A cash budget is a forecast of the firm’s cash inflows and outflows over a specific time
period.
Selling to a resident buying office is just like selling to domestic customers since the
buying office handles all of the details of exporting the products.
Contribution margin is the portion of sales revenue left after covering fixed expenses
and a profit.
Entrepreneurs must always be on guard against traditional assumptions and
perspectives about how things ought to be because they are certain killers of creativity.
The only ways a niche can be defined are by customer profile and by geography.
In an initial public offering, a company raises capital by selling shares of its stock to the
general public for the first time.
An employer can be held liable for third parties who engage in sexual harassment if the
employer has the ability to stop the improper behavior.
Rather than build the current year’s budget on increases from the previous year’s budget,
zero-based budgeting starts from a budget of zero and evaluates the necessity of every
item.
The process of transferring power should be quick and absolute.
Because of their organizational and managerial flexibility, small businesses often can
detect and act on new opportunities faster than large companies.
A line of credit is usually secured by collateral.
The company’s average collection period ratio indicates the length of time the firm’s
cash is tied up in credit sales.
Credit unions are best known for making consumer and car loans.
One of the best ways for an entrepreneur to evaluate a potential franchiser is to
interview several franchise owners who have been in business at least one year.
Even though cost-plus pricing is simple, it does not encourage a small business to use
its resources efficiently.
“3/10, EOM” means a 3% discount can be taken if the bill is paid by the tenth day of the
month after the purchase.
Merchandise purchased on impulse and convenience goods should be located near the
front of the store.
Small businesses have had employees steal by putting merchandise in the trash, take it
out, and then return to the dumpster and remove it after their shift is over.
An S-corporation can have more than 75 shareholders.
Small business owners should always prosecute and not worry about negative publicity
or legal entanglements.
Only mistakes of fact permit a contract to be voided.
A trust is a contract between a grantor and a trustee which shields all assets from any
federal tax and permits the small business owner to pass on his/her business without tax
loss.
Factors an entrepreneur should consider when choosing a form of ownership should
include but not be limited to: tax considerations, liability exposure, business goals,
managerial ability, etc.
When the entrepreneur describes the product in terms of what the customer gains
through its purchase and use, he/she is describing it in terms of its features.
One of the disadvantages of buying an existing business is that customers may be loyal
to previous owners.
Price is a measure of what the customer must exchange to obtain goods and services
and is an indicator of value to the customer.
One hallmark of true entrepreneurs is their ability to adapt to the changing demands of
their customers and businesses.
Courts judge a party’s subjective, personal intentions to enter into a contract when a
dispute about a contract’s existence arises.
Like “C” corporations, S-corporations must pay taxes on any assets that have
appreciated in value and are sold.
If a company has a written code of ethics and provides clear instructions to employees,
two-way communication is unimportant in maintaining ethical standards.
An invoice marked 3/12 net 30 means that you can take a 3% discount if you pay the
bill in 12 days but you must pay the entire balance in 30 days.
The quick ratio is sometimes called the working capital ratio.
Most often, disputes over a franchise contract arise after the agreement is in force.
The key ingredientthe crucial elementto avoiding the failure of a new business is:
A) the business plan.
B) knowing the business.
C) technical expertise regarding the product.
D) differentiating the business and product from the competition.
The responsibility for verifying the identity and condition of merchandise:
A) is the seller’s.
B) is the carrier’s.
C) depends on the nature of the contract between buyer and seller.
D) is the buyer’s.
The international market:
A) has proven to be a tremendous opportunity for small business.
B) is being dominated by large corporations based in Europe and Japan.
C) is largely closed to small U.S.-based businesses because of the growth of
international entrepreneurship.
D) provides greater opportunities for women and minority entrepreneurs than U.S.
domestic markets do.
Most venture capitalists purchase ownership in a small business through:
A) a common stock or convertible preferred stock.
B) an ESOP.
C) loans with an option to buy stock.
D) a general partnership.
The ________ ratio measures the small company’s ability to generate sales in relation to
its assets.
A) net sales-to-working capital
B) net sales-to-total assets
C) average collection period
D) average inventory turnover
The ________ is the most complex form of ownership and is a separate legal entity in
the eyes of the law.
A) sole proprietorship
B) partnership
C) corporation
D) joint venture
To implement TQM successfully, a small business owner must rely on 10 fundamental
principles. One principle states:
A) share information with everyone in the organization.
B) information needs to be handled by only the top management.
C) information needs to be handled by only the lower level workers who deal with the
products every day.
D) All of the above
The formula for calculating the reorder point of a product is:
A) Q/2 H.
B) D C.
C) D/Q S.
D) (L U) + S.
An export trading company is:
A) a government-owned or business-owned facility set up in a foreign country to buy
products that are made there.
