A master franchise is called a piggyback franchise.
In start-ups, it is often safest to be a “me-too” business, follow the leaders in the market
until sufficient cash flow develops to permit R & D into new and innovative products.
One of the most commonly cited reasons for a new product failing is that it is not
adequately differentiated from competitive products.
A consignment contract means that the supplier (i.e., the consignor) retains title and risk
of loss for the consigned merchandise.
Because inventory is illiquid, cash invested there is tied up and cannot be used for other
purposes.
The adjusted balance sheet method of valuing a business changes the book value of net
worth to reflect actual market value.
When determining the owner’s target income, you must consider a reasonable salary for
the time spent running the business, less the depreciation of assets.
The courts hold that a contract entered into by an intoxicated person or an insane person
is always voidable.
The balanced scorecard is a set of measurements unique to a company that includes
bothfinancial and operational measures and gives managers a quick yet
comprehensivepicture of the company’s total performance.
Failing to keep corporate and personal funds separate is most often a problem in closely
held corporations.
Innovation is nothing but random, disjointed tinkering.
To be successful, both off-line and online companies require solid planning and a
well-formulated strategy that emphasizes customer service.
It is important for potential entrepreneurs to have extensive experience in the business
in which they are buying a franchise.
The times-interest-earned ratio expresses the relationship between the capital
contributions of creditors and those of the owners.
Small companies that anticipate net losses are ideally suited for S-corporation status.
It is not necessary to provide a street address, an e-mail address, and a toll free
telephone number on the company’s Web site to prove the legitimacy of the business.
What managers and owners say is more important in determining employee ethical
behavior than what they do.
Left-brain vertical thinking is narrowly focused and systematic.
A nonprofit organization uses its revenues to pursue social value rather than to create
personal value for investors.
Open book management is a management style where the owner provides employees
with access to all the company’s records, including financial statements.
Lease is considered a liability on the balance sheet.
On a break-even chart, the break-even point occurs at the intersection of the fixed
expense line and the total revenue line.
For changes in inventory management to be considered consistent with a “just-in-time”
philosophy they must use both EDI and POS technology to manage the inventories.
The cash flow cycle is the time lag between paying suppliers and receiving payment
from customers.
An advantage to establishing an international location is lower start-up costs in the
foreign country.
A small company needs fixed capital to expand and grow the business.
Companies started by women tend to be smaller than those started by men.
Although competitor’s prices can have a dramatic effect on a small business’s own
prices, monitoring competitor prices is illegal in many states.
“Just-in-time” inventory control techniques are best suited for manufacturing operations
where there are significant inventory levels and where the manufacturing operations are
unique and varied, producing custom items.
The majority of venture capital firms that provide capital to small businesses strive to
not be involved in running the business.
While every business plan will be unique, there are several areas of information that
should be common to all good business plans.
An estate freeze minimizes estate taxes by creating two classes of stock, preferred and
nonvoting common stock, and only allowing the preferred stock, which the owner
holds, to appreciate.
Independent entrepreneurs with a “go-my-own-way” attitude are ideally suited for
becoming franchisees.
Selling on credit is a common practice in business.
The basic and first question an entrepreneur should ask him/herself before jumping into
a franchise is, “How much is this going to cost me?”
The best conversion of strategic plans to operational plans is done by top management
without the help of the employees.
The product or service offered is the foundation of any marketing-oriented business.
One major advantage of the ________ is that once the owner has paid all of the
company’s expenses, he/she can keep the remaining profits (less taxes, of course).
A) partnership
B) corporation
C) sole proprietorship
D) limited liability company
F.O.B. factory is a variation of ________ pricing.
A) opportunistic
B) bundling
C) geographic
D) skimming
A major threat that family businesses face is:
A) having kids.
B) divorce.
C) management succession.
D) None of the above
To avoid business failure, an entrepreneur should:
A) know the business in depth.
B) develop a solid business plan.
C) take entrepreneurship courses.
D) Both A and B
The primary reason entrepreneurs choose to incorporate is because of:
A) the corporation’s ability to attract capital.
B) the need to attract top quality management talent to grow the business.
C) the lower tax rates inherent in the corporate form of ownership.
D) the limited liability of stockholders.
Rupert, a very old man, suffers from bouts of senility. During a lucid moment, he
contracts to buy a new freezer from a local appliance dealer. This contract is:
A) void.
B) voidable.
C) enforceable.
D) illegal.
Reasons for leaving a Web site without purchasing are:
A) having a phone number when encountering problems.
B) insufficient product information.
C) having to check back to view items in the shopping cart.
D) for security purposes, multiple steps are necessary to get to the check out page.
________ is a useful Web site that gives entrepreneurs help in the location decision.
A) Consumer Reports
B) Index of Retail Saturation
C) ZoomProspector
D) Sales Conversion Index
In view of the cause of most new business failures, probably the most valuable service
provided franchisees by the franchiser is:
A) management training and experience.
B) national advertising.
C) financial assistance.
D) territorial protection.
