Deck 4: Entrepreneurship, Small Business, and New Venture Creation

Question 1

During the period from 2002 to 2012, small businesses created ________ percent of all the jobs in Canada.

A) 8
B) 15
C) 28
D) 43
E) 77

Answer 1

E

Question 2

What are the three key elements in the entrepreneurial process?

A) The entrepreneur, the opportunity, and the marketing plan
B) The marketing plan, the production plan, and the finance plan
C) The product (or service) plan, the entrepreneur, and luck
D) The entrepreneur, the opportunity, and the resources
E) The financing plan, the product (or service) plan, and luck

Answer 2

D

Question 3

Women account for ________ of all new businesses that are formed, and they lead ________ percent of the small- and medium-sized businesses that export goods and services.

A) About one-fifth; 6
B) about one-quarter; 18
C) about one-third; 18
D) more than one-half; 12
E) two-thirds; 24

Answer 3

D

Question 4

Which of the following is correct with regard to small business?

A) Various measures might be used to define a small business, including the number of people the business employs, the company's sales revenue, the size of the investment required, or the type of ownership structure the business has.
B) Since the Business Register tracks businesses and the Labour Force Survey tracks individuals, these sources of information are not useful in defining the term "small business."
C) To be included in the Business Register, a business must have at least five paid employees.
D) In the Business Register, a goods-producing company is considered small if it has fewer than 500 employees, while a service-producing business is considered small if it has fewer than 100 employees.
E) All of these are correct.

Question 5

According to Industry Canada, small businesses account for over two thirds of employment in all of the following except

A) other services.
B) construction.
C) accommodation and food.
D) manufacturing.
E) non-institutional health care.

Question 6

Entrepreneurs often have more than one goal for starting a business and becoming self-employed. Which of the following reasons is probably the least common goal of entrepreneurs?

A) To seek independence and be their own boss
B) To earn a comfortable living for a period of time
C) To grow and expand a current business
D) To meet community or social obligations
E) To provide for their financial needs

Question 7

What percentage of Canada's GDP is contributed by small businesses?

A) 7 percent
B) 13 percent
C) 19 percent
D) 30 percent
E) 41 percent

Question 8

How are intrapreneurs different from entrepreneurs?

A) The former are women and the latter are men.
B) The former are older than the latter.
C) The former work within an existing business while the latter start their own business.
D) The former earn less money than the latter.
E) There is not difference between the two terms.

Question 9

A small business is an owner managed business with less than ________ employees.

A) 25
B) 50
C) 10
D) 500
E) 100

Question 10

Self-employed Canadians account for about ________ percent of the workforce.

A) 3
B) 5
C) 16
D) 22
E) 34

Question 11

The Heritage Foundation's "index of economic freedom" measures

A) how well command economies are performing compared to market economies.
B) the extent to which entrepreneurs have freedom to pursue new business opportunities.
C) how well entrepreneurs are performing in advanced industrialized countries compared to developing economies.
D) how much profit entrepreneurs are making in command economies compared to market economies.
E) the economic freedom entrepreneurs have in various countries, using the United States as the comparison point.

Question 12

Individuals who both recognize and seize opportunities are referred to as

A) speculators.
B) franchisees.
C) entrepreneurs.
D) intrapreneurs.
E) independents.

Question 13

According to Industry Canada there are about ________ people who are "self- employed" and about ________ "business establishments."

A) 1.2 million; 1.2 million
B) 5 million; 500 000
C) 2.7 million; 2.2 million
D) 725 000; 500 000
E) 225 000; 225 000

Question 14

In the Business Register, a goods-producing business is considered small if it has fewer than ________ employees, and a service-producing business is considered small if it has fewer than ________ employees.

A) 1000; 500
B) 500; 1000
C) 100; 50
D) 500; 250
E) 250; 500

Question 15

A new firm is

A) one that has been in business for 5 years or less.
B) one that has not yet opened for business.
C) one with less than 10 years' experience.
D) one that has become operational within the previous 12 months.
E) one that opened its doors within the past 6 months.

Question 16

At Telus, the redesign of the company's website was the result of ________ in a large firm.

