Deck 5: Entrepreneurship and New Venture Management

Question 1

To be an entrepreneur you have to start the enterprise from scratch.

Answer 1

False

Question 2

Small business-especially in certain industries-is an important source of new (and often well-paid)jobs in the United States.

Answer 2

True

Question 3

A small business can only have one owner.

Answer 3

False

Question 4

The strong presence of small businesses in the United States is not typical of the rest of the mature economies in the world.

Question 5

International business is not an option for small companies because of the cost and risks.

Question 6

Manufacturing firms are always capital-intensive,so they are not a good place to start a small business.

Question 7

The more resources an industry requires,the harder it is to start a business and the less likely that the industry is dominated by small firms.

Question 8

A segment of a market that offers a new opportunity because it is not currently being satisfied is called a first-mover market.

Question 9

Most American entrepreneurs in the past decade bought an existing firm.

Question 10

Josh is a pastor,attempting to plant a new church.His denomination is helping to cover his salary while the church is growing.Josh is an entrepreneur.

Question 11

Jeffrey Gundlach wrote a business plan to start DoubleLine.Later he used it to convince Oaktree,a finance firm,to form a partnership.This is a typical use for a business plan.

Question 12

Most U.S.workers are employed by large firms.

Question 13

Market research is a key step in building a business plan.

Question 14

Typically,large organizations are better than small organizations at exploiting niches in markets.

Question 15

Some,but not all,small business owners are entrepreneurs.

Question 16

Transportation businesses are good choices for entrepreneurs because they typically require few resources to start.

Question 17

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

Question 18

Dr.Ting developed the first blood pressure watch to monitor blood pressure for twenty-four hours.He has a first-mover advantage.

Question 19

Jacques Torres is a chocolatier who created chocolate covered Cheerios and cornflakes.This is an example of how small businesses are only capable of creating small innovation.

Question 20

Small organizations usually can compete effectively with large organizations in industries in which economies of scale are not significant.

Question 21

What percentage of businesses in the United States is classified as small businesses?

A)Less than 10 percent
B)About 25 percent
C)About 50 percent
D)About 75 percent
E)More than 90 percent

Question 22

The FDIC filed a civil lawsuit against for former executives of IndyMac Bank,accusing them of negligence in making loans to homebuilders that had slim chances of being repaid.This indicates getting bank loans for a start up will get easier.

Question 23

Which of the following activities is essential to the role of entrepreneur?

A)Assuming the risks of operating a business
B)Active involvement in operating the business
C)Being one's own boss
D)Starting a new business venture
E)All of these.

Question 24

The most common source of financing for entrepreneurs is bank loans because they require the least amount of work.

Question 25

Women tend to start their own businesses because they really like being their own bosses.

Question 26

More people are discouraged to test their skills as entrepreneurs because the failure rate among small businesses has been increasing in recent years.

Question 27

Teresa Walsh and Bonnie Kelly started Silpada Designs,jewelry sold through home parties.They are best classified as a(n)

A)intrapreneurs.
B)entrepreneurs.
C)franchisers.
D)franchisees.
E)venture capitalists.

Question 28

What is the difference between a small business and a business owned by an entrepreneur?

A)An entrepreneur's business depends upon the personal involvement of the entrepreneur in the day-to-day management of the business; small businesses may not.
B)An entrepreneur's firm may be of any size,while a small business must be too small to have a significant impact on its environment.
C)An entrepreneur's business must be new,while a small business may have been in existence for any length of time.
D)An entrepreneur's business may be privately or publicly owned; a small business must be privately owned.
E)All of these.

Question 29

The definition of "small business" requires that the business's sales and assets

A)be less than $100,000 annually.
B)place it in the lower half of its industry.
C)all of these.
D)create profit for just one owner.
E)be too small to influence the external environment.

Question 30

The growth in electronic commerce (also called e-business or online business)has had little impact on small businesses in the United States.