B) a firm in an overseas distribution network selling noncompetitive products made by
other firms.
C) formed by an agreement by which a licenser gives a foreign licensee the right to use
a patent, trademark, copyright, technology, and products in return for a percentage of
the licensee’s sales or profits.
D) a business that buys and sells products in many countries, either in its own name, or
as an agent for its buyer-seller clients.
Open book management is one technique that supports:
A) a job redesign strategy.
B) the empowering of employees.
C) job enrichment.
D) effective job hiring.
Al voluntarily becomes intoxicated at a local bar. He sells his car for half of its value
simply to irritate his wife. Later when sober, Al and his wife want the car back. This
contract:
A) is void because of a lack of genuineness of assent.
B) is voidable.
C) is unenforceable due to duress and undue influence.
D) cannot be voided by Al or his wife.
An executive summary should:
A) explain the basic business model and the problem the business will solve for
customers.
B) briefly describe the owners and key employees, target market(s), and financial
highlights.
C) briefly describe the company’s competitive advantage.
D) All of the above
In franchising, a ________ pays fees and royalties to a ________ in return for the right
to sell its products or services under the franchiser’s trade name and often to use its
business format and system.
A) franchiser; franchisee
B) franchisee; franchiser
C) franchise; business owner
D) business owner; parent company
A product layout has the disadvantage of:
A) a high fixed investment in specialized equipment.
B) the highest materials costs with lower productivity.
C) being harder to schedule and monitor.
D) dividing the work area into separate operations that are highly independent with a
duplication of equipment.
Quality improvement efforts must ultimately focus on:
A) the product.
B) the customer.
C) the manufacturing process.
D) the purchasing process.
The most successful strategic plans make the ________ focal.
A) competitive analysis
B) customer
C) product
D) control process
An entrepreneur’s ________ and ________ influence the way she leads her firm
through every decision that is made; every policy written; and every action taken.
A) personal values; beliefs
B) management; family
C) management; finances
D) None of the above
During the transfer of power, when the successor makes mistakes, the owner should:
A) use them as a means for teaching.
B) step in and fix them him/herself, to prevent damage to the company.
C) explain how the owner would have handled it and insist it be done that way in the
future.
D) retake control of the company.
A(n) ________ is an agreement between a grantor and a trustee where the trustee holds
legal title to property for the beneficiaries of the trust.
A) grantor-retained annuity trust
B) family limited partnership
C) trust
D) estate freeze
Combining ________ with a POS system gives a small business owner a
state-of-the-art checkout system and further extends the abilities of the POS system in
the information it provides the owner.
A) TQM
B) an EDI system
C) universal product code labels and scanners
D) an ABC system
________ is any sales presentation that is nonpersonal in nature and is paid for by an
identified sponsor.
A) Promotion
B) Advertising
C) Personal selling
D) Publicity
________ 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 customer’s behavior.
A) Customer relationship management
B) Data mining
C) Data discovery
D) Simulation
For some customers, a higher price equals:
A) higher quality.
B) greater perceived value.
C) uniqueness.
D) All of the above
The voice of a ________ can be an important source of creative ideas.
A) customer
B) competitor
C) operator
D) manager
Sole proprietorships characteristically are:
A) fairly complex to create.
B) subject to special legal restrictions.
C) expensive to create.
D) easy to discontinue.
Perhaps the ideal source of financing the purchase of an existing business is:
A) the seller.
B) the Small Business Administration.
C) a venture banker.
D) your local bank.
A(n) ________ gives the surviving owner or heir of a family business the right to
purchase the stock of the deceased owner at a price established by a predetermined
formula.
A) grantor-retained annuity trust
B) estate freeze
C) unified transfer credit
D) buy/sell agreement
Sonny is buying a computer system for his college’s administrative functions. The
negotiated price of the system is $475, 000. He receives a contract for $375,000 with no
explanation as to the change and gladly signs it and sends it back to the vendor. He
receives a phone call from the vendor explaining that the secretary in typing the figures
into the contract hit the 3 instead of the 4 on her keyboard. Sonny wants to hold the
vendor to the contract. Is the contract legally binding on the contractor?
A) Yes, because it constitutes a written offer.
B) No, because of a lack of genuineness of assent on the part of the vendor.
C) Yes, because of the law of agency covers the secretary as well as the salesperson.
D) No, because this constitutes a mistake of fact that Sonny should have immediately
recognized.
________ ratios indicate how efficiently the small firm is being managed.
A) Liquidity
B) Profitability
C) Leverage
D) Operating
Small businesses thrive in every industry, but the majority of them are in:
A) the general construction industry.
B) retail businesses.
C) mining and manufacturing.
D) service industries.
The two-bin system and the tag system of inventory control are best suited for items
classified as ________ in ABC analysis.
A) “A” items
B) perishable items
C) “C” items
D) “B” items