Deck 5: Entrepreneurship and New Venture Management

Question 1

Who among the following is most likely to be an entrepreneur?

A) Rebecca works as an operations manager at Omega Corp.
B) Kevin is a student who also writes for a magazine.
C) Anita works for a non-profit organization.
D) Jordon has invested a small amount of money in Libra Inc. which is a large corporation.
E) Mariam has taken a loan to fund her new café.

Answer 1

E
Mariam is most likely to be an entrepreneur. Entrepreneurship is the process of planning, organizing, operating, and assuming the risks of a business venture. An entrepreneur, in turn, is someone who engages in entrepreneurship.

Question 2

Which of the following is a good strategy for small businesses?

A) Starting service businesses
B) Choosing industries that require more resources
C) Starting manufacturing rather than retailing businesses
D) Avoiding retailing industries
E) Choosing markets that require high investment costs

Answer 2

A
Primarily because they require few resources, service businesses are the fastest-growing segment of small-business enterprise. In addition, no other industry group offers a higher return on time invested.

Question 3

Which of the following statements is true about small businesses?

A) They constitute 2 percent of all businesses in the United States.
B) The vast majority of small firms are owner-operated.
C) Small businesses are least likely to lay off workers during economic downswings.
D) Small businesses hire at a slower rate than large companies.
E) Most small businesses in the United States have more than 500 employees.

Answer 3

B
According to U.S. Census Bureau, 24.5 percent of all U.S. workers are employed by firms with fewer than 20 people; another 29.6 percent work in firms that employ between 20 and 99 people. The vast majority of these companies are owner-operated.

Question 4

Identify an accurate statement about small businesses and large businesses.

A) Most of the products made by big manufacturers are sold to consumers by small businesses.
B) Innovations are least likely to come from small businesses.
C) Large businesses are likely to eliminate jobs at a far higher rate than small businesses.
D) Large businesses hire at a much faster rate than small businesses.
E) Large businesses consistently supply the majority of all "innovations" introduced into the U.S. marketplace each year.

Question 5

Entrepreneurs:

A) are essentially limited partners in a business venture who assume minimal risks.
B) do not directly participate in the operation of a business venture.
C) are individuals who invest in promising start-ups established by others.
D) are involved in planning and organizing activities of a business venture.
E) are individuals who exclusively start non-profit organizations.

Question 6

Small businesses:

A) dominate industries that require more resources.
B) are the last to lay off workers during economic downswings.
C) provide fewer innovations than large companies.
D) hire at a lower rate than large employees.
E) provide big businesses with many of the services they need.

Question 7

Which of the following statements is true about entrepreneurs?

A) They are typically angel investors.
B) They essentially start new businesses.
C) They essentially hire professional managers.
D) They essentially manage businesses of other individuals.
E) They are essentially employees of a corporation.

Question 8

Small businesses:

A) are a key source of new jobs in various industries.
B) are not present in the technology sector.
C) are least likely to lay off workers during economic downswings.
D) employ 0.2 percent of all workers in the United States.
E) hire at a slower rate than large companies during economic recovery.

Question 9

Which of the following is an accurate statement about small businesses?

A) They hire at a much slower rate than large companies.
B) They are likely to eliminate jobs at a far higher rate than large companies.
C) They provide little scope for innovation.
D) They constitute 3 percent of all businesses in the United States.
E) They employ only 4 percent of all workers in the United States.

Question 10

Gadgetbug, a gadget repair store, has 26 employees and operates in a two-storey building. The firm is well known in the community and the city in which it operates but not in the entire country. Gadgetbug manages to make annual sales of $80,000. Gadgetbug qualifies as a _____.

A) small business
B) corporation
C) regulatory agency
D) not-for-profit organization
E) strategic business unit

Question 11

Which of the following is true of small businesses?

A) Small business hire a minimum of 200 employees.
B) Small firms constitute 2 percent of all businesses in the United States.
C) Small businesses have a strong presence in the economy of the United States.
D) Small businesses have no presence in the technology sector.
E) Small businesses hire at a much slower rate than big businesses during economic recovery.