Question 31

In a survey of small business owners 58% said "I would recommend the small-business opportunity as a career to my own children." This shows that entrepreneurship is easy.

Question 32

The risks of starting a new business from scratch are greater than those of buying an existing firm.

Question 33

An entrepreneur does all of the following EXCEPT

A)operate.
B)organize.
C)plan.
D)assume risk.
E)hire a professional manager.

Question 34

In terms of the number of new jobs formed each year,how does small business compare with big business?

A)They create about the same number each year.
B)Entrepreneurial business success,more than business size,accounts for most new job creation.
C)Small business creates more than 99 percent of the new jobs.
D)Big business creates more than double the number of new jobs that small business creates.
E)Big business is responsible for nearly all the new jobs created.

Question 35

A manufacturing firm with common stock that is publicly traded has 100 employees and $10 million in sales.The firm would not qualify as a "small business," according to the definition in your text,because

A)the firm is not privately held.
B)the sales are too high.
C)manufacturing firms are not usually small.
D)the number of employees is too great.
E)All of these.

Question 36

Claire Morris,founder of Charmed by Claire,has used only personal resources to finance her business.This is the most common form of entrepreneurial financing.

Question 37

Hundreds of small businesses are under contract to make parts for Honda.This is an example of which of the following roles of small businesses?

A)Innovation
B)Importance to large businesses
C)Job creation
D)All of these
E)None of these

Question 38

Which of the following is a role performed by successful small businesses?

A)Creation of new jobs
B)Development of new management techniques
C)Providing capital for expansion of large businesses
D)Inventory storage
E)Development of new management theories

Question 39

The Small Business Administration (SBA)offers management counseling and training for new business owners at very low or no cost.

Question 40

The purpose of the Small Business Administration's SCORE program is to evaluate the managerial performance of small businesses and then to assign scores that are used to determine the amount of loans those individual businesses can obtain.

Question 41

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)Designing a computer that can control traffic flow on a freeway

Question 42

McDonald's was already operating in India when it announced it would open its first vegetarian-only restaurants.McDonald's is exploring a

A)niche.
B)first-mover advantage.
C)service industry.
D)new market.
E)joint venture.

Question 43

Service businesses are the fastest growing segment of small-business enterprises primarily because of

A)low labor requirements.
B)lack of owner commitment.
C)favorable tax treatment.
D)high market demand.
E)size of initial capital investment required.

Question 44

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

A)Lonnie Johnson develops the Super Soaker,the world's most successful water gun.
B)Low-dose Bayer aspirin introduced into the Chinese market.
C)Coca-Cola introduces another low calorie soft drink.
D)Kroger supermarkets add a new line of cosmetics for teens to its shelves.
E)Purina introduces a new package design for its dog food.

Question 45

If an entrepreneur were considering a new business,which of the following would be a DESIRABLE characteristic of the industry being considered?

A)Several companies are engaged in highly competitive advertising,which indicates that the product is desirable.
B)The new company will sell a newly patented invention that is not yet well known but is expected to dominate the market.
C)Start-up costs are high,so only a few companies are in business.
D)The new company will be able to sell only to selected buyers.
E)Customers have substitute products from which to choose if the new company cannot produce the products as rapidly as needed.

Question 46

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

A)economies of scale.
B)venture capitalism.
C)a franchising agreement.
D)first-mover advantage.
E)None of these.

Question 47

Which of the following is a strategic challenge that faces a small business?

A)Emphasizing distinctive competencies
B)Writing a business plan
C)Finding a niche market
D)Raising capital
E)All of these.

Question 48

In which of the following industries are you LEAST likely to find a small business owner performing well due to a lack of economies of scale?

A)Construction
B)Transportation
C)Service
D)Retailing
E)Manufacturing

Question 49

Which of the following explains why small businesses are generally more effective than large companies in specialty retailing?