A) product refinement
B) intrapreneurship
C) entrepreneurship
D) starting a business from scratch
E) marketing research

Question 17

What percentage of businesses in Canada have less than 100 employees?

A) 98
B) 58
C) 88
D) 78
E) 28

Question 18

In the 2015 Heritage Foundation index of economic freedom, the top three countries were ________; Canada ranked ________.

A) Australia, Japan, and Singapore; 25th
B) the United States, Germany, and Japan; 8th
C) the United States, Ireland, and Germany; 11th
D) Hong Kong, Singapore, and New Zealand; 6th
E) China, Japan, and South Vietnam; 37th

Question 19

The part of the economy that is made up of companies and organizations not owned or controlled by the government is called

A) crown corporations.
B) split sector.
C) legislated corporations.
D) public sector.
E) the private sector.

Question 20

Approximately how many new businesses are started each day in Canada?

A) 25
B) 100
C) 250
D) 380
E) 500

Question 21

Karen is trying to assess whether she can start her own small business. But, as with many small businesses, money is a problem. She asks for your help. You indicate that the most likely source of money for starting up a small business is

A) family investment.
B) lottery winnings.
C) banks.
D) credit unions.
E) personal savings.

Question 22

Robert wants to start a new business. At this point, he needs to ask himself all of the following questions except

A) what is my competitive advantage?
B) how much will the customer buy?
C) what legal form should the business take?
D) what value is created or added to for the customer?
E) what is the marketability of this idea?

Question 23

Franchising is a contract between a(n) ________ and a(n) ________ that stipulates how ________ or ________ will be sold.

A) buyer; seller; a product; a service
B) retailer; outlet owner; food; a service
C) manufacturer; dealer; a product; a service
D) manufacturer; seller; a service; a product
E) outlet owner; dealer; food; a service

Question 24

A ________ typically includes a company description, product description, marketing analysis and plan, operating plan, financial plan, and other supporting information.

A) bank loan application
B) business plan
C) tax application
D) partnership agreement
E) grant application

Question 25

Which is the most common source of ideas for a new venture?

A) Brainstorming
B) Family
C) Work experiences
D) Children
E) Magazines

Question 26

A financial forecast includes all of the following items except

A) a cash budget.
B) an estimate of start-up costs.
C) an income statement.
D) a listing of potential customers.
E) a balance sheet.

Question 27

With respect to the financing of a business, which one of the following statements is accurate?

A) Love money is the most popular form of debt financing.
B) Suppliers typically provide long-term financing.
C) Debt financing refers to money invested by the owner in the company.
D) Borrowing money reduces the potential for higher returns when a business is performing well.
E) Banks are typically risk averse.

Question 28

Bootstrapping involves all of the following actions except

A) acquiring resources such as people and equipment.
B) doing more with less.
C) purchasing as many resources as possible.
D) using other people's resources.
E) borrowing materials.

Question 29

Bootstrapping means

A) doing more with less.
B) selling shares.
C) designing new products.
D) preparing a business plan.
E) creating new ideas.

Question 30

With regard to the process of screening possible ideas for a new idea, which of the following is correct?

A) Determining whether or not the new idea adds value for customers is not essential at this early stage of the process.
B) It is not possible to determine at this early stage whether a new idea will actually give a company a sustained competitive advantage.
C) It is important to determine if sales will lead to profits.
D) If the idea is not expected to result in making a profit for a number of years, exit costs are low.
E) All of these are correct.

Question 31

Venture capitalists

A) require collateral for all transactions.
B) are risk averse lenders.
C) invest funds from professionally managed pools of investor money.
D) offer loans with a maximum 90-day payback period.
E) are individuals in the United States who are willing to loan money to Canadians who want to start a business.

Question 32

One popular source of equity capital is informal capital from private investors who are known as

A) private loaners.
B) traditional lenders.
C) pseudo loaners.
D) off-the-books financers.
E) angels.

Question 33

Which of the following statements is (are) correct with respect to financing a business?

A) Debt financing refers to money that is borrowed, while equity financing refers to money that is invested in the business by investors in return for a share of the ownership of the company.
B) The most common source of debt financing is venture capitalists.
C) Choosing between debt and equity financing involves trade-offs with regard to immediate vs. long-term profitability.
D) Most new venture founders prefer equity financing because they are reluctant to give up any control to outsiders.
E) All these statements are correct.

