Q1. The __________ is a "moving picture" of a company's profitability over a specific time period that compares its expenses against its revenue to show net profit (or loss).
a. income statement
b. balance sheet
c. statement of cash flows
d. debt ratio
Q2. Alton Simmons, owner of Alton's Tire Service, suspects that some of his slow-paying customers are draining cash from his business. Although his credit terms are 30 days, Alton discovers that his average collection period ratio is 58 days. His average daily sales are $10,530. Using a normal rate of return of 12 percent, how much are Alton's slow-paying customers costing his company per year?
a. $35, 380
b. $37,908
c. $73, 289
d. $87,750
Q3. Quantitative data from the entrepreneur's market research form the basis of the financial projections throughout the business plan.
a. true
b. false
Q4. One study found that __________ percent of small business owners analyzed their companies' financial statements as part of the managerial planning and decision making process.
a. 11
b. 21
c. 36
d. 48
Q5. A(n) __________ is an arrangement with a company's bank in which the bank maintains a post office box near the company's key customers; several times each day, the bank collects payments those customers send to the post office box and deposit them immediately into an interest-bearing account for the company.
a. sweep account
b. zero balance account
c. lockbox
d. automatic stay
Q6. When a customer's account becomes past due, a business owner should:
a. not bother the customer over the past due bill, even if it is a sizeable one, for fear of alienating the customer and losing him or her forever.
b. take immediate action in the form of either a letter or a telephone call that serves as a polite reminder that the bill is due and asks for payment.
c. immediately turn the account over to a collection agency.
d. call the "deadbeat" customer and threaten to ruin his or her credit by telling the customer's other suppliers about the past due account.
Q7. Small businesses should maintain a current ratio of at least:
a. 1:1
b. 2:1
c. 4:1
d. 10:1
Q8. __________ are television viewers who flash from one channel to another, especially during commercials, posing a real threat to TV advertisers.
a. Flashers
b. Zappers
c. Spammers
d. Jammers
Q9. Inventory represents the largest investment for most businesses.
a. true
b. false
Q10. What are the characteristics of my customers . . . their ages, education levels, income, gender, marital status, and other features?" Questions such as these address which type of marketing information?
a. geographic
b. demographic
c. psychographic
d. monolithic
Q11. Experts suggest that the greatest marketing mistake small businesses make is:
a. failing to define clearly the target markets they will serve.
b. setting prices that are so high that their customers soon start shopping elsewhere.
c. defining their target markets too narrowly and failing to capture a customer base large enough to sustain the business.
d. overemphasizing the importance of quality and service to their customers.
Q12. Paulette Sanchez has just received an invoice for merchandise she purchased from one of her company's suppliers. The invoice is for $1,892.78 and includes "2/10, net 30" terms, which mean that:
a. Paulette must pay the invoice within 30 days; otherwise, she will incur a 2 percent penalty for every 10 days the bill is past due.
b. Paulette must pay 2 percent of the invoice ($37.86) within 10 days and must pay the remaining balance within 30 days.
c. Paulette can pay just $1,854.92 if she pays the invoice within 10 days; otherwise, the full invoice ($1, 892.78) is due within 30 days.
d. Paulette can pay just $1,703.50 if she pays the invoice within 2 days; otherwise, the full invoice ($1, 892.78) is due within 30 days.
Q13. Which of the following is a technique that top salespeople use?
a. Use an indirect sales approach so that customers never suspect that a sales call is taking place.
b. Measure their success strictly by the volume of sales they generate.
c. See themselves as problem solvers for their customers rather than just vendors.
d. Never leave sales literature with customers unless they specifically ask for it.
Q14. The "big three" of cash management are:
a. sales, accounts receivable, and accounts payable
b. sales, inventory, and net income
c. inventory, accounts payable, and accounts receivable
d. accounts payable, accounts receivable, and sales
Q15. To calculate the breakeven point, a business owner should use which of the following formulas?
a. total variable expenses / contribution margin as a percentage of sales
b. total fixed expenses / contribution margin as a percentage of sales
c. (total revenue - total expenses) / total revenue
d. contribution margin as a percentage of sales / total expenses
Q16. Blending show business with the retail business, Golf Galaxy offers its customers a variety of fun features, including an in-store putting green, a driving range, and a golf simulator that lets golfers "play" any one of 32 world-famous courses, no matter what the weather outside is. Golf Galaxy is using which principle of guerrilla marketing?
a. demographic analysis
b. entertailing
c. data mining
d. time compression management
Q17. Only _____ percent of a typical business's inventory turns over quickly.
a. 10
b. 20
c. 30
d. 40
Q18. About ____ percent of entrepreneurs compute financial ratios and use them to manage their businesses.
a. 2
b. 10
c. 20
d. 80
Q19. A small music store sets the prices of most of its CDs at three levels: $12.99, $14.99, and $16.99, even using brightly-colored labels to indicate each price level. This music store is using:
a. leader pricing
b. price lining
c. uniform delivered pricing
d. bundling
Q20. Breakeven analysis is an ideal for valuation because it takes into account the importance of the time value of cash flows.
a. true
b. false
Q21. The __________ takes a "snapshot" of a business, giving the owner an estimate of the company's worth as of a given date.
a. income statement
b. balance sheet
c. statement of cash flows
d. debt ratio
Q22. Approximately __________ percent of the average company's sales come from existing customers.
a. 20
b. 40
c. 50
d. 70
Q23. The __________ is the first section in a business plan, but it is the last section to be written.
a. company history
b. list of goals and objectives
c. marketing strategy
d. executive summary
Q24. An effective market analysis in a business plan should include:
a. a clear definition of the company's target market.
b. the types of advertising and promotional campaigns that will reach the intended audience most effectively and efficiently.
c. market size and trends.
d. all of the above.