A)Large companies generally lack the specialists that are needed in this area.
B)Specialty retail stores are generally located in small towns where large organizations tend not to compete.
C)The dollar size of the market is too small for large companies.
D)Specialty retailing requires a different organizational structure than is usually found in large companies.
E)None of these.

Question 50

Nokia and Samsung make cell phones that operate on the Microsoft system.They operate in the ____ industry.

A)transportation
B)manufacturing
C)retailing
D)services
E)wholesaling

Question 51

Which of the following is NOT generally considered to be a role performed by small businesses?

A)Creation of new jobs
B)Development of new products
C)Manufacture of materials for large businesses
D)Distribution of products made by large businesses
E)Provision of capital for expansion of large businesses

Question 52

Which of the following is a true statement?

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)Small businesses generally don't have the resources to develop major innovations.
D)All of these.
E)Only "small businesses are about as likely to innovate as large businesses" and "large businesses have been responsible for virtually every major product innovation."

Question 53

Facebook operates in which industry?

A)Construction
B)Wholesaling
C)Manufacturing
D)Services
E)All of these.

Question 54

Which of these is a correct comparison of large and small businesses?

A)Big businesses create more new jobs than small businesses.
B)Big businesses are less efficient at producing and delivering specialty products than small businesses.
C)Small businesses show consistently lower profit margins than big businesses.
D)Big businesses outnumber small businesses by a wide margin.
E)Small business formations are on the decline,but the rate for big businesses is increasing.

Question 55

Which of the following is the main reason why small businesses experience success in the wholesale industry?

A)Wholesale businesses require a large capital investment.
B)They are able to develop personal working relationships with several sellers and buyers.
C)Wholesale businesses can be managed easily by one individual.
D)Small businesses have access to more technology than large companies.
E)Small businesses do not experience success in the wholesale industry.

Question 56

Red Wagon produce stand,sells fruit and vegetables along a road.It operates in the ____ industry.

A)wholesaling
B)services
C)retailing
D)manufacturing
E)None of these

Question 57

Edinberg Animal Hospital is a veterinarian clinic.It operates in the ____ industry.

A)wholesaling
B)services
C)retailing
D)manufacturing
E)None of these.

Question 58

The aspects of a business that the firm performs at a higher level than its competitors are known as the firm's

A)niches.
B)capital-intensiveness.
C)distinctive competencies.
D)strategic weakness.
E)first-mover advantage.

Question 59

____ has been responsible for recent shifts in the economies of scale in many industries.

A)Increasing worker diversity
B)A favorable interest rate
C)Changing technology
D)The economic downturn
E)None of these.

Question 60

Giorgio Armani opened The Armani Hotel in Milano,a luxury hotel with designer decor in the lobby and designer clothing on the staff.Which of the following distinctive competencies is Armani using?

A)The ability to identify new niches in established markets
B)The ability to reduce economies of scale
C)The ability to enter the manufacturing industry
D)The ability to create jobs
E)All of these.

Question 61

After success in the market for executive pet care,Maverick Pet Partners moved to high energy pets that need runs and fitness training as opposed to just being let out to a fenced yard.MPP identified

A)a partnership.
B)a first-mover advantage.
C)a niche.
D)an established market.
E)a new market.

Question 62

Tesla,an electric car maker,initially had financing with a small group of investors seeking to make profits through rapid growth.Tesla's source of financing was

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

Question 63

In times of economic prosperity,small firms are the first to hire additional workers and big firms are last.In times of economic downswings,small firms are the first to eliminate workers and big firms are last.This reflects which attribute of small firms as compared to large firms?

A)Increased innovation
B)Increased flexibility
C)Higher susceptibility to lawsuits
D)Economies of scale
E)All of these.

Question 64

Which of the following questions is important for entrepreneurs who are starting a business from scratch?

A)Who are my customers?
B)Who are my competitors?
C)What quantity will my customers buy?
D)What price will customers pay?
E)All of these.

Question 65

Why should a new entrepreneur,who has to be careful how she spends every penny,join the National Federation of Independent Businesses (NFIB)?