Question 34

Which of the following is correct with regard to the issue of where new ideas for a business come from?

A) The most important source of ideas for a new venture arise as the result of a conscious search for new venture ideas.
B) About half of all new venture ideas come from insights gained or skills learned at a previous job.
C) Personal hobbies or interests are the most important source of ideas for a new venture.
D) Suggestions from family members are an important (but not the most important) factor in coming up with new venture ideas.
E) There is no particular pattern in the development of ideas for a new venture.

Question 35

Erin feels that she has a wonderful opportunity to create a new apple beverage she saw in Europe by using surplus apples grown near Georgian Bay in Ontario. At this point, which question must she answer in evaluating this opportunity?

A) What interest rate will be charged for financing the purchase of capital equipment?
B) What depreciation procedures will be used?
C) What kind of computers should I purchase?
D) Where will my business be located?
E) Are there enough customers willing to buy this product?

Question 36

Assets that a borrower uses to secure a loan or other credit are referred to as

A) financed assets.
B) tangible assets.
C) fixed assets.
D) collateral.
E) assignments.

Question 37

Which one of the following statements is correct?

A) Love money is a form of debt financing.
B) Suppliers typically provide long-term financing.
C) Debt financing refers to money invested by the owner in the company.
D) Borrowing money reduces the potential for higher returns when a business is performing well.
E) Banks are typically risk averse.

Question 38

When screening ideas, an entrepreneur would ask all of the following questions except

A) is the idea marketable?
B) does this idea have a high entrance cost?
C) does this idea create or add value for the customer?
D) does the idea provide a sustainable competitive advantage?
E) is the idea financially viable?

Question 39

Sam has always been interested in starting his own business but, as a recent graduate, is not certain where he can get ideas. Which of the following is a good reliable source for information needed to make the decision to start a new business?

A) Experience in industry before starting a new business
B) Parents
C) Teachers
D) Bankers
E) Business analysts

Question 40

Which of the following is correct with regard to business planning?

A) A business plan is a good thing to have, but it is generally not a requirement for securing resources for the proposed new venture.
B) If market conditions are changing rapidly, the benefits gained from extensive research and planning will diminish quickly.
C) If the product is highly innovative, research is particularly important.
D) Planning should be completed before action is taken.
E) All things considered, it is probably best to plan to start as a franchise.

Question 41

All of the following are common sources of equity for new ventures except

A) banks.
B) personal savings.
C) love money.
D) private investors.
E) venture capitalists.

Question 42

Which of the following statements is accurate?

A) Love money is a form of debt financing.
B) Borrowing money reduces the potential for higher returns when a business is performing well.
C) Debt financing refers to money invested by the owner in the company.
D) Banks are typically risk averse.
E) Suppliers typically provide long term-financing.

Question 43

Which of the following is not likely to be provided by the seller of a franchise?

A) Financing help
B) Guarantee of success
C) Marketing strategy
D) Training for employees and managers
E) Management advice

Question 44

Which of the following is correct with regard to collateral?

A) It refers to business (but not personal) assets that a borrower uses to secure a loan or other credit.
B) It consists of tangible assets like buildings as well as intangible assets like goodwill.
C) Collateral can be seized by the lender if the loan is not repaid according to specified terms.
D) It refers to personal (but not business) assets that a borrower uses to secure a loan or other credit.
E) Banks are most impressed with debt investment.

Question 45

To start up a new business by operating under a license issued by a parent company to local entrepreneurs who own and manage the business is known as

A) a small business.
B) a macroenterprise.
C) an enterprise.
D) a microenterprise.
E) a franchise.

Question 46

Jody is a young graduate from a business program. She can either help out in the family business or work with another organization. Which of the following is not a typical advantage associated with a family business?

A) Highly trained individuals
B) Valuable community relationships
C) Personal sacrifices leading to financial advantage
D) High employee loyalty
E) Unified family management

Question 47

Harold's father owns a plumbing business, which Harold will likely take over. However, Harold needs to know the problems that beset family businesses. Which of the following is not a problem in a family business?