In ABC analysis, the dollar usage value of an item is determined by:
A) its price per unit times its shrinkage rate.
B) a statistical application of the 80/20 rule.
C) POS systems.
D) its cost per unit and its sales volume.
A distinct disadvantage of the corporate form of ownership is:
A) treasury stock.
B) double taxation.
C) stockholder’s liability.
D) All of the above
The owner of a small auto repair shop knowingly installs a used water pump in your car
and tells you it is “brand new.” This is:
A) fraud.
B) duress.
C) innocent misrepresentation.
D) breach of contract.
A solid business plan is marked by a number of characteristics including:
A) broad, general market research on the overall industry and business environment.
B) a description of the management team.
C) a minimum of financial detail.
D) an optimistic financial projection and understandable risk statement.
________ is simply the cost per unit of an item multiplied by the annual quantity used.
For instance, the owner of a stereo shop may find that she sold 190 pairs of a popular
brand of speaker during the previous year.
A) Daily dollar usage volume
B) Quarterly dollar usage volume
C) Annual dollar usage volume
D) None of the above
Once a credit account becomes past due, a small business owner should:
A) wait patiently; the customer will most likely pay the bill sooner or later.
B) turn the account over to a collection agency the day it becomes past due.
C) contact the customer immediately, ask for full payment, and set a deadline.
D) call the “deadbeat” in the middle of the night and make harassing and threatening
remarks until he pays.
The table below is an example of a ________ discount.
Order Size Price
1″1,000 units List Price
1,001″5,000 units List Price”3%
5,001″10,000 units List Price”6%
10,001 & over List Price”10%
A) trade
B) quantity
C) cash
D) cumulative
Which one of the following is NOT a small business innovation enabler, according to
Intuit?
A) Compassion
B) Customer connection
C) Agility and adaptation
D) All are enablers
Sometimes, once established in international markets, businesses ________, despite the
frustrations of securing services, the significant capital investment involved, etc.
A) offer foreign licenses
B) sell international franchises
C) establish an international location
D) use trade intermediaries
The Uniform Commercial Code:
A) significantly revised Merchant Law.
B) is based on case law and overturns much of the common law that merchant law was
based on.
C) makes minor changes to merchant law, largely making the law more uniform and
consistent.
D) is the most significant revision of commercial law since the Napoleonic Code.
Dirk wants to be in control. He’s tired of taking orders from others and wants to feel a
sense of accountability for the outcome of his work. Dirk displays the entrepreneurial
characteristic of:
A) the desire for immediate feedback.
B) a desire for responsibility.
C) confidence in his ability to succeed.
D) a high energy level.
A ________ is a small number of customers who give you feedback on specific issues
in your businessquality, convenience, hours of operation, service, and so on.
A) survey
B) questionnaire
C) focus group
D) All of the above
________ is (are) the value of the owner’s investment in the business.
A) Assets
B) Liabilities
C) Owner’s Equity
D) Profit
Malcolm won a contract to provide nuts, bolts, and washers to a small African country’s
military. Unfortunately, neither his bankers nor venture capitalists would provide the
loans needed to buy the material to produce the order. The bank didn’t do international
loans. Which barrier to international trade is Malcolm experiencing?
A) Information
B) Cultural
C) Financing
D) Attitude
It is important to remember when assessing the financial soundness of a company that:
A) if profits are adequate, there will be sufficient funds to pay salaries and fund cash
flow.
B) cash flow is the key financial element in determining financial soundness.
C) revenues need to equal to twice the debt load in order for the company to be viable.
D) the buyer is buying the past revenues and profits of the company.
The primary purpose of building a business plan is to:
A) raise capital.
B) attract potential employees.
C) provide direction, to create a “target” to shoot for.
D) meet SEC requirements designed to protect lenders and investors.
One effective documentation technique involves ________, in which entrepreneurs test
their business models on a small scale before committing serious resources to a
business.
A) forecasting
B) business prototyping
C) collateral
D) None of the above
________ is a process in which computer software that uses statistical analysis,
database technology, and artificial intelligence finds hidden patterns, trends, and
connections in data so that business owners can make better marketing decisions and
predictions about their customers’ behavior.
A) Demographic collection
B) Target marketing
C) Data mining
D) None of the above
Under GRAT, the beneficiaries are required:
A) to pay $11,000 gift tax.
B) to deduct the gift tax.
C) to pay gift tax on the value of the assets placed in the GRAT.
D) Beneficiaries are not required to pay any gift tax.
The ________ of a nation includes the beliefs, values, views, and mores that its
inhabitants share.
A) political beliefs
B) business beliefs
C) personal beliefs
D) cultural beliefs
The North American Free Trade Agreement has which of the following provisions?
A) The immediate elimination of all tariff and quota barriers on all goods
B) The elimination of trade barriers among Canada, Mexico, and the United States
C) A lowering of safety and air quality standards
D) The formation of a North American Trade Organization
A ________ outlines the duties and responsibilities associated with a job and the
working conditions involved.
A) job analysis
B) job description
C) job specification
D) human resource plan