For a new owner of an existing business, physical facilities and equipment costs are
very similar to what would have been spent on a startup with all new facilities and
equipment.
The data shows that writing a business plan increases the odds that a venture will
successfully accomplish important tasks (initializing product development, obtaining
inputs, starting marketing, talking to customers, and asking for external funds) as well
as continue in business.
Difficulty in collecting accounts receivable is the primary cause of cash flow problems,
according to small business owners.
Profits earned by a partnership are taxed in the same fashion as those earned by a sole
proprietorship.
Studies show that companies with strong ethical cultures experience fewer ethical
violations than those with weak ethical cultures.
The first line of defense against bad debt losses is to have a financial institution extend
loans to credit-seeking customers.
Conducting primary research involves collecting data firsthand and analyzing it.
One way for a business buyer to avoid being surprised by liens against the assets
purchased is to include a clause in the sales contract stating that any liability not shown
on the balance sheet at the time of the sale remains the responsibility of the seller.
The first and most difficult step to exporting for the small business is breaking the
psychological barrier, “My company is too small to export.”
Profit is the difference between a company’s total revenue and its total expenses.
To prove a charge of dumping under the U.S. Antidumping Act, a company must prove
that a foreign company’s prices on a product are lower here than in the home country
and that U.S. companies are directly harmed.
Selling large quantities of a product in a foreign market below cost is the best way for a
small company to begin its export program.
Which of the following is required for the covenant not to compete to be enforceable?
A) Part of a business sale and reasonable in scope.
B) Approved by a court of law and reasonable in scope.
C) The assistance of an attorney and approved by a court of law.
D) The registration of the due-on-sale agreement.
Regarding Gunther’s Emporium, refer to the following to answer the question(s)
below:
Gunther’s Emporium expects net sales of $2,396,919 for the upcoming year, with
variable expenses totaling $1,813,443 and fixed expenses of $412,190.
Gunther’s Emporium expects net sales of $2,396,919 for the upcoming year, with
variable expenses totaling $1,813,443 and fixed expenses of $412,190. What is
Gunther’s break-even point?
A) $1,876,324
B) $1,693,276
C) $5,667,009
D) Insufficient information given to determine.
Which of the following is not a stakeholder for an organization?
A) Creditors
B) Employees
C) Suppliers
D) All of the above are stakeholders
A key ingredient to setting prices properly is to understand a company’s ________.
A) cost structure
B) most aggressive price competitor
C) target market
D) profit expectations
Which of the following is not one of the three components of intellectual capital?
A) Human
B) Structural
C) Competitor
D) Customer
Some franchisors offer ________ to give existing franchisees the right to exclusive
distribution of brand name goods or services within a particular geographic area.
A) territorial protection
B) exclusive rights
C) guaranteed protection
D) exclusivity
Which of the following is an indication of a dishonest franchisor?
A) A high-pressure sale.
B) A “get-rich-quick” scheme.
C) Attempts to discourage you from getting an attorney to review the contract.
D) All of the above
“Windshield” research is an example of ________ research.
A) library
B) primary
C) secondary
D) tertiary
A key customer benefit of a product or service that sets it apart from the competition
answers the critical questions every customer asks: “What’s in it for me?” and is known
as ________.
A) its brand identity
B) the unique selling proposition (USP)
C) total quality management (TQM)
D) branding
Refer to the following information to answer the question(s) regarding Port Royal:
Port Royal’s net profit-to-equity ratio is ________ percent.
A) 23.8
B) 37.4
C) 16.1
D) 232.7
________ provides useful demographic information in eight areas.
A) Topological Integrated Geographic Encoding Referencing
B) The American Marketplace: Demographics and Spending Patterns
C) Zip Code Atlas and Market Planner
D) Sales and Marketing Management’s Survey of Buying Power
A business with a payables turnover ratio of 10.4 times a year would have an average
payable period of about ________ days.
A) 3
B) 30
C) 35
D) 62
Before entering into any partnership arrangement, entrepreneurs must consider
________.
A) the partnership will only have an impact on sharing profits
B) what interest rate the partner is expecting
C) the impact of giving up some personal control and sharing profits with others
D) the ramifications of having another person on the payroll
Successful marketing requires a business owner to ________.
A) understand target customers’ needs, demands, and wants
B) offer customers products and services that will satisfy their needs, demands, and
wants
C) provide customers with service, convenience, and value so that they will return
D) All of the above
An estimated ________ percent of small business owners in the U.S. have Web sites.
A) 25
B) 82
C) 75
D) 90
To get external financing, an entrepreneur’s plan must pass three tests with potential
lenders and investors. List and briefly explain all three.