A) Untrained and uneducated family members as personnel
B) Failure to respond to changing market conditions
C) Choosing an appropriate successor
D) Consistent under-financing
E) Disagreement among family members about the future of the business

Question 48

A business is normally at its riskiest point during the ________ phase.

A) preliminary
B) growth
C) start-up
D) maturity
E) conception

Question 49

Margaret has an opportunity to buy an existing business. She should be knowledgeable about all of the following issues except

A) the location of the business.
B) legal form of the business.
C) difficulty in determining an appropriate price for the business.
D) incomplete knowledge of the state of the business.
E) the reputation of the business.

Question 50

Trade credit is

A) the selling of bonds or debentures.
B) reinvested in the enterprise.
C) paid to the owners in the form of dividends.
D) derived from funds generated from the operation of the business.
E) delayed payment terms offered by suppliers.

Question 51

Ted is about to take over a family business. The issues of which he should be aware include all of the following except

A) assuring economic security for the retiring leader and spouse.
B) training the successor.
C) benefits for the successor.
D) timing the succession.
E) successor selection.

Question 52

The ________ fit involves determining if the resources needed to capitalize on the opportunity can be acquired.

A) resource-entrepreneur
B) personal-entrepreneur
C) entrepreneur-opportunity
D) opportunity-resource
E) entrepreneur-resource

Question 53

Which of the following is the most significant disadvantage of starting a business from scratch?

A) Having few employees
B) Inability to franchise
C) Having competition
D) Coming up with new ideas
E) The risk of failure

Question 54

An example of a debt source of funds is ________ and an example of an equity source of funds is ________.

A) family and friends; venture capitalists
B) private lenders; family and friends
C) private lenders; trade credit
D) venture capitalists; private lenders
E) family and friends; private lenders

Question 55

Judy is a graduate from a denturist program. Normally, graduates start up their own business, much like dentists and doctors. She has the choice of starting on her own or buying an existing practice. What is an advantage for her of starting a new business from scratch?

A) No problems as a result of the prior owner's errors
B) Odds are better to succeed
C) Relationship with suppliers already established
D) Needs and desires of customers known
E) The risks are lower than if she were to buy an existing practice

Question 56

About one-third of all new businesses owners

A) buy an existing business.
B) start from scratch.
C) buy out a partner.
D) win the business in a draw.
E) inherit the business.

Question 57

Which source of capital is identified as a group of small investors who are willing to invest money into the new firm in exchange for an ownership share?

A) Venture capital firm
B) Foreign investors
C) Stockbroker syndicate
D) Silent domestic partner
E) Banks

Question 58

Roger has made a list of what he considers to be advantages of buying a franchise. You tell him that one item on his list is not an advantage. Which one is it?

A) Improved chances of success
B) Access to big business management skills
C) Don't have to build a business step by step
D) Incentive of owning your own business
E) Low start-up costs

Question 59

Which of the following is considered an advantage for both the franchisee and the franchisor?

A) Guaranteed success
B) Economies of scale in buying
C) Promotion savings
D) Recognition
E) Management assistance

Question 60

What is the most significant disadvantage of owning a franchise?

A) Start-up costs
B) Operational guidelines
C) Difficulty obtaining loans
D) Double taxation
E) Competition

Question 61

Which of the following is an advantage for the franchisee?

A) Freed from detail of local operations
B) Recognition
C) Rapid growth for the franchise
D) Low entry cost
E) Guaranteed success

Question 62

Which of the following is a key contributing factor to the success of a small business?

A) Hard work, drive, and dedication
B) Overcapitalization
C) Strong control systems
D) Creativity
E) Insufficient capital

Question 63

Viola wants to be a business owner and is contemplating whether to start her own business or open a franchise. Which of the following, if true, would be a compelling reason for Viola to open a franchise rather than start a new business?

A) The franchiser requires $3000 in start-up costs and a 5 percent monthly royalty fee.
B) The franchiser tightly controls and monitors the service protocol.
C) The franchisee is responsible for developing all marketing materials.
D) The company has only recently become a franchise.
E) There are several other franchises with the same company in the area.