Question 12

The _____ industry provides a higher return on time invested than any other industry group.

A) retail
B) manufacturing
C) service
D) construction
E) finance

Question 13

Which of the following is a true statement about small businesses?

A) Small businesses are the first to hire in times of economic recovery.
B) Small businesses provide the least scope for innovation.
C) Small businesses are the last to lay off workers during economic downswings.
D) Small businesses employ less than 2 percent of all workers in the United States.
E) Small businesses do not have a presence in the technology sector.

Question 14

Which of the following statements is true about small businesses in the United States?

A) Small businesses hire at a slower rate than big companies.
B) Technology is the only sector in which small firms have no presence.
C) Small businesses are the last to lay off workers during economic downswings.
D) There are very few small firms in the United States.
E) Most U.S. workers are employed by small firms.

Question 15

A _____ is privately owned by one individual or a group of individuals and has sales and assets that are not adequate enough to meaningfully influence its environment.

A) publicly held corporation
B) regulatory agency
C) non-profit organization
D) strategic business unit
E) small business

Question 16

Which of the following is a true statement about small businesses and large businesses?

A) Small businesses are about as likely to innovate as large businesses.
B) Large businesses have been responsible for virtually every major product innovation.
C) Most small businesses in the technology sector have been failures.
D) All successful new start-ups are leading-edge dot-com enterprises.
E) Large businesses hire at a higher rate than small businesses.

Question 17

Which of the following statements is true about entrepreneurs?

A) Entrepreneurs hire professional managers to take care of all the business operations.
B) Professional managers who manage businesses of others are also entrepreneurs.
C) Entrepreneurs assume the risks of their business ventures.
D) Entrepreneurs do not participate in planning and organizing activities.
E) Entrepreneurs do not invest personal savings in their businesses.

Question 18

Sarah has started a day care centre of her own. She makes the major decisions about how the centre runs, what services it provides, and at what prices. She has funded the venture with her own savings and will be taking up complete responsibility of the success or failure of the venture. Sarah is most likely a(n) _____.

A) commercial financer
B) retailer
C) venture capitalist
D) angel investor
E) entrepreneur

Question 19

Identify the true statement about small businesses.

A) New jobs are also being created by small firms specializing in international business.
B) Public policies and government regulations have limited the growth of small businesses.
C) Most small firms in the United States have more than 500 employees.
D) Smaller firms eliminate employees at a slower rate than large firms during economic downswings.
E) Innovations are least likely to come from small businesses.

Question 20

Jason has started a restaurant of his own. He makes all the major operational decisions and is completely liable for the profits and losses the restaurant makes. Jason is most likely to be a(n):

A) SCORE volunteer.
B) first-line manager.
C) angel investor.
D) venture capitalist.
E) entrepreneur.

Question 21

_____ serve fewer customers than other providers.

A) E-tailers
B) Service providers
C) Wholesalers
D) Manufacturers
E) Retailers

Question 22

Samantha runs a store that exclusively sells handmade vegan cosmetics. The store has a wide range of products manufactured by different companies. The store is relatively small in size and Samantha did not have to invest a lot in it. She knows that only a small segment of customers buy such products and she exclusively focuses on them. Which of the following can be inferred from the scenario?

A) Samantha runs a wholesale store.
B) Samantha uses a niche strategy in the retail industry.
C) Samantha uses a cost leadership strategy in the service industry.
D) Samantha uses a product differentiation strategy in the manufacturing industry.
E) Samantha uses a market penetration strategy in the manufacturing industry.

Question 23

A wholesale business buys products from producers and then sells them to _____.

A) other manufacturers
B) retailers
C) end-users
D) customers
E) government regulators

Question 24

Angela runs a babysitting referral agency. Her work involves referring reliable and qualified babysitters to busy parents on a monthly, weekly, or hourly basis. She earns money by charging a nominal referral fee to the parents, and gets commissions from the babysitters for referring them. Angela's business operates in the _____ industry.

