Deck 4: Understanding Entrepreneurship, small Business, and New Venture Creation

Question 1

According to Industry Canada,small businesses account for over two-thirds of employment in which of the following industries?

A) Non-institutional health care,other services,manufacturing,and construction
B) Other services,manufacturing,construction,and accommodation and food
C) Accommodation and food,non-institutional health care,other services,and manufacturing
D) Construction,non-institutional health care,other services,and accommodation and food
E) Manufacturing,non-institutional health care,other services,and construction

Answer 1

D
Construction,non-institutional health care,other services,and accommodation and food

Question 2

A new firm is

A) one that has been in business for 5 years or less.
B) one that as 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.

Answer 2

D
one that has become operational within the previous 12 months.

Question 3

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

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

Answer 3

A
98

Question 4

Which of the following statements is (are)true regarding the definition of the term "small business"?

A) To be included in the Business Register,a business must have at least 10 paid employees and annual sales revenues of $30 000 or more.
B) A goods-producing business in the Business Register is considered small if it has fewer than 100 employees,while a service-producing business is considered small if it has fewer than 50 employees.
C) The Labour Force Survey uses information from companies to make estimates of employment and unemployment levels.
D) An unincorporated business operated by a self-employed person (with no employees)would be counted among the 2.3 million businesses in the Business Register.
E) All of these statements are true.

Question 5

What percentage of Canadian business establishments are located in Ontario and Quebec?

A) 20
B) 89
C) 32
D) 57
E) 76

Question 6

There are approximately ________ women entrepreneurs in Canada.

A) 18 000
B) 1 million
C) 910 000
D) 54 000
E) 1.5 million

Question 7

Individuals who both recognize and seize opportunities are referred to as

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

Question 8

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 9

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; 2.3 million
D) 725 000; 500 000
E) 225 000; 225 000

Question 10

The textbook defines a small business as an owner-managed business with fewer than ________ employees.

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

Question 11

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 12

The Swiffer product line from Procter & Gamble 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 13

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

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

Question 14

At Hewlett-Packard there is a division called the New Business Group,which listens to "sales pitches" about possible new products.This is an example of ________.

A) microenterprise
B) entrepreneurship
C) intrapreneurship
D) profit centres
E) new venture analysis

Question 15

From 2001 to 2010,small businesses created ____ percent of all the jobs in Canada.

A) 10
B) 18
C) 31
D) 47
E) 56

Question 16

Nascent entrepreneurs are

A) people who have recently sold their business.
B) people who actually have started a business.
C) people who are trying to start a business.
D) people who have been in business over 10 years.
E) people who are in their first year of business.

Question 17

In the 2011 Heritage Foundation index of economic freedom,what were the top three countries?

A) Australia,Japan,and Somalia
B) the United States,Canada,and Japan
C) Canada,Ireland,and Greece
D) Hong Kong,Singapore,and Australia
E) China,Japan,and South Vietnam

Question 18

Which of the following is true?

A) Women account for about 25 percent of new businesses that are formed.
B) Women fail less frequently in small business than men do.
C) Men run about 90 percent of all small businesses.
D) Women lead 60 percent of small businesses that export goods and services.
E) Women make more money running small businesses than men do.

Question 19

Self-employed Canadians account for ____ percent of the workforce.

A) 5
B) 11
C) 16
D) 23
E) 29

Question 20

Three research studies that have identified characteristics of entrepreneurs are described in the textbook.Which of the following characteristics is evident in all three studies?

A) Flexibility
B) Internal locus of control
C) Intelligence
D) Determination
E) Self-confidence

Question 21

All of the following are questions to ask in order to identify a genuine business opportunity except

A) will our sales lead to profits?
B) does this product/service solve a problem or meet a significant need?
C) who are our customers?
D) what is our estimated demand?
E) what government loan assistance is available?

Question 22

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

Question 23

Which one of the following questions is not one that an entrepreneur would ask in the process of screening ideas?

A) Is the idea marketable?
B) Does this have low entrance costs?
C) Does this create or add value for the customer?
D) Does it provide a sustainable competitive advantage?
E) Is it financially viable?

Question 24

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

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

Question 25

Erin feels that she has a wonderful opportunity of creating 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?

Question 26

A financial forecast includes all of these 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

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 is 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 28

Which of the following would strengthen the argument that Vincent has found a good opportunity in opening a new pizza restaurant?

A) There are already many pizza restaurants in Vincent's town.
B) The pizza business in Vincent's town has not changed much in many years.
C) Restaurant consumers in the city favour Thai restaurants.
D) Experienced employees are necessary in order for a pizza restaurant to be successful.
E) Pizza restaurants are found across Canada.

Question 29

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 30

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 31

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 32

Which of the following characteristics is not typical of an entrepreneur?

A) Willing to work hard
B) Strong desire for personal freedom
C) Enjoys taking a risk
D) Creative and venturesome
E) Desire to lead a comfortable lifestyle

Question 33

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 34

Mary Ellen is thinking about opening a pizza restaurant.Which of the following questions would be the LEAST relevant for Mary Ellen as she is trying to determine whether she has found a good opportunity?

