years.
b. 70 years.
c. 75 years.
d. 100 years.
The computation of cost of goods sold and operating expenses is based on all of the
following except
a. the cost of goods sold.
b. general and administrative expenses.
c. the firm’s interest expense.
d. depreciation expenses.
Before meeting with media representatives, a small business manager should
a. perform a statistical analysis of the market.
b. consult different banks for loan rates.
c. learn about the strengths and weaknesses of each advertising medium.
d. create the message.
Lauren Hassell, a partner in Jales & Jales Bonding Company, manages its day-to-day
operations. She is considered to be a ________ partner.
a. directing
b. general
c. limited
d. operating
A compensation system based on time is most appropriate for jobs in which
a. performance is not easy to measure.
b. responsibilities are difficult to understand.
c. fringe benefits are an important part of the compensation offered.
d. commissions make up a significant portion of compensation received.
You Make the CallSituation 1
The three Dorsett brothers are barely speaking to each other. “Phone for you” is about
all they have to say. It hasn”t always been like this. For more than 30 years, Tom, Harry,
and Bob Dorsett have run the successful manufacturing business founded by their
father. For most of that time, they have gotten along rather well. They”ve had their
differences and arguments, but important decisions were thrashed out until a consensus
was reached.
Each brother has two children in the business. Tom’s oldest son manages the plant,
Harry’s oldest daughter keeps the books, and Bob’s oldest son is an outside salesman.
The younger children are learning the ropes in lower level positions. The problem?
Compensation. Each brother feels that his own children are underpaid and that some of
his nieces and nephews are overpaid. After violent arguments, the Dorsett brothers just
quit talking while each continues to smolder.
The six younger-generation cousins are still on speaking terms, however. Despite the
differences that exist among them, they manage to get along with one another. They
range in age from 41 down to 25.
The business is in a slump but not yet in danger. Because the brothers aren”t talking,
important business decisions are being postponed. The family is stuck. What can be
done?
Source: “Anger over Money Silences Brothers,” Nation’s Business, Vol. 78, No. 10
(October 1990), p. 62.
Question 1 Why do you think the cousins get along better than their fathers do?
Question 2 How might this conflict over compensation be resolved?
During the cash conversion period, the firm no longer has the benefit of the financing
provided by the supplier.
The accrual method of accounting is synonymous with double-entry accounting.
The factors that determine operating profit margin are the cost of goods sold and sales
revenue generated.
You Make the CallSituation 1
Ethan Moore is a college student in Phoenix, Arizona, currently enrolled as an
entrepreneurship major at a local university. Moore’s home is in Chandler, Arizona, a
nearby city, where he is considering purchasing a franchise. The franchise, which
caught his interest while he was on a shopping trip to the Tucson Mall, is operated by
an Idaho-based gumball company named Gumball Gourmet.
Moore talked to the owner of the franchise at the Tucson Mall while he was stocking
the kiosk, which is set up in three tiers with 47 gumball machines and a money changer.
The owner mentioned in their brief conversation that this particular kiosk had sold
12,000 gumballs in the last 30-day period.
From information he found at the Gumball Gourmet Web site, Moore determined that
franchises are available with as little as a $25,000 investment.
Source: http://www.gumballgourmet.com, September 2003.
Question 1 What other Internet sites might provide helpful information to Moore as he
tries to learn more about this franchise?
Question 2 What other questions should Moore have asked the Tucson franchisee?
Question 3 What information might a Uniform Franchise Offering Circular from
Gumball Gourmet provide?
You Make the CallSituation 1
The following is an account of one employee’s introduction to a new job:
It was my first job out of high school. After receiving a physical exam and a pamphlet
on benefits, I was told by the manager about the dangers involved in the job. But it was
the old-timers who explained what was really expected of me. The company
management never told me about the work environment or the unspoken rules. The
old-timers let me know where to sleep and which supervisors to avoid. They told me
how much work I was supposed to do and which shop steward to see if I had a problem.