Mini-Case 7-1: Pipe Dreams
Ralph Emerson thought he’d been a librarian long enough, and when the opportunity
arose to open a small tobacco, pipe, and cigar shop in the newly-renovated downtown
business district, he was ready to act. Pipe Dreams is a franchisor of smoke shops, and
was founded eight years ago by a noted tobacconist in New York City. The concept for
the shops is simple, yet sophisticated. It is simple in the sense that the shops sell only
tobacco-related products, but sophisticated in the breadth and quality of the inventory
they carry. Each franchise, depending on size, is stocked with inventory selected by the
company’s founder. The franchisor finances the shop’s initial inventory. The franchisee
is expected to create a decor within predetermined standards that Pipe Dreams
established. Each franchisee must attend a three-day workshop, outlining the
fundamentals of tobacco blending, the merchandising of pipes and cigars, and the
techniques of successful business operation.
The franchise contract requires the franchisee to contribute 1.5 percent of gross revenue
to a national advertising campaign. According to the contract, Pipe Dreams will finance
the required fixtures for the store for ten years. In addition, the franchisor supplies all
inventory at very favorable prices because it purchases in large quantities.
Ralph knows he can buy tobacco products from a variety of wholesalers. He also has
some ideas on what would make a tobacco shop successful in this town. Ralph knows
that Pipe Dreams franchisees have had a high success rate in the past.
Help Ralph make a decision by outlining the advantages and the disadvantages of a
franchise arrangement.
Mini-Case 16-3: The Pride of Vicksburg
Wallace Fry had been a lover of good food from the time he was a child. The only son
of wealthy Southern parents, he spent hours with his mother watching her prepare
meals for the family and friends. By the time Wallace was in high school, he had
already won a number of awards for his original recipes. After leaving Vicksburg,
Mississippi, to attend college in the Midwest, Wallace returned home to what must have
been an unbelievable graduation present. His relatives purchased an old paddlewheel
riverboat and had begun initial preparations to have it moored permanently at the foot
of the Vicksburg landing on the Mississippi River. Wallace was presented with a 50
percent interest in the restaurant named “The Pride of Vicksburg.”
The complete renovations and restoration of the beautiful old riverboat took an
additional four months. Wallace was planning to have his new restaurant open for the
spring tourist season. A number of regional magazines had already run feature stories
on the project. With the opening one month away, Wallace decided it was time to staff
the restaurant.
Are job descriptions necessary in a restaurant?
Mini Case 6-1: “Today, You Gotta’ Be a Corporation”
Duke has been a successful used car dealer for 25 years in the same location, operating
as a proprietorship. In those 25 years, he has expanded his operation and become the
largest independent car dealer in a city of 85,000 people. Few people in town can boast
of a business reputation better than Duke’s. As he says, “I’ve always done business in a
fair and honest fashion, and I’ve tried to give my customers an honest deal. The public
has responded well, and last year the business revenue increased to an all-time high of
$830,000.”
As the business has grown, so have Duke’s liabilities. On a given day, Duke will have
cars worth from $350,000 to $450,000 as inventory on the lot. “Twenty years ago, if I’d
asked the bank for a line of credit of $200,000, they’d have tossed me out the front door.
There is no question that today business is different.”
Duke’s only daughter recently married a garage mechanic who has worked in the area
for the past three years. Though Duke thinks the boy is certainly nice enough, he does
not believe he is very smart. “The kid sure knows how to fix a car, but that’s as far as it
goes,” says Duke. “On my last visit to the accountant, he suggested I consider
incorporating. I guess he knows what he’s talking about. That’s all you hear today – ‘you
gotta be a corporation.’ I guess he’s right. But, to tell you the truth, I don’t know.”
Should Duke incorporate or should he remain a proprietorship? Why?
How does the threat of substitutes affect an industry’s structure?
Explain the following franchise concepts and give an example of each: area
development, intercept marketing, conversion franchising, master franchising and
cobranding.
Mini-Case 9-1: Marketing a Nonprofit – Virtual Opportunities
New Wave Chance Youth Club is a local youth organization supported solely by the
donations of individuals and the local church community. Its co-founders, Valerie and
Kristen, are considering launching a Web site to promote upcoming events and raise
money for a new gym. Their good friend Paul has volunteered to develop a Web site,
which they feel will help promote their efforts.
Which other type of activities should New Wave Chance implement to support the
success of the new Web site?
Identify and describe the goal/purpose of the three types of manufacturing layouts.
Briefly explain the fundamental considerations in evaluating an existing building as a
location. Utilize the explanation of zoning laws, ergonomics and the Americans with
Disabilities Act in your explanation.
What is a partnership? Explain the advantages and the disadvantages of a partnership.