A) Are there other pizza restaurants close to the planned location?
B) Is demand for pizza growing?
C) Does the location she is looking at have competitive rental rates?
D) Will the pizzas she is planning to sell offer something unique?
E) Does Mary Ellen bring strong and unique talents to the business?

Question 35

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 36

Karen is using her company's assets to secure a bank loan.These assets are called

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

Question 37

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 38

Which of the following best explains why flexibility is an important quality that an entrepreneur needs in order to be successful?

A) It takes a certain amount of money to start a business.
B) It often helps to have a business partner in a new business.
C) Starting a new business requires a great deal of planning.
D) Starting and running a new business involves many unpredictable factors.
E) An entrepreneur must be extremely competent in business skills.

Question 39

Which one of the following is not one of the main new venture entry strategies?

A) Franchise
B) Introduce a product or service that competes directly with current offerings but has a new twist
C) Test a new marketplace
D) Introduce a totally new product or service
E) All of these are new entry strategies

Question 40

Chris wants to set up his own business,but wants to know if what he wants is the same as most entrepreneurs.Which of the following is not a typical entrepreneurial characteristic?

A) Driven to achieve
B) Resourceful
C) Aversion to risk
D) Energetic
E) Visionary

Question 41

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 42

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

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

Question 43

________ financing refers to the amount of money that is borrowed and ________ financing refers to money invested in exchange for an ownership interest.

A) Debt; equity
B) Treasury; equity
C) Collateral; equity
D) Equity; debt
E) Treasury; debt

Question 44

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

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

Question 45

Which term identifies the arrangement in which a buyer purchases the right to sell the good or service of the seller?

A) Exporter
B) Rights marketer
C) Franchise
D) Importer
E) Collateral

Question 46

In order to obtain debt financing,an entrepreneur typically must have at least ________ equity investment in the business.

A) 35%
B) 50%
C) 20%
D) 40%
E) 60%

Question 47

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

A) Trade credit; personal savings
B) Venture capitalists; entrepreneur's personal funds
C) private investors; private lenders
D) personal savings; governments
E) love money; governments

Question 48

Which one of the following is not one of the main new venture entry strategies?

A) Develop entirely new products or services
B) Introduce a product or service that competes directly with current offerings but has a new twist
C) Franchise
D) Start a family business
E) All of these are new entry strategies

Question 49

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 50

Jody is a graduate from a business program.She can either help out in the family business or work in 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 51

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 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

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 54

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 suffering from 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 55

The advantages of becoming a small businessperson by buying an existing business include all of the following except

A) established customer base.
B) established working relationships with vendors.
C) freedom to structure the business the way you want to.
D) reputation in the community.
E) odds of success are better.

Question 56

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 includes 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 57

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 58

About one-third of all new businesses owners

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

Question 59

Venture capitalists

A) require collateral for all transactions.
B) are risk averse lenders.
C) loan money to promising new ventures in return for a share of ownership in the business
D) offer loans with a maximum 90-day payback period.
E) are individuals in the U.S.who are willing to loan money to Canadians who want to start a business.

Question 60

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 61

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 62

A major disadvantage of the sole proprietorship is

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

Question 63

A general partnership has advantages that 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 64

Gilbert is considering setting up a business.He likes some of the advantages of sole proprietorships,but is concerned about some of the disadvantages.He should consider all of the following except

A) unlimited liability.
B) difficulty of passing the business on to his heirs.
C) limited managerial and financial resources.
D) difficulty of liquidation.
E) difficulty in getting bank loans.

Question 65

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 66

Lester is hoping that by buying a franchise he will get a lot of assistance from the company providing the franchise.Which of the following would not be a benefit to Lester should he decide to buy a franchise?

A) Recognition
B) Guaranteed success
C) Management assistance
D) Standardized appearance of the franchise
E) Economies of scale in buying

Question 67

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

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

Question 68

Hector wants to buy a franchise.He has developed a list of advantages and disadvantages.Which one does not apply?

A) The start-up costs
B) A franchise arrangement combines the incentive of owning a business with the advantage of access to big business management skills
C) Franchises have a greater success rate than starting businesses from scratch
D) Usually involves contributing a percentage of the sales to the parent company
E) It is virtually impossible to lose money owning a well-known franchise

Question 69

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 70

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

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

Question 71

Jim Short and Ron Tall are trying to decide whether to start a new business or buy an existing one.Which of the following would strengthen the case for buying an existing business?

A) The men have lots of ideas regarding the type of business they would like to own.
B) They would benefit from the customer base of an existing business.
C) An existing business may have difficulties that they would inherit if they bought it.
D) Both men value independence.
E) Existing small businesses usually have a lot of debt.

Question 72

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 73

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

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

Question 74

Franchising accounts for approximately ____ percent of retail sales in Canada.

A) 10
B) 20
C) 30
D) 40
E) 50

Question 75

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 76

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 77

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 78

Mary is trying to decide whether to start her own business or buy a franchise.Which of the following would be a strong reason for her to buy 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 79

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 80

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) Incentives of owning your own business
E) Low start-up costs