Question 1

If an entrepreneur uses social media to obtain startup financing from willing providers, this is called

Accepted Answer

Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the internet and social media. This can include equity crowdfunding, where investors receive a stake in the company, or rewards-based crowdfunding, where backers receive products or other benefits in exchange for their contribution.

Question 2

Wendy, a single parent of two boys, has started a small bakery in her house. She cannot work away from home because her children are very young. Which of the following kinds of entrepreneurship is this an example of?

Accepted Answer

This is an example of necessity-based entrepreneurship because Wendy has started her business out of necessity due to her family situation.

Question 3

President ____ called crowdfunding a "game changer" when he signed the Jumpstart Our Business Startups Act.

Accepted Answer

President Obama signed the Jumpstart Our Business Startups Act (JOBS Act) into law in 2012, which included provisions that legalized crowdfunding for the first time. In his remarks at the signing ceremony, Obama called crowdfunding a "game changer" for entrepreneurs and small businesses.

Question 4

When shares of stock are first sold to the public and begin trading on a stock exchange, it is referred to as _____.

Accepted Answer

When shares of stock are first sold to the public and begin trading on a stock exchange, it is referred to as an initial public offering (IPO).

Question 5

Joe has started his one-man audio consulting business under the name Sound Wiz. The legal structure for the company can best be described as a _____.

Accepted Answer

A sole proprietorship is a business owned and managed by one individual, making it the best description for Joe's one-man business.

Question 6

Kickstarter and AngelList are examples of websites that help with

Accepted Answer

Kickstarter and AngelList are both examples of crowdfunding websites, which allow individuals and small businesses to raise funds from a large number of people by pooling together smaller investments to reach a larger goal. This is different from angel investing, debt financing, or equity financing, which typically involve larger investments from a smaller number of investors or lenders. While an initial public offering (IPO) does involve raising capital from a large number of investors, it is a more complex and regulated process that typically requires the services of investment banks and underwriters.

Question 7

Emma, Heidi, and Hilda have opened a new cafe. Each of them have contributed $1,500 toward start-up costs and have agreed on dividing costs and profits equally. The legal structure for the company can best be described as a:

Accepted Answer

The fact that Emma, Heidi, and Hilda have divided costs and profits equally indicates that they have formed a partnership, where each partner contributes to the business and shares in the financial rewards and risks. A proprietorship would involve a single owner, while a corporation and benefit corporation are more complex legal structures involving shareholders and different levels of liability. A trade alliance is a group of businesses that work together to promote their common interests, but do not necessarily share ownership.

Question 8

Which of the following is true of a limited liability corporation?

Accepted Answer

Limited Liability Corporations (LLCs) are treated as pass-through entities for tax purposes, meaning if there is a single owner, it can be taxed as a sole proprietorship, allowing profits and losses to be reported on the owner's personal tax returns.

Question 9

Karl takes a loan from a reputed bank to set up a recording studio. Which of the following best represents Karl's source of finance?

Accepted Answer

Karl is taking a loan from a bank which means he is opting for debt financing.

Question 10

Before starting on his new venture, Mike writes down the specifics of his ideas, the amount of money needed, and future business operations. Mike is involved in preparing a _____.

Accepted Answer

Mike is preparing a business plan which includes the specifics of his ideas, the amount of money needed, and future business operations. A succession plan involves identifying and developing potential successors for key positions in a company. A business portfolio is a collection of different businesses or products owned by a company. A competitive analysis involves identifying and analyzing the strengths and weaknesses of competitors in the market. A mission statement is a statement that defines the purpose and goals of a company.

Question 11

Arthur, a young college graduate, started a store for traditional musical instruments. He liked working independently and without being directed by others. He believed that his destiny is under his own control. Which of the following personality traits of an entrepreneur is exhibited by Arthur?

Accepted Answer

Arthur exhibits an internal locus of control by believing that his destiny and success is under his own control and not determined by external factors or other people.

Question 12

_____ involves giving ownership shares in the business to outside investors in return for their cash investments.

Accepted Answer

Equity financing involves giving ownership shares in the business to outside investors in return for their cash investments. This is different from debt financing, which involves taking out loans that need to be repaid with interest. Securitization is the process of bundling assets, such as loans or mortgages, together and selling them as securities to investors. Debt consolidation involves combining multiple debts into a single loan with a lower interest rate. Risk management involves identifying and mitigating potential risks to a business.

Question 13

_____ facilitate making large investments in new ventures in return for an equity stake in the business.

Accepted Answer

Venture capitalists are investors who provide funding to startup businesses or small companies that are believed to have long-term growth potential. They usually provide financial and managerial support in exchange for a share of ownership in the business. This can include providing expertise or guidance on marketing, management, and finance. Venture capitalists usually invest in high-risk, high-reward industries such as technology, biotech, and healthcare.

Question 14

Ali, a small business owner, is concerned about passing the business to his heirs after his retirement or death. He should prepare a formal _____ plan.

Accepted Answer

A succession plan outlines how a business owner will pass on their business to their chosen heirs or successors. It includes identifying potential successors, providing training and development opportunities, and developing a timeline for the transition of ownership. A formal succession plan can help ensure the smooth continuation of the business after the owner's retirement or death.

Question 15

_____ are wealthy individuals willing to invest in a new venture in return for an equity stake.

Accepted Answer

Angel investors are wealthy individuals who invest in a new venture in return for an equity stake.

Question 16

Igor needed financing for his budding business but was rejected by many financing companies. Finally, one of his uncle's friends, a wealthy man, got interested in the business and gave Igor a substantial amount for a share in the venture. Which of the following best represents Igor's source of finance?

Accepted Answer

An angel investor is typically someone who has personal funds to invest in a business venture, often in exchange for ownership equity or convertible debt. In this case, Igor's uncle's friend invested a substantial amount in exchange for a share in the business, making him an angel investor.

Question 17

Colin and Becky started a garbage disposal and recycling program called "No More Trash" in their city, which has seen enormous growth in the last few years. The public waste management system has proved to be a failure as the authorities are overwhelmed by the influx of people from all parts of the country. Which of the following kinds of entrepreneurship is "No More Trash" an example of?

Accepted Answer

"No More Trash" is an example of social entrepreneurship as it aims to address a social or environmental issue by creating a sustainable business model.

Question 18

_____ involves going into debt by borrowing money from another person, bank, or financial institution.

Accepted Answer

Debt financing involves borrowing money from another person, bank, or financial institution, which results in going into debt.

Question 19

For liability purposes, a limited liability corporation functions like a _____ and protects the assets of owners against claims made against the company.

Accepted Answer

A limited liability corporation functions like a corporation and provides protection of personal assets of owners against claims made against the company.

Question 20

Julia is an entrepreneur. At the current stage in which her company is stated, her main concerns are if she will have enough customers and money. Julia's company is in the:

Accepted Answer

The birth stage is the initial stage of a company where the main concerns are obtaining customers and capital. These concerns align with Julia's current stage in her company. The breakthrough stage is when the company experiences rapid growth, the maturity stage is when the company stabilizes and generates consistent profits, the stagnant stage is when the company plateaus and stops growing, and the failure stage is when the company goes bankrupt or ceases to exist.

Quiz 6: Entrepreneurship and New Ventures