A business owner’s policy is unique in that
a. it contains no insurance to value feature.
b. the business owner cannot be the designated beneficiary.
c. property insured by the policy must have an after-loss residual value.
d. it cannot exclude named perils.
An entrepreneur opened a small business producing high-quality paper products. She
decided to place a multicolored pine tree on all product boxes and on the sign outside
the facilities, to symbolize the business. This symbol is an example of
a. a brand.
b. a trademark.
c. a service mark.
d. trade dress.
John Pearson created Acme Online to allow paper suppliers to compete for
manufacturers’ orders over the Internet in live auctions. This model would best be
described as
a. consumer-to-business.
b. business-to-consumer.
c. business-to-business.
d. consumer-to-consumer.
Integrity is as much about what to do as it is
a. when to do it.
b. where it fits in.
c. who it affects.
d. who to be.
A small manufacturer is concerned about a possible cost disadvantage caused by
expensive environmental requirements. She should realize that her own firm’s
competitive position is best served by restrictions imposed by
a. city ordinances.
b. county requirements.
c. state laws.
d. federal legislation.
A widely used piecemeal approach to determining the level of promotional expenditures
is
a. expert opinion.
b. what can be spared.
c. what the market will bear.
d. cost plus.
The scope of physical distribution covers all of the following except
a. transportation.
b. inventory management.
c. materials handling.
d. final assembly.
A business plan is best described as a
a. crystal ball picture.
b. money plan.
c. contingency plan.
d. game plan.
The cost of a franchise may include
a. royalty payments.
b. high executive salaries.
c. a one-time federal franchise tax.
d. higher-than-usual labor costs.
E-commerce refers to
a. B2B models of doing business.
b. the facilitation of business by making initial contact by electronic means.
c. the paperless exchange of business information via the Internet.
d. a form of business that involves online trades and auctions.
Government publications offering information about franchises include
a. Franchise Opportunities Handbook.
b. Successful Franchising.
c. Franchising Today.
d. The Wall Street Journal.
Which of the following is not encompassed in the broad meaning of risk management?
a. Uninsurable risks
b. Impermeable risks
c. Insurable risks
d. Noninsurance approaches to reducing all types of pure risks
What accounts for the increase in operating support when an independent business
expands by becoming a franchisor?
a. Accounting and legal services
b. Information technology demands
c. The need for decentralization
d. Coordination requirements
A Web site is
a. a location on the Web where users can find information about a company and its
products.
b. an essential tool in today’s business environment.
c. usually too expensive for small businesses to support.
d. often difficult for customers to find, and therefore of little use to reaching a market.
Louise Piper plans to sell stock in her company in order to raise capital. One of the
benefits of issuing stock as a source of funds is
a. reduced risk to the enterprise.
b. sharing success potential.
c. confidentiality.
d. periodic reporting requirements.
In a harvest situation, the exiting owners are usually paid in cash or
a. tangible assets.
b. imputed goodwill.
c. favorable publicity.
d. stock.
Mary Delany, owner of Delany Salsas, is curious to know whether the new packaging
for her line of salsas is being noticed by supermarket consumers. Accordingly, she
ventures out to the local supermarket and passively watches the reactions of shoppers as
they pass by one of the many Delany Salsas displays. Mary Delany is collecting _____
data through _____ methods.
a. secondary/observational
b. primary/questioning
c. primary/observational
d. secondary/questioning
Which of the following is not an environmental condition affecting selection of a
business location?
a. Competition
b. Weather and climate
c. Laws and regulations
d. Raw material availability
The number of subordinates reporting to one superior constitutes that manager’s
a. span of control.
b. informal organization.
c. organizational structure.
d. chain of command.
Marcia Mendez, who runs a drapery business, has groups of employees who work in
production and in installation. If she decides to use work teams as part of her leadership
approach, she must increase
a. supervision.
b. compensation.
c. independence.
d. quality.
All of the following are product strategy alternatives except
a. multiple products strategies.
b. one product strategies.
c. product market strategies.
d. modified product strategies.
The distinctive operating image of a product, including features such as size, shape,
color or color combinations, texture, graphics, or even particular sales techniques, can
be protected
a. by copyright.
b. by patent.
c. as trade dress.
d. as a registered concept.
Having publicly traded stock can be beneficial to owners in that a public market offers
a. greater liquidity.
b. protection against an unwanted harvest.
c. insight into how to improve the performance of the firm.
d. a justification for refusing requests for ESOP options.