A) service
B) retail
C) wholesaling
D) finance
E) insurance

Question 25

Nokia and Samsung make cell phones. They operate in the ____ industry.

A) construction
B) manufacturing
C) finance
D) service
E) wholesale

Question 26

A good deal of money is usually needed to start a(n) _____ business because of the investment normally required in equipment, energy, and raw materials.

A) retail
B) wholesaling
C) manufacturing
D) services
E) insurance

Question 27

Service businesses:

A) comprise about 4.2 percent of all firms with fewer than 20 employees.
B) require high investment costs.
C) appeal to the talent for innovation typified by many small enterprises.
D) provide little scope for the development of niche strategies.
E) are involved in selling products manufactured by other businesses.

Question 28

A _____ business sells directly to consumers products manufactured by other firms.

A) service
B) finance
C) manufacturing
D) wholesale
E) retail

Question 29

Jordon owns a pet shop which sells specialty products like birthday cakes for dogs, canned cat food, and live food for fishes. He sources these animal foods from different manufacturers, and sells it to local residents. Jordon's shop operates in the _____ industry.

A) retail
B) wholesale
C) service
D) manufacturing
E) finance

Question 30

Pet care salons, skin clinics, and day care centres are all examples of businesses operating in the _____ industry.

A) retail
B) service
C) manufacturing
D) construction
E) finance

Question 31

Johnson recently launched a new electronics store in Fremont. The store sells smartphones, laptops, and mobile accessories from companies like Apple, Samsung, Sony, and Philips. The store operates in the _____ industry.

A) manufacturing
B) wholesale
C) finance
D) service
E) retail

Question 32

Delta LLC. purchases raw materials such as leather and canvas from suppliers and processes them into finished shoes. Delta LLC. operates in the _____ industry.

A) construction
B) E-tailing
C) service
D) retail
E) manufacturing

Question 33

The Red Wagon Utility Store sells home supplies to residents on Charlton Street. It operates in the _____ industry.

A) wholesale
B) service
C) retail
D) manufacturing
E) finance

Question 34

Which of the following is a good strategy for small businesses entering the retail industry?

A) Targeting a wide customer base
B) Selling standard rather than specialty products
C) Focusing on a narrow market segment
D) Increasing overhead costs
E) Emphasizing a cost leadership rather than a niche strategy

Question 35

Mortgage companies, and pawnshops operate in the _____ industry.

A) wholesale
B) retail
C) services
D) manufacturing
E) finance

Question 36

Graver Bros. Inc. is a company that buys packaged organic grains from local farmers and sells it to supermarkets in large cities. Graver Bros. Inc. operates in the _____ industry.

A) wholesale
B) retail
C) manufacturing
D) finance
E) insurance

Question 37

Edinberg Animal Hospital is a veterinary clinic. It operates in the _____ industry.

A) wholesale
B) service
C) retailing
D) manufacturing
E) finance

Question 38

Which of the following statements is true about wholesalers?

A) They sell products to the general public.
B) They need fewer employers than manufacturers or retailers.
C) They have more customers than service businesses.
D) They buy raw materials and process them into products.
E) They require higher investment costs than manufacturers.

Question 39

Ryan has started a store where customers can find a wide range of organic products manufactured by different companies. Ryan's business is in the _____ industry.

A) retail
B) service
C) finance
D) manufacturing
E) wholesale

Question 40

Which of the following statements is true about the service industry?

A) The service industry provides no scope for developing niche strategies.
B) The service sector is dominated by large companies that prevent small businesses from entering the industry.
C) The service industry provides low returns on the time invested.
D) Service businesses require more resources than any other industry.
E) Service businesses are the fastest-growing segment of small-business enterprise.

Question 41

The financial plan is made up of a cash budget, an income statement, balance sheets, and a _____.

