It may appear in the incubation stage of the creative process that the entrepreneur is
loafing, as he is taking time to reflect on the information collected.
The most common reason online customers abandon their shopping carts is that the
shipping charges are too high.
Effective interviewers ignore candidates’ nonverbal clues (i.e., body language) in
interviews because they know that most candidates are so nervous that their nonverbal
communication is meaningless.
The income statement is based on the fundamental accounting equation:
Assets = Liabilities + Owner’s Equity.
The business acquisition process should begin with the search for potential companies
to acquire.
Limited liability partnerships (LLP) are where all partners in a business are limited
partners, which offers the advantage of limited liability for the debts of the partnership.
A study by Rafi Mohammed, author of The Art of Pricing, found that companies that
raised prices by 1 percent saw profits increase by 11 percent and those that raised prices
by 10 percent realized profit increases of 100 percent.
On a projected income statement, a business owner’s target income is the sum of a
reasonable salary for the time spent running the business and a normal return on the
amount the owner has invested in it.
A limited partner is treated as an investor in a business venture and does not take an
active role in managing it.
A job description sets forth a job’s duties and responsibilities; a job specification
translates these duties into the qualifications needed for that job.
For most products, there is an acceptable price range, not a single ideal price.
Crowd funding is a process in which entrepreneurs tap their personal savings and use
creative, low-cost start-up methods to launch their businesses.
Although franchise outlets operate throughout the world, the primary market for U.S.
franchisers is Europe.
Before making a loan to a business startup, banks prefer to see ________.
A) sufficient cash flow generated by the business
B) ample collateral for the loan amount
C) a SBA guarantee to insure the loan
D) All of the above
Management consulting firm McKinsey and Company states that more than ________
percent of the pricing problems on new products are the result of companies setting
prices that are too low.
A) 20
B) 40
C) 60
D) 80
Earning a profit may be a company’s ________ responsibility.
A) first
B) only
C) singular
D) last
Which hemisphere of the brain is responsible for language, logic, and symbols?
A) Right hemisphere
B) Left hemisphere
C) Lateral hemisphere
D) Intuitive hemisphere
The primary disadvantage of equity capital is that the entrepreneur ________.
A) must repay it at some point with interest
B) must give up some (perhaps most) of the ownership in the business to outsiders
C) experiences the disadvantage of the risk/return tradeoff in the form of higher interest
rates
D) B and C above
Building a Web strategy based on a clear definition of the company’s target audience
and an understanding of those customers’ needs, wants, likes, and dislikes is ________.
A) relatively unimportant for a company’s Web site due to its flexibility
B) something that the entrepreneur no longer has to focus on to realize success
C) also critically important for a company’s presence on the Web
D) an exercise that should eventually be addressed after the site is launched
A(n) ________ is a special exemption to a zoning ordinance.
A) variance
B) exception
C) trade area
D) cluster
One of the most significant economic developments in recent business history relates to
the ________.
A) growth of blue-chip corporations
B) development of Pacific Rim countries
C) entrepreneurial spirit
D) additional employment opportunities offered by government institutions
A checking account that never has idle funds (because it draws funds from an
interest-bearing master account to cover checks written) is called a ________ account.
A) zero-balance
B) money market
C) deficit
D) sweep
When Jan and Detmar Wolcinski bought their 152-year-old house, they began
remodeling it with one goal in mind – opening a bed and breakfast inn. The Chadwick
Inn has exceeded the Wolcinski’s expectations in its first year of operation, but now
some neighbors are starting to complain about the increased traffic in their
neighborhood and the late hours some of the Inn’s guests keep. The Wolcinski’s greatest
challenge in the near future is most likely ________.
A) convincing the local historical preservation board that the modifications they made
to the house are in keeping with its historical character
B) zoning laws prohibiting commercial businesses in a residentially zoned area
C) major hotel chains opening competing “bed and breakfast” hotels on adjacent lots
D) encroaching shopping centers and malls that push up real estate prices
Employees must be given the tools and resources they need to be creative. One of the
most valuable set of resources is ________.
A) setting limits and providing challenges
B) establishing rules and guidelines
C) time, support and encouragement
D) reinforce traditional problem solving methods
Mini-Case 12-2: The Laurens Corporation
In past years, Sue Salgado, owner of the Laurens Corporation, has been plagued by
unexpected cash flow problems. Her banker, worried about her lack of cash flow
management, has suggested that Sue create a cash budget for the upcoming quarter. Sue
does this, using the following information:
Laurens Corporation expects 35 percent of its sales to be in cash, 70 percent of the
accounts receivable will be collected within the next month, and 25 percent in the
second month after sale. Depreciation, insurance, and property taxes comprise $25,000
of monthly manufacturing costs and $12,000 of operating expenses. Insurance and
property taxes are paid in February, June and September. One-half of the remaining
manufacturing costs and operating expenses will be paid in the month in which
incurred, and the rest in the following month. As of October 1st, the following facts are
relevant:
-Current assets consist of $50,000 in cash, $50,000 in securities
-Credit sales for August and September were $500,000 and $450,000, respectively
-The firm has a line of credit with a local bank at 18 percent APR, and loan is due the
following month
-Accounts payable of $200,000 for September manufacturing expenses
-Accrued liabilities of $100,000 for September operating expenses
-Dividends of $1,000 should be received in November
-An income tax payment of $20,000 will be made in November
-The firm’s minimum cash balance is $10,000
From the information given, prepare a monthly cash budget for the next quarter
(October through December) for the Laurens Corporation.
