Question 1

Success of entrepreneurial ventures is often jeopardized by the death of the founder. Which of the following is an important strategy to minimize this problem?

Accepted Answer

Founding entrepreneurs often fail to plan for succession. When death occurs, estate tax problems or the lack of a skilled replacement for the founder can lead to business failure.

Question 2

Entrepreneurs, in part because they are very busy, often fail to use ____.

Accepted Answer

Entrepreneurs, in part because they are very busy, often fail to use formal control systems. One common entrepreneurial malady is an aversion to record keeping. Pricing decisions are based on intuition without adequate reference to costs.

Question 3

Bad economic times can

Accepted Answer

Although good economic times may make it easier to start a company and to survive, bad times can offer an opportunity to expand and makes it easier to recruit talent.

Question 4

_____ are a way for a business to raise capital through federally registered and underwritten sales of shares in the company.

Accepted Answer

Initial public stock offerings (IPOs) offer a way to raise capital through federally registered and underwritten sales of shares in the company.

Question 5

A(n) _____ is a formal planning step that focuses on an entire venture and describes all the elements involved in starting it.

Accepted Answer

The business plan describes all the elements involved in starting a new venture. The business plan describes the venture and its market, strategies, and future directions.

Question 6

Which of the following is a reason why companies go public?

Accepted Answer

The reasons for going public include raising more capital, reducing debt or improving the balance sheet and enhancing net worth, pursuing otherwise unaffordable opportunities, and improving credibility with customers and other stakeholders.

Question 7

Benefits of business incubators typically include ____.

Accepted Answer

Incubators offer benefits such as low rents and shared costs. Shared staff costs, such as for receptionists and secretaries, avoid the expense of a full-time employee but still provide convenient access to services.

Question 8

A disadvantage of going public is the

Accepted Answer

Disadvantages of going public include the expense, time, and effort involved; the tendency to become more interested in the stock price and capital gains than in running the company properly; and the creation of a long-term relationship with an investment banking firm that won't necessarily always be a good one.

Question 9

Which of the following is one of the major liabilities of start-ups?

Accepted Answer

Start-ups have at least two major liabilities: newness and smallness. New companies are relatively unknown and need to learn how to be better than established competitors at something that customers value. Regarding smallness, the odds of surviving improve if the venture reaches a critical mass of at least 10 or 20 people, has revenues of $2 million or $3 million, and is pursuing opportunities with growth potential.

Question 10

A reason why many entrepreneurs prefer to avoid going public is that they

Accepted Answer

Sometimes companies reach a point at which the owners want to "go public." Many entrepreneurs prefer to avoid going public, feeling they'll lose control if they do.

Question 11

A(n) _____ includes a description of the good or service, an assessment of the opportunity, an assessment of the entrepreneur, a specification of activities and resources needed to translate the idea into a viable business, and the individual's source of capital.

Accepted Answer

An opportunity analysis includes a description of the good or service, an assessment of the opportunity, an assessment of the entrepreneur, a specification of activities and resources needed to translate the idea into a viable business, and the individual's source of capital.

Question 12

IPO is an acronym that stands for

Accepted Answer

Initial public stock offerings (IPOs) offer a way to raise capital through federally registered and underwritten sales of shares in the company.

Question 13

Aleta is developing a new software company. She locates her business in an industrial park that offers low rent and shared support staff to start-up companies. This is an example of a _____.

Accepted Answer

Business incubators are protected environments for new, small businesses. Incubators offer benefits such as low rents and shared costs.

Question 14

Joakim wishes to open a new landscaping company that will have no services that are particularly distinctive compared to competitors in this well-established field; because of the need for trucks and equipment, the business will require a sizable investment. In which part of the entrepreneurial strategy matrix is new company likely to be located?

Accepted Answer

Most small business ventures are in the lower-right quadrant, where innovation is low and risk is high. They are fairly conventional entries in well-established fields. New restaurants, retail shops, and commercial outfits involve a sizable investment by the entrepreneur and face direct competition from similar businesses.

Question 15

According to Peter Drucker, who should help plan succession for a family-managed business?

Accepted Answer

Management guru Peter Drucker offered advice to help family-managed businesses survive and prosper, including that family members working in the business must be at least as capable and hardworking as other employees, that at least one key position should be filled by a nonfamily member, and that someone outside the family and the business should help plan succession.

Question 16

Hector comes up with a highly unusual but appealing idea for a new phone application. He would require a substantial amount of money to pay for developing the required graphics and technology. His idea can be categorized as involving

Accepted Answer

In the upper-right quadrant, novel product ideas (high innovation) are accompanied by high risk because the financial investments and competition are great. A new drug or a new automobile would likely fall into this category.

Question 17

Renaldo is creating a business plan. His first formal step should be to

Accepted Answer

The first formal planning step is to do an opportunity analysis. An opportunity analysis, or opportunity assessment plan, focuses on the opportunity, not the entire venture.

Question 18

Which of the following is the fundamental reason for creating an opportunity analysis?

Accepted Answer

The opportunity analysis, or opportunity assessment plan, focuses on the opportunity, not the entire venture. It provides the basis for deciding whether to act.

Question 19

In order for family-managed businesses to survive and prosper, management guru Peter Drucker advises them to

Accepted Answer

Management guru Peter Drucker offered advice to help family-managed businesses survive and prosper, including that family members working in the business must be at least as capable and hardworking as other employees, that at least one key position should be filled by a non-family member, and that someone outside the family and the business should help plan succession.

Question 20

The _____ quadrant in the entrepreneurial strategy matrix depicts ventures of truly novel ideas with little risk.

Accepted Answer

The upper-left quadrant, high innovation/low risk, depicts ventures of truly novel ideas with little risk. As examples, the inventors of Lego building blocks and Velcro fasteners could build their products by hand, at little expense.

Quiz 7: Entrepreneurship