Question 64

The benefits of franchising the franchiser enjoys include all of the following except

A) more revenue.
B) more financing.
C) more involvement in the details of local operations.
D) advertising money is spent more efficiently.
E) rapid growth.

Question 65

Low start-up costs, simplicity in formation, and freedom are advantages in establishing a

A) corporation.
B) sole proprietorship.
C) partnership.
D) joint venture.
E) co-operative.

Question 66

Shirley is opening a flower shop and has decided to operate as a sole proprietorship. Which of the following is not an advantage Shirley will have in operating her business?

A) Freedom
B) Simplicity of operation
C) Limited liability
D) Low start-up costs
E) Choice of location

Question 67

Molly believes that success is almost guaranteed when one buys a franchise. You point out that she should consider the costs such as

A) emergency needs.
B) operational expenses.
C) the franchise sales price.
D) training expenses.
E) all of these.

Question 68

A general partnership has advantages which are similar to a sole proprietorship, such as

A) easy to transfer ownership.
B) limiting owner's liability.
C) being simple to organize.
D) providing for continuity.
E) being dependent upon resources of an individual.

Question 69

Which of the following is not one of the disadvantages of owning a franchise?

A) High failure rates
B) Sacrifice of independence
C) Difficult to terminate
D) On-going payments to the parent company
E) High start-up costs

Question 70

Olivia has found a viable business, a small furniture store, she is interested in purchasing. She has learned that the store is supplied by reliable vendors and has a steady stream of local and online buyers. What should be Olivia's next step at this point?

A) Analyze the furniture store's past financial statements
B) Start negotiating a purchase price with the current owner
C) Approach a banking institution about financing her purchase
D) Consult a marketing agency about ways to reach more customers
E) Search for vendors that can provide similar products at lower costs

Question 71

A limited partnership attempts to

A) avoid the problem of unlimited liability for the owners.
B) limit the number of partners who may purchase a share of ownership.
C) provide for continuity of operation upon the departure of one of the partners.
D) limit the number of partners who may vote at board meetings.
E) limit the geographical area of operation for a business firm.

Question 72

Sam Clark has a custom cheesecake business that he owns and operates out of his home. Sam's ownership structure likely is

A) a franchise.
B) a limited partnership.
C) a partnership.
D) a corporation.
E) a sole proprietorship.

Question 73

A major disadvantage of the sole proprietorship is the

A) ability to grow by adding talent.
B) high start-up costs.
C) unlimited liability.
D) lack of freedom in making business decisions.
E) difficulty in beginning business activities.

Question 74

A new business typically adopts one of four main organizational forms. They are

A) franchise, sole proprietorship, partnership, or corporation.
B) franchise, partnership, corporation, or co-operative.
C) sole proprietorship, franchise, corporation, or co-operative.
D) sole proprietorship, partnership, corporation, or co-operative.
E) debt, equity, venture capital, or gifted.

Question 75

Which is the most important reason for the failure of small business?

A) Poor marketing
B) Managerial incompetence
C) Loss of interest in the business
D) Fraud
E) Poor production capabilities

Question 76

Which of the following is not typical for a sole proprietorship?

A) Limited liability
B) Losing money at start-up
C) Lack of continuity
D) Easy to dissolve
E) Hard to borrow money

Question 77

The features of a sole proprietorship include all the following except

A) a lot of government paperwork.
B) simple to form.
C) easy to dissolve.
D) limited resources.
E) unlimited liabilities.

Question 78

Tax laws permit ________ to treat the sales revenues and operating expenses of the business as part of their personal finances.

A) sole proprietorships
B) joint ventures
C) privately-held corporations
D) either publicly-held or privately-traded corporations
E) publicly-held corporations

Question 79

Franchising accounts for about ________ percent of retail sales in Canada and ________ percent of GDP.

A) 10; 20
B) 20; 30
C) 40; 10
D) 60; 15
E) 80; 55

Question 80

In a franchise agreement, the ________ is purchasing the right to sell the products of the ________.

A) franchisee; franchiser
B) franchiser; parent company
C) franchiser; franchisee
D) pigeon; shyster
E) subleaser; leaser