Which of the following statements is true of credit bureaus?
a. They act as third-party underwriters of credit to companies which then offer this to
customers.
b. They provide a likely scenario of future use/misuse of credit.
c. They profile members’ credit experiences specifically with non-profit organizations.
d. They collect credit information and offer it only to member businesses.
The reason that a group of uniformed people walking down the street playing musical
instruments is recognized as a band is the result of
a. characteristic profiling.
b. evaluative criteria.
c. perceptual categorization.
d. problem recognition.
Which of the following is excluded from the definition of entrepreneur given in the
book?
a. Founder
b. Second generation owner-manager
c. Franchisee
d. A salaried manager who has a flair for innovation
Helen Garbo, owner of a travel agency, is concerned about the length of time needed for
employees to get adjusted to the business and to become sure of their own roles in the
business. She should first evaluate the firm’s
a. on-the-job training.
b. management development efforts.
c. quality training program.
d. orientation sessions.
Mark is more efficient in transforming his inputs into outputs than Joe. Mark’s
_________ is higher than Joe’s.
a. input/output production
b. in/out transformation
c. quantity of production
d. productivity
Projected financial statements are also known as
a. adjusted financial statements.
b. pro forma financial statements.
c. “predicting the unpredictable.”
d. cost of goods to be sold.
From the children’s standpoint, one common reason that they may be reluctant to join
the family firm is
a. teenage rebellion.
b. a desire to prove their abilities in another company.
c. a desire to make a higher rate of pay.
d. a desire to help the parent avoid favoritism.
When it comes to financing a company, a banker looks at two kinds of assets:
a. direct and indirect.
b. tangible and intangible.
c. those founded upon past performance and those depending on future performance.
d. industry-specific and firm-specific.
Which of the following layouts arranges special-purpose equipment along a production
line in the sequence in which it is used?
a. Product layout
b. Process layout
c. Free-flow layout
d. Self-service layout
A small business owner finds that his salesperson has lied to a customer about test
results on a new product. The owner recognizes that this breach of good ethics falls into
the category of
a. management processes and relationships.
b. governmental obligations and relationships.
c. human resources decisions.
d. relationships with customers and competitors.
Potential advantages of small entrepreneurial firms include:
a. Customer focus
b. Quality performance
c. Special niche
d. All of these.
The cash flow statement reflects cash flows from
a. operating activities.
b. investment activities.
c. financing activities.
d. all of these.
Anne Dunne owns a small business dealing with industrial products. She currently uses
personal selling extensively, but she wants to reduce her cost without losing exposure.
Which promotional tool should she use?
a. Specialties
b. Coupons
c. Contests
d. Trade show exhibits
Which of the following shows the original cost of each asset and depreciation taken to
date, along with other information such as the condition of the asset?
a. Accounts payable records
b. Accounts receivable records
c. Cash records
d. Fixed asset records
Adoption of the just-in-time inventory system requires
a. the elimination of raw materials wherever possible.
b. an emphasis on work in progress.
c. a reduction in the firm’s finished goods.
d. close cooperation with suppliers.
The _____ shows all cash receipts and payments involved in operating the business and
managing its financial activities.
a. income statement
b. balance sheet
c. cash flow statement
d. statement of financial position
Part of the appeal of forming a regional trade area is that companies can then
a. gain access to more employees.
b. benefit from locational features unrelated to costs.
c. draw upon the advantages of a “fortress mentality.”
d. acquire the potential to expand into international markets.
Small business marketing involves a number of activities, including
a. preparing, communicating, and delivering a bundle of satisfaction to a target market.
b. planning for optimal production efficiency.
c. identifying alternative technologies.
d. establishing a sales-oriented marketing philosophy.
The accounting option a business chooses for financial reporting must
a. be the same as the option chosen for tax accounting.
b. meet legal requirements.
c. be double entry in order to create the necessary financial statements.
d. be computerized rather than manual.