A) environmental scanning report
B) management summary
C) break-even chart
D) mission statement
E) business description

Question 42

In a _____, the entrepreneur summarizes the business strategy and how that strategy is to be implemented.

A) market summary
B) mission statement
C) business plan
D) cost-benefit analysis
E) business environment analysis

Question 43

Which of the following is an important question that is answered in a business plan?

A) What are the marketing strategies used by the entrepreneur's competitors?
B) What are the trade restraint strategies used by businesses in the external environment?
C) What are the entrepreneur's goals and objectives?
D) What are the overhead costs of the entrepreneur's venture?
E) How will the entrepreneur divest strategic business units?

Question 44

A business plan is most likely to contain:

A) self-dealing strategies.
B) trade restraint strategies.
C) anti-competitive strategies.
D) divesting strategies.
E) production strategies.

Question 45

The idea that the manufacturing costs per unit decrease as the number of units produced increases is known as _____.

A) economy of scale
B) venture capitalism
C) Reed's law
D) the first-mover advantage
E) the network effect

Question 46

_____ are the aspects of business that a firm performs better than other companies in the same industry.

A) Niches
B) Process losses
C) Distinctive competencies
D) Feedback loops
E) Comparative disadvantages

Question 47

More than any other industry, the _____ industry lends itself to big business.

A) insurance
B) wholesale
C) manufacturing
D) E-tailing
E) retail

Question 48

A _____ is a segment of a market that is not currently being exploited.

A) niche
B) merger
C) divestiture
D) stock
E) share

Question 49

A(n) _____ is any advantage that comes to a firm because it exploits an opportunity before any other firm does.

A) comparative advantage
B) first-mover advantage
C) economic moat
D) absolute advantage
E) core competency

Question 50

Which of the following is an example of a company that has identified a new market?

A) Delta Inc. is offering discounts on its vacuum cleaners.
B) NutriMax has introduced its low-fat cookies in Asia.
C) Omega Corp. has modified the packaging of all its products.
D) Beta Inc. has acquired Venus LLC.
E) Redd Inc. has changed its company logo.

Question 51

Henry discovered and added a new flavor of ice cream to his menu of homemade ice creams in the ice cream parlor he owns in Florida. The ice cream became an instant hit; he plans to sell the ice cream in Georgia by supplying it to the retailers there. Henry is involved in _____.

A) divesting
B) harvesting
C) identifying a niche in an emerging market
D) identifying an established market
E) identifying a new market

Question 52

Which of the following is an advantage of starting a business from scratch?

A) The entrepreneur can easily estimate product sales.
B) The entrepreneur is free to choose inventories and locations.
C) Potential buyers have a clear idea of what products to expect from the venture.
D) The risks involved are lesser.
E) The entrepreneur is relieved of the task of identifying markets.

Question 53

Identify an accurate comparison between small businesses and large businesses.

A) Small businesses are better than large businesses in identifying niches.
B) Small businesses can compete better on the basis of economies of scale than large businesses.
C) Small businesses perform better than large businesses in manufacturing industries.
D) Small businesses dominate high-investment industries more than large businesses.
E) Large businesses are usually better at identifying new markets than small businesses.

Question 54

Which of the following is an example of identifying a new niche in an established market?

A) Copying a competitor's popular computer design
B) Modifying a computer so that it is usable by untrained persons
C) Reducing the price of a printer so that it is more affordable
D) Introducing a new computer to another country
E) Using a bundle pricing strategy for computers and printers

Question 55

The most important element of a business plan's financial plan is the cash budget, which shows:

A) how many units must be sold to recover start-up costs.
B) the tangible assets owned by the firm.
C) how much money is needed to start the business and keep it operating.
D) the salary which the entrepreneur will earn.
E) how many business units should be opened and the annual tax payment to be made.

Question 56

Entrepreneurs:

A) generally choose manufacturing over retailing.
B) use economies of scale as a competitive advantage to compete with large businesses.
C) typically do well in manufacturing rather than service businesses.
D) generally dominate industries that require more resources and high investment costs.
E) are usually better at discovering new markets than are larger, more mature organizations.