Question 1 To what extent should a small firm use “old-timers” to help introduce new
employees to the workplace? Is it inevitable that newcomers will look to old-timers to
find out how things really work?
Question 2 How would you rate this firm’s orientation effort? What are its strengths and
weaknesses?
Question 3 Assume that this firm has fewer than 75 employees and no human resource
manager. Could it possibly provide more extensive orientation than that described here?
How? What low-cost improvements, if any, would you recommend?
Most entrepreneurs have an excellent understanding of the field of rivals against which
their new venture will compete.
Only institutions such as universities use institutional advertising.
Because it is a standard practice in many types of businesses, credit selling often cannot
be avoided.
You Make the CallSituation 2
Pansy Ellen Essman is a 42-year-old grandmother who is chairperson of a company that
does $5 million in sales each year. Her company, Pansy Ellen Products, Inc., based in
Atlanta, Georgia, grew out of a product idea that Essman had as she was bathing her
squealing, squirming granddaughter in the bathroom tub. Her idea was to produce a
sponge pillow that would cradle a child in the tub, thus freeing the caretaker’s hands to
clean the baby. From this initial product, the company expanded its product line to
include nursery lamps, baby food organizers, strollers, and hook-on baby seats. Essman
has seemingly managed her product mix risk well. However, she is concerned that other
sources of business risk may have been ignored or slighted.
Question 1 What types of business risk do you think Essman might have overlooked?
Be specific.
Question 2 Would a risk-retention insurance program be a good possibility for this
company? Why or why not?
Question 3 What kinds of insurance coverage should this type of company carry?
You Make the CallSituation 2
Cheree Moore owns and operates a small business that supplies delicatessens with bulk
containers of ready-made salads. When served in salad bars, the salads appear to have
been freshly prepared from scratch at the delicatessen. Moore wants additional
promotional exposure for her products and is considering using her fleet of trucks as
rolling billboards. If the strategy is successful, she may even attempt to lease space on
other trucks. Moore is concerned about the cost-effectiveness of the idea and whether
the public will even notice the advertisements. She also wonders whether the image of
her salad products might be hurt by this advertising medium.
Question 1 What suggestions can you offer that would help Moore make this decision?
Question 2 How could Moore go about determining the cost-effectiveness of this
strategy?
Question 3 What additional factors should Moore evaluate before advertising on
trucks?
A penetration price strategy is most practical when there exists little threat of short-term
competition in the market or when startup costs must be recovered rapidly.
The four primary routes to entrepreneurship are buying an existing business, starting a
new business, opening a franchised business, and entering a family business.
Three classes of needssocial, psychological, and spiritualcannot be connected to
behavior through motivations.
The four primary means firms can use to protect their tangible assets are trademarks,
patents, copyrights, and trade dress.
Explain the concept of internal control and why it is important to a firm. Give some
examples of internal control procedures.
The type of advertising used should be based on the nature of the business, industry
practice, available media, and the firm’s objectives.
You Make the CallSituation 2
Carter Dalton is well on his way to starting a new ventureMax, Inc. He has projected a
need for $350,000 in initial capital. He plans to invest $150,000 himself and either
borrow the additional $200,000 or find a partner who will buy stock in the company. If
Dalton borrows the money, the interest rate will be 6 percent. If, on the other hand,
another equity investor is found, he expects to have to give up 60 percent of the
company’s stock. Dalton has forecasted earnings of about 16 percent in operating
income on the firm’s total assets.
Question 1 Compare the two financing options in terms of projected return on the
owner’s equity investment. Ignore any effect from income taxes.
Question 2 What if Dalton is wrong and the company earns only 4 percent in operating
income on total assets?
Question 3 What should Dalton consider in choosing a source of financing?
The best approach to promotional funding is allocating what can be spared.
Small firms can successfully open an overseas sales office, but this should only be done
when sales in the local market are great enough to justify this expensive move.