An increase in the rivalry among existing competitors in a target market
a. increases both the attractiveness and the profitability of the target market.
b. decreases both the attractiveness and the profitability of the target market.
c. decreases the attractiveness and increases the profitability of the target market.
d. increases the attractiveness and decreases the profitability of the target market.
Characteristics of a corporation which of the following:
a. artificial being
b. visible
c. tangible
d. immutable
In making capital budgeting decisions, small business owners tend to rely to a
significant extent on
a. intuition.
b. government assessment.
c. economic analysis.
d. informed opinion.
Most small business advisors recommend __________ life insurance for key-person
policies.
a. whole
b. universal
c. term
d. blanket coverage
Stockholders have limited liability unless they
a. are active in the management of the corporation.
b. personally endorse company notes.
c. own preferred stock.
d. convert their shares to partnership status.
After issues related to customers and competitors, the second most common category of
ethical issues that challenge small businesses is concerned with
a. the treatment of employees.
b. international relations.
c. public relations.
d. harmful production processes.
A firm should decide to buy components from a supplier (as opposed to making them)
a. when it has excess plant capacity.
b. when it will require greater flexibility on the firm’s part to accommodate the supplier.
c. if product quality would be the same (regardless of the firm’s decision.)
d. if the risk of equipment obsolescence can be transferred to the supplier.
Repetitive operations in manufacturing use
a. general-purpose machines.
b. job-order schedules.
c. highly specialized equipment.
d. short production runs.
A firm that provides substantial profits to its owner is called a(n) _________.
a. franchise
b. high-potential venture
c. attractive small firm
d. lifestyle business
Marlene Carlson selected a ________ strategy when she chose to market her Puzzle
Toes product to parents with young children.
a. demographic
b. multi-segment
c. single-segment
d. unsegmented
A trade credit bill of $80,000 with terms of sale of 2/5, net 30 means the buyer saves
_______ if the bill is paid within the discount period.
a. $400
b. $1,600
c. $2,500
d. $4,000
When a firm reaches Stage 2 (player-coach) in its growth, the entrepreneur withdraws
from personal participation in production, selling, writing checks, and record keeping.
The 2004 Index of Economic Freedom has reported that per capita income around the
world is rising, but there is no discernable change in levels of economic freedom.
A policy of regular vacations can be an important part of an internal control system.
The name S corporation comes from the Internal Revenue Code, which permits
corporations to retain the limited-liability feature of regular corporations while being
taxed as partnerships.
Employee referrals provide a rich source of good applicants for many small firms.
How is the concept of personal fulfillment related to entrepreneurship?
Actual cash value (ACV) refers to the purchased value of a property.
Because of the relatively inconsequential amount of sales conducted by a typical small
business, the majority of entrepreneurs need not be concerned with formulating
accurate sales forecasts.
Fringe benefits are expensive, amounting to more than 40 percent of payroll expense
for many small firms.
To retain control and avoid accountability to those with a minority equity position in the
firm, small business owners are often reluctant to give away any of the company’s
ownership.
If the busy entrepreneur wants to keep a hand on the pulse of the business, he or she
should continue to read technical or trade publications.
Most small firms choose to go global first by exporting.
The payback period technique does not consider the time value of money.
The current ratio is computed by dividing current assets by current liabilities.
You Make the CallSituation 4
Lonnie Lehrer, CEO of Leros Point to Point, a New York City limousine service,
thought he was prepared for anything. Then the first plane hit the World Trade Center
on September 11, 2001, and all Lehrer’s plans went down with it. “Ninety percent of our
business is tied to the airports,” says Lehrer, “We went from being a $7 million
company to a $700,000 company overnight.” Business slowly returned and is now
better than ever. Leros recently acquired two smaller companies and expanded
operations, bringing annual revenues to nearly $9 million in 2002.
Source: Daniel Tynan, “In Case of Emergency,” Entrepreneur, April 2003, pp. 59″60.
Question 1 What kind of insurance would have helped Lehrer cope with the loss
resulting from 9/11? What must considered when determining the amount and terms of
coverage when purchasing this type of insurance?
Question 2 What major type of liability is faced by a firm such as Leros Point to Point?
What kind of insurance will cover these risks?
Question 3 Would you have recommended that Lehrer purchase insurance that would
have covered the losses in this case?
Return on equity is computed by dividing net income by common equity.
In practice, a SWOT analysis is usually based on a dynamic view of the firm and its
situation.