The argument developed in Chapter 1 about entrepreneurial opportunities holds that
a. potentially profitable opportunities exist at all times.
b. the biggest barrier to seizing opportunities is lack of capital.
c. minorities are effectively blocked from exploiting opportunities.
d. approximately 99 percent of all opportunities involve some form of retailing.
The two basic types of advertising are _____, which makes potential customers aware
of products and their need for them, and _____, which conveys an idea about the firm
that produces the product.
a. institutional, product
b. product, institutional
c. product, publicity
d. specialty, publicity
Evaluation and review is an important step in the risk management process because
a. it is difficult to select an effective method to manage risks.
b. conditions change.
c. it is nearly impossible to evaluate risk effectively.
d. entrepreneurs find it challenging to identify the major risks that they face.
Products and trade name franchising is best illustrated by the system offered by
a. Dr. Pepper.
b. Mail Boxed Etc.
c. Burger King.
d. Holiday Inn.
Small businesses that have great prospects for growth are called ______.
a. gorillas
b. antelopes
c. jaguars
d. gazelles
In considering the content of a business plan, an entrepreneur should think first and
foremost about
a. how to present factors related to the opportunity.
b. formulating effective strategies and financial projections.
c. who will be reviewing the plan.
d. how to protect the confidentially of the plan.
Small business investment companies (SBICs)
a. are licensed and regulated by the Federal Trade Commission.
b. may lend funds or supply equity funds.
c. obtain part of their capital from local governments at attractive interest rates.
d. provide only short-term financing.
The _____ indicates the extent to which plant and equipment are being utilized.
a. acid-test ratio
b. fixed asset turnover ratio
c. current ratio
d. average collection period
For most small businesses, the primary motivation for going global is to
a. develop new market opportunities.
b. reduce the costs of doing business.
c. gain access to resources that are important to the firm’s operations.
d. capitalize on special features of location.
You Make the CallSituation 3
Kim Hodges operates a 3-year-old furniture company named Metallika in Waco, Texas.
Does the name sound familiar? According to a lawyer for the heavy-metal rock band
Metallica, it sounds too familiar. In a letter to Hodges, the lawyer wrote, “Specifically,
we need you to change the name of your business to a name that does not include the
terms Metallika, Metalika, Metallica, Metalica, or any name, term, logo, domain name
or vanity telephone number similar thereto.”
The lawyer said if Hodges chooses not to change the name of his company, they might
sue for damages, company profits, and attorneys’ fees.
Source: Mike Copeland, “Metallika Rocked by Metallica,” Waco Tribune Herald,
December 9, 2000, p. 1A.
Question 1 What course of action would you recommend to Hodges?
Question 2 What can Hodges say in defense of the name he chose for his furniture
business?
Seeking to extend the product life cycle by expanding into international markets has
become a less effective strategy, in part, because
a. customer preferences have become more similar around the world.
b. international delivery systems cannot handle the variety of company distribution
systems.
c. income levels in many countries are insufficient to support this strategy.
d. product life cycles have already been growing over the years.
Accounting software is available for the computers of most businesses. Most software
packages provide
a. a computerized checkbook, accounts receivable managers, and financial-statement
preparers.
b. a computerized checkbook, budgeting programs, and accounts receivable managers.
c. a computerized checkbook, preparation of a cash budget that compares actual and
budgeted expenditures, and preparation of income statements and balance sheets.
d. budgeting programs, accounts receivable managers, and financial-statement
preparers.
A woman is planning to establish a business in her residence. In order to maintain a
proper balance between family and business matters, she should
a. establish spatial and nonspatial boundaries.
b. design a business-style letterhead that gives no hint of a home location.
c. buy an answering machine.
d. install a computer with a modem.
_____ is basically a checkbook system of receipts and disbursements.
a. A single-entry system
b. A double-entry system
c. The accrual method
d. The cash method
Available types of transportation intermediaries include all of the following except
a. common carriers.
b. public carriers.
c. private carriers.
d. contract carriers.