A)The organization offers excellent networking opportunities.
B)The organization is the source of financial resources.
C)The organization is full of venture capitalists.
D)The organization provides generic promotional campaigns free of charge to new businesses.
E)There is no good reason for wasting money on this organization.

Question 66

Venture capital companies typically

A)exchange money for partial ownership in the new business.
B)prefer to work with companies with rapid growth potential.
C)want some management control over the new business.
D)All of these.
E)None of these.

Question 67

Which of the following is a true statement?

A)Buying an existing business,rather than creating one from scratch,frees the entrepreneur from the prior owner's errors.
B)Buying an existing business is less risky than starting a new business from scratch.
C)Most entrepreneurs buy an existing business,rather than starting a new business from scratch.
D)All of these.
E)Only "buying an existing business,rather than creating one from scratch,frees the entrepreneur from the prior owner's errors" and "buying an existing business is less risky than starting a new business from scratch."

Question 68

A written summary of the business strategy and its implementation plan is known as

A)a niche summary.
B)a first-mover advantage.
C)a business plan.
D)economies of scale.
E)a franchise agreement.

Question 69

Four friends home from college want to start a moving business to earn money during the summer.To determine whether this is a good idea,they need to find the answer to which of the following questions?

A)Who are my customers,and where are they?
B)Who are my competitors,and where are they?
C)How can I differentiate my product from that of my competitors?
D)In what quantities and at what price will my customers buy my service?
E)All of these.

Question 70

Todd wants to start a new business.With which of the following methods of starting a new business will he pay a share of the income from the business in return for the use of such things as trademarks and business formulas?

A)Venture capitalism
B)Franchising
C)Buying an existing business whose purchase price includes "goodwill"
D)Starting a new business with loans from the SBA
E)Industrial revenue sharing

Question 71

Jeffrey Gundlach wrote a business plan to start DoubleLine.Later he used it to convince Oaktree,a finance firm,to form a partnership.This type of financing is ____.

A)personal resources
B)initial public offering
C)strategic alliances
D)SBICs
E)venture capital companies

Question 72

Which of the following is the most common entry method for owners of new businesses?

A)Buying an existing business
B)Starting a new business from scratch
C)Inheriting a business
D)eBay
E)None of these are common.

Question 73

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)the expected inflows and outflows of money.
D)the salary which the entrepreneur will earn.
E)All of these.

Question 74

The ____ tells how much money is needed to operate a new business.

A)income statement
B)profit and loss statement
C)cash budget
D)t-account
E)balance sheet

Question 75

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

A)Intrapreneurs
B)Hierarchical allies
C)Stakeholders
D)Venture capitalists
E)Bondholders

Question 76

Bill's new business venture is having trouble with employee benefits,and Bill has hired a human resource expert to give advice.The type of new-venture advice Bill is seeking is called

A)an advisory board.
B)management consulting.
C)the Small Business Administration (SBA).
D)networking.
E)None of these.

Question 77

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,this is known as

A)a franchise agreement.
B)an advisory board.
C)a partnership.
D)a business plan.
E)networking.

Question 78

When Four Seasons was looking for the next hot luxury spot,it planned to open more than ten hotels in China over several years.Four Seasons was attempting to benefit from

A)a market niche.
B)a franchise agreement.
C)an established market.
D)a first-mover advantage.
E)identifying new markets.

Question 79

Jane's Candy Shack is in danger of failing.She needs some major consulting help but she has limited financial resources.She contacts the SBA.She will most likely get help from the

A)Small Business Development Center (SBDC).
B)Small Business Administration (SBA)
C)Service Corps of Retired Executives (SCORE)
D)Active Corps of Executives (ACE)
E)Small Business Institute (SBI)

Question 80

The most significant disadvantage to franchising as a means of acquiring a business is

A)the amount of paperwork.
B)the absence of economies of scale.
C)high start-up costs.
D)government regulation.
E)low break-even points.