Question 57

Which of the following is an advantage of buying an existing business?

A) Established supplier relationships
B) Increased customer loyalty
C) Freedom to choose locations
D) Opportunity to develop new inventories
E) Minimal production costs

Question 58

Relish LLC. spent a lot of resources to open an exclusive outlet of low-fat pizzas made from organic ingredients. Relish made huge sales on the pizzas. Relish enjoys customer loyalty because it introduced the pizza range before any of its competitors. Which of the following concepts is illustrated in the scenario?

A) Opportunism
B) First mover advantage
C) Divesting strategy
D) Market penetration
E) Anti-competitive strategy

Question 59

A(n) _____ is a market in which several large firms compete according to relatively well-defined criteria.

A) emerging market
B) niche
C) merged market
D) established market
E) frontier market

Question 60

Which of the following is a disadvantage of buying an existing business?

A) Potential buyers have less clarity on what to expect from the venture.
B) The entrepreneur may suffer the ill effects of a prior owner's errors.
C) The task of predicting sales becomes more difficult.
D) The task of identifying customers becomes more difficult.
E) The risks involved are higher.

Question 61

Dan wants to start a supermarket in his hometown, and wants to get into the business only after finding out about the market and how successful his business might be. The best way for Dan to gain knowledge is to:

A) take advice about the market from his friends and relatives.
B) conduct a consumer survey.
C) study the history of the world's famous supermarkets to get an idea of how to go about the business.
D) work in a supermarket before starting his own.
E) start the business on a small scale and test the market, and then expand the business by selling more of the products with greater demand.

Question 62

Which of the following is a disadvantage of franchising agreements?

A) The franchisee cannot use the trademarks and business plans.
B) The franchisee loses some independence in running the venture.
C) The franchiser does not get any investment from the franchisee.
D) The franchisee must establish management and operation processes from scratch.
E) The franchiser has no control over what products the franchisee sells.

Question 63

Which of the following statements is true about a franchise agreement?

A) The franchisee is free to modify the franchisor's products.
B) The franchisee can consult the franchiser for managerial and financial help.
C) The franchisee and not the franchiser takes the responsibility of marketing and advertising activities.
D) The franchisee can keep all the profits made by the venture.
E) The franchisee does not have to pay a start-up cost for the venture.

Question 64

Delta Inc., an electric car maker, initially had financing from a small group of investors seeking to make profits through rapid growth. The investors did not lend money, but invested it in the company in return for stock. Delta's source of financing was:

A) personal resources.
B) a commercial bank.
C) a strategic alliance.
D) a venture capital company.
E) a small-business investment company (SBIC).

Question 65

_____ are federally licensed to borrow money from the Small Business Administration and to invest it in or lend it to small businesses.

A) Small business investment companies
B) Small business angel investors
C) Venture capitalists
D) Small business management consultants
E) Regulatory agencies

Question 66

Marianne, who has started a software development firm, is looking for sources of financing. Marianne has approached Zenith LLC., a large consulting firm, to partner with her venture. Zenith has agreed to partner with Marianne's venture and provide it with capital. In this scenario, Marianne's source of financing falls in the category of:

A) personal resources.
B) government loans.
C) strategic alliances.
D) Small Business Administration loans.
E) venture capital companies.

Question 67

Jane has started a new business venture. Since the resources available are minimal, Jane needs to reduce the production costs of the venture. Jordon, a student of advanced business management, is helping Jane come up with techniques and strategies to reduce costs. Jordon's grades will be influenced by how effectively he helps Jane. Such an arrangement is provided by the _____ project of the Small Business Administration.

A) Service Corps of Retired Executives
B) management consulting
C) Active Corps of Executives
D) Small Business Investment Company
E) Small Business Institute

Question 68

Venture capital companies:

A) exchange money for partial ownership in the new business.
B) exclusively fund not-for-profit organizations.
C) grant no-interest loans to small business firms.
D) are federally licensed to grant loans to businesses with more than 20 employees.
E) provide management consulting services to small businesses.