Lydia Kurze works as a senior network administrator and is dissatisfied with stifling
bureaucratic environment of her job. She considering venturing out on her own as a
consultant. If she carries through with her intentions, she would be considered a
___________.
a. pariah
b. dilettante
c. emigrant
d. refugee
The board of directors is elected by the stockholders of a corporation.
As a firm moves from Stage 1 to Stage 4, the pattern of entrepreneurial activities
changes in that the entrepreneur becomes less of a manager and more of a doer.
Sales forecasts are typically expressed in dollars or units.
You Make the Call – Situation 3
A self-employed commercial artist reports taxable income of $7,000. Actually, her
income is considerably higher, but much of it takes the form of cash for small projects
and thus is easy to conceal. She considers herself part of the “underground economy”
and defends her behavior as a tactic that allows her small business to survive. If the
business were to fail, she argues, the government would receive even less tax revenue.
Question 1 Is the need to survive a reasonable defense for the practice described here?
Question 2 If the practice of concealing income is widespread, as implied by the phrase
“underground economy,” is it really wrong?
Good faith, together with reasonable care in the exercise of managerial duties, is
required of all partners in a business.
The Coca-Cola Company is an example of a product and trade name franchisor.
Service establishments are exempt from setting quality standards, since their product is
intangible and thus cannot be measured.
You Make the CallSituation 4
Carson Smith is an employee of a small family-owned manufacturing plant located in
his hometown of Malone, Mississippi. One day, while waiting to see someone at a
competitor’s business, he noticed a memo tacked to a bulletin board and read it. The
memo described a forthcoming promotional campaign and details of a new pricing
strategy. Upon leaving the plant, Smith returned to his office and informed management
of the details of the memo.
Question 1 Is this a legitimate form of marketing research? Why or why not?
Question2 Do you consider Smith’s behavior to constitute spying?
Question3 What would you have done in his situation?
Taken together, China and India account for nearly 30 percent of the world’s 4 billion
inhabitants.
It is generally easier and more beneficial for a small business to develop products that
are similar to those of competitors, rather than attempt to offer a sufficiently different
product.
A large percentage of small business owners cite their desire to be their own boss as the
main reason they left their previous employers.
Which of the three different categories of new venture ideas accounts for the most
startup ventures?
You Make the CallSituation 4
Jeremy Jenkins, who operates a 30-truck freight hauling business in Florida, tries to
show what he calls “fairness, firmness, and friendliness” in dealing with employees.
The firm’s personnel include drivers, mechanics, and clerical and secretarial employees.
Jenkins’s approach has contributed to an atmosphere of reasonably good employee
relationships. However, Jenkins is finding that the paperwork associated with payroll
preparation, government regulation, tax reporting, and other personnel matters is
becoming burdensome. It is also placing heavy demands on his office staff.
An outside leasing company has offered to take over much of the firm’s human resource
management work by transferring personnel to its own payroll. The cost would be 3
percent of payroll. Additional benefits and services, including training classes on
subjects such as workplace violence and sexual harassment, are available at additional
cost. Jenkins is pondering the feasibility of contracting with the leasing company.
Question 1 How can Jenkins be sure that the leasing company is reputable and that he
will receive real value for the money?
Question 2 How would transferring employees to the leasing company be likely to
affect employee relationships within Jenkins’s firm? Will employee loyalty be
transferred to the new “employer”?
Question 3 What steps should Jenkins take before entering into an agreement?
Discuss the topic of delegation of authority in small business. Include in your
discussion a definition of the term, manifestations of weakness in delegation, and
benefits to be realized.
Markups may be expressed as a percentage of either the firm’s cost or the
industry-standard cost.
Hobbies of retiring business executives can spawn startup ideas.
Because small businesses are small by definition, pricing and credit considerations are
relatively unimportant to their overall performance.
E-commerce is really nothing more than a new way of taking orders, supplementing the
capabilities of the phone or fax machine.
The process of preparing a successor for leadership in a family business can take more
than a decade.
When a small business markets a line of products, some of which may compete with
one another, pricing decisions must take into account the effects of a single product
price on the rest of the line.