Question 1

Which form of business ownership is a particularly poor choice for an aggressive entrepreneurial firm?

Accepted Answer

A sole proprietorship is a poor choice for an aggressive entrepreneurial firm because it offers no liability protection, which increases the personal risk for the owner.

The best choice(s) would be either a C corporation or a limited liability corporation (LLC). A C corporation provides limited liability protection for its shareholders and offers the potential for issuing stock to raise capital. An LLC also offers limited liability protection and has pass-through taxation, which can be beneficial for smaller firms. The choice between the two ultimately depends on the specific needs and goals of the firm.

Question 2

A situation that involves doing something that is beneficial to oneself or the organization, but may be unethical is called an:

Accepted Answer

A situation that involves doing something that is beneficial but may be unethical is called an ethical dilemma. In this situation, there is a conflict between one's personal values and the actions that would be in the best interest of the organization. It requires a careful consideration of the potential consequences and weighing the competing ethical principles. It is important to seek guidance from trusted mentors and colleagues and to consider the long-term effects of any decision made. Ultimately, one must choose the option that upholds the highest ethical standards and is consistent with one's personal values.

Question 3

The What Went Wrong? feature in Chapter 7 focuses on Green Planet Juicery, a smoothie drink restaurant that went out of business. According to the feature, the primary reasons that Green Planet Juicery went out of business were:

Accepted Answer

D

Question 4

A ________ is a formal statement of an organization's values on certain ethical and social issues.

Accepted Answer

A code of conduct is a formal document that outlines an organization's values and expectations regarding ethical and social issues. It sets out rules and guidelines for employees to follow in their daily work activities, and helps to create a culture of respect, integrity, and professionalism within the organization. Codes of behavior and performance, while related, are not typically used to address ethical and social issues in the same way that a code of conduct is. Principles and morals may be included in a code of conduct, but they are not the focus of the document.

Question 5

According to the textbook, the single most important thing the founders of an entrepreneurial venture can do is:

Accepted Answer

Establishing a strong ethical culture is vital for the success and sustainability of an entrepreneurial venture. It helps in attracting and retaining employees, building a good reputation, gaining customer loyalty, and avoiding legal and financial penalties. Making money, starting a board of advisors, establishing business partnerships, and selecting a limited liability corporate structure are important, but they are not as critical as building an ethical culture.

Question 6

________ is the process in which an impartial third party helps those involved in a dispute reach an agreement.

Accepted Answer

Mediation is the process in which an impartial third party (mediator) helps those involved in a dispute reach an agreement. The mediator does not make a decision but facilitates communication and negotiation between the parties to reach a mutually acceptable solution.

Question 7

Ken Parsons just took a job with eBay. As part of his employment contract, Ken signed an agreement that states that he will not disclose any of eBay's trade secrets. The agreement that Ken signed is called a:

Accepted Answer

The agreement Ken signed that restricts him from disclosing eBay's trade secrets is known as a nondisclosure agreement or NDA. An NDA is a legal agreement between two or more parties that outlines confidential material or trade secrets that the parties want to keep private and restrict access to.

Question 8

A ________ agreement binds an employee or another part to not disclose a company's trade secret. A ________ agreement prevents an individual from competing against a former employer for a specific period of time.

Accepted Answer

A nondisclosure agreement prevents an employee or another party from disclosing a company's trade secret, while a noncompete agreement prevents an individual from competing against a former employer for a specific period of time. Option A is the only choice that states both the correct terms.

Question 9

Which of the following statements regarding business licenses and permits is incorrect?

Accepted Answer

It is incorrect to assume that most business licenses and permits can wait until after a business is launched to be obtained. In fact, many licenses and permits need to be obtained before the launch of the business to comply with legal requirements.

Question 10

Most founders' agreements include a ________, which legally obligates the departing founder to sell to the remaining founders his or her interest in the firm if the remaining founders are interested.

Accepted Answer

The answer of Most founders' agreements include a ________, which...

Question 11

All businesses that plan to use a fictitious name, which is any name other than the business owner's name, need a:

Accepted Answer

The correct term for a business name other than the owner's name is a fictitious name. Therefore, businesses that plan to use a fictitious name need a fictitious business name permit. The other options provided are not the correct terminology and are not used in actual practice.

Question 12

RealKidz, the company profiled in the opening feature for Chapter 7, experienced one particularly startling legal challenge early in the life of the firm. What was the challenge?

Accepted Answer

RealKidz faced a legal challenge when they contracted with a clothing designer who turned out to be a scam artist.

Question 13

According to the 2007 National Business Ethics Survey, a total of ________ of the employees surveyed said they had observed conduct that violated company ethical standards, policy, or law during the past year.

Accepted Answer

According to the 2007 National Business Ethics Survey, 55 percent of the employees surveyed said they had observed conduct that violated company ethical standards, policy, or law during the past year.

Question 14

A ________ is a written document that deals with issues such as the relative split of the equity among the founders of the firm, how individual founders will be compensated for the cash or the "sweat equity" they put into the firm, and how long the founder will have to remain with the firm for their shares to fully vest.

Accepted Answer

A founders' agreement is a written document that deals with issues such as the split of equity among the founders, compensation for the work put into the firm, and vesting periods for shares. The other answer choices are not commonly used terms for this type of agreement.

Question 15

Which of the following is not one of the four factors identified in the textbook as critical in selecting a form of business ownership?

Accepted Answer

Accounting and financial reporting considerations are not typically listed as one of the critical factors in selecting a form of business ownership. The other options relate directly to legal, financial, and liability aspects that are crucial in this decision.

Question 16

The simplest form of business entity is the:

Accepted Answer

This is the simplest form of business entity as it is owned and operated by a single individual. It is easy to set up and has minimal legal and regulatory requirements. However, the owner is personally liable for all debts and obligations of the business.

Question 17

"Don't be evil" is the corporate motto for:

Accepted Answer

"Don't be evil" is famously the corporate motto of Google.

Question 18

Rachael James just took a job with IKEA. As part of her employment agreement, IKEA required Rachael to sign an agreement, which states that if she leaves IKEA, she will not work for a firm that competes against IKEA for at least two years. The agreement that Rachael signed is called a:

Accepted Answer

The agreement that Rachael signed is commonly known as a noncompete agreement. It is an employment agreement where an employee agrees not to enter into a similar profession or trade after leaving their current employer, for a certain period of time, in order to protect the employer's trade secrets and confidential information.

Question 19

The Savvy Entrepreneurial Firm feature in Chapter 7 focuses on Globat.com, a Web hosting company, which encountered a crisis described in the feature. The main point of the feature was to illustrate that the manner in which a company handles a crisis:

Accepted Answer

The feature emphasizes that how a company handles a crisis sends a message to its customers about its values and trustworthiness, which is crucial for maintaining customer relationships and brand reputation.

Question 20

All of the following is an advantage of a sole proprietorship except:

Accepted Answer

Limited liability is not an advantage of a sole proprietorship because the owner is personally responsible for all business debts and liabilities.

Quiz 7: Preparing the Proper Ethical and Legal Foundation