Question 69

The _____ boasts a total membership of more than 10,000 small-business owner largest number in the country; it offers its members not only networking possibilities but also educational programs and services tailored to their needs.

A) Small Business Development Center
B) Active Corps of Executives
C) Council of Smaller Enterprises of Cleveland
D) Historically Underutilized Business Zone
E) Small Business Investment Company

Question 70

The most significant disadvantage of a franchising agreement is that:

A) the franchisee is required to create an operations process from scratch.
B) the risks involved in franchising are higher compared to starting a business from scratch.
C) the franchisee may have to pay a high start-up cost.
D) the franchisee will have to set up the business from scratch.
E) the franchisee does not receive any management consultation.

Question 71

Which of the following is an advantage of a franchising agreement?

A) The franchisee is not required to pay a start-cost.
B) The franchisee can easily establish a business with reduced risks.
C) The franchisee enjoys maximum independence in running the venture.
D) The franchisee gets to modify the franchiser's products.
E) The franchisee can create an individual identity in the community.

Question 72

Begun in 1976, _____ are designed to consolidate information from various disciplines and institutions, including technical and professional schools.

A) Small Business Development Centers
B) Small Business Angel Investors
C) Service Corps of Retired Executives
D) Active Corps of Executives
E) Small Business Colleges

Question 73

When an entrepreneur pays a parent company a monthly percentage of the gross income of her business in return for using the parent company's name and products, it is known as _____.

A) a franchise agreement
B) a merger
C) a partnership
D) a business plan
E) networking

Question 74

One disadvantage of hiring management consultants to solve problems in business is that:

A) management consultants are expensive and charge high fees for their services.
B) most management consultants do not provide objective opinions.
C) managment consultants can be of little help to businesses in the manufacturing industry.
D) management consultants can only provide suggestions for general administrative issues.
E) it is very difficult to find consultants who specialize in one area.

Question 75

Jason worked as a manager for 30 years in a leading corporation who now works with the Small Business Administration. As he wishes to help small business, he provides free consultation and assistance to new entrepreneurs. Jason is most likely to belong to:

A) Service Corps of Retired Executives.
B) Small Business Management Consultants.
C) Venture capitalist companies.
D) Small Business Investment Companies.
E) angel investors.

Question 76

Which of the following is the the most important source of money for individuals starting up new businesses?

A) Strategic alliances
B) Government loans
C) Personal resources
D) Banks and private investors
E) Venture capital companies

Question 77

The National Association of Women Business Owners:

A) provides networking forums for entrepreneurs.
B) provides 85 educational programs in a year for entrepreneurs for free.
C) provides management consulting for free to small business owners.
D) exclusively funds not-for-profit organizations run by women.
E) provides interests-free loans to women entrepreneurs.

Question 78

Which of the following statements is true about sources of financing for entrepreneurs?

A) Banks and government loans provide much larger portions of start-up funds than the personal resources of owners.
B) Lending institutions such as banks are more likely to help finance the purchase of an existing business than a new business.
C) Getting money from banks and government loans is an easy task for business owners.
D) Business owners have to spend very little time in business plans and other documents while borrowing money from banks.
E) Government loans have flexible eligibility guidelines to encourage entrepreneurship among the general public.

Question 79

____ are a group of small investors seeking to make profits on companies with rapid growth potential.

A) Intrapreneurs
B) Hierarchical allies
C) Strategic allies
D) Venture capitalists
E) Banks

Question 80

Identify an advantage of a franchising agreement.

A) The franchiser gets all the profits made by the franchisee venture.
B) The franchisee has scope for innovation and can modify products.
C) The franchiser does not have to help the franchisee manage the venture.
D) The franchisee does not have to pay a start-up cost.
E) The franchiser can grow rapidly from franchising agreements.