Q25. Numerous customer surveys across a variety of industries show that ___________ is the most important element of service.
a. the personal touch businesses offer them
b. technology
c. convenience
d. quality
Q26. In the __________ stage of the product life cycle, sales volume continues to rise, but profit margins peak and then begin to decline as competitors enter the market.
a. growth and acceptance
b. maturity
c. saturation
d. decline
Q27. Companies selling high-tech products such as computers and cellular phones often rely on a __________ pricing strategy in which they initially establish a high price for a product and then, as technological advancements lower their costs, push its price down, preferably ahead of the competition.
a. penetration
b. skimming
c. sliding down the demand curve
d. cyclical
Q28. The price range for a product or service is:
a. the final price a business owner establishes for a product or service, taking into account the company's desired image in the market.
b. a function of a single factor: the prices competitors set for similar goods and services.
c. the area between the price ceiling defined by customers in the market and the price floor defined by a company's cost structure.
d. the area between the price floor set by a company's cost structure and the price ceiling determined by the prices competitors set for similar goods and services.
Q29. __________ is any sales presentation that is nonpersonal in nature and is paid for by an identified sponsor.
a. publicity
b. personal selling
c. advertising
d. promotion
Q30. The __________ ratio measures the percentage of a company's sales that remains as profit after paying all of its expenses.
a. current
b. quick
c. net profit on sales
d. net profit to equity
Q31. Fans of which of the following sports demonstrate the highest loyalty to sponsors' products?
a. football
b. baseball
c. golf
d. NASCAR racing
Q32. The Downtown Hobby Shop expects net daily sales of $1200, with the cost of goods sold at $750 and total expenses of $250. Variable expenses, including cost of goods sold, is estimated at $800, with fixed expenses of $200. What is the contribution margin?
a. 33%
b. 25%
c. 27%
d. 75%
Q33. The two-thirds rule says that:
a. only two-thirds of the entrepreneurs with a viable business venture will find financial backing.
b. of those entrepreneurs who get financing will get just two-thirds of what they initially requested.
c. getting the financing to start a business will take entrepreneurs two-thirds longer than they expected.
d. all of the above
Q34. Ohmae Tanuchi, owner of Times Past, a small company selling clocks, knows that one of her bestselling clocks cost her $93.75 each. If Ohmae wants a markup (of retail price) on this clock to be 55 percent, what final selling price should she establish?
a. $135.94
b. $145.31
c. $170.45
d. $208.33
Q35. Customers use credit cards to pay for __________ out of every $100 spent on consumable goods and services.
a. $12
b. $28
c. $41
d. $52
Q36. About 20 percent of the typical company's customers account for about __________ percent of its sales.
a. 20
b. 50
c. 65
d. 80
Q37. A __________ pricing strategy for a new product or service maintains a relatively low profit margin so that a company can gain its quick acceptance into the market and quickly achieve a high volume of sales.
a. penetration
b. skimming
c. sliding down the demand curve
d. cyclical
Q38. The __________ ratio measures the owners' rate of return on their investment in the business.
a. current
b. quick
c. net profit on sales
d. net profit to equity
Q39. When describing the company's products or services in a business plan, entrepreneurs should focus on the product's or service's:
a. features
b. price
c. benefits
d. physical characteristics
Q40. A bank account that automatically moves fund from checking to an interest-bearing account is called a(n):
a. money market account.
b. zero balance account.
c. sweep account.
d. asset management account.
Q41. The typical direct mail advertising campaign produces a response rate of __________ percent.
a. 2
b. 7
c. 16
d. 24
Q42. To get external financing, every business plan must pass three tests. The __________ test involves proving to lenders and investors that the business offers a high probability of repayment or an attractive rate of return.
a. reality
b. competitive
c. value
d. market
Q43. About two-thirds of the customers who stop patronizing a particular store do so because:
a. its prices are too high.
b. the quality of its products and services is too low.
c. an indifferent employee treated them poorly.
d. its location is inconvenient.
Q44. A typical manufacturing company pays __________ percent of the value of its inventory to cover the cost of borrowed money, warehouse space, materials handling, staff, lift-truck expenses, and fixed costs.
a. 10 to 15
b. 25 to 30
c. 35 to 40
d. 50 to 55
Q45. To capitalize on the diversity that the domestic market provides, small businesses should:
a. use a "shotgun approach" to marketing, firing marketing blasts at every potential customer they see, hoping to capture some of them.
b. pursue a "one-size-fits-all" marketing approach designed to appeal to the mass market so that they can reach as many potential customers as possible.
c. follow a "rifle approach" to marketing, focusing on narrow market segments and taking the time to recognize, understand, and cater to the specific needs of each segment.
d. try to outspend their competitors in advertising, promotional, and marketing campaigns.
Q46. The heart of the cash budget is the __________ forecast.
a. income
b. profit
c. sales
d. accounts receivable
Q47. Which of the following statements most accurately reflects the relationship between the startup cash required for a company and its anticipated inventory turnover ratio?
a. The higher a company's average inventory turnover, the greater the amount of startup cash it will require.
b. The higher a company's average inventory turnover, the smaller the amount of startup cash it will require.
c. A company's startup cash requirement is equal to its average inventory turnover times 12.
d. There is no connection between a company's average inventory turnover and the amount of startup cash it will require.
Q48. "What drives my customers' behavior? Why do they buy these goods and services? What values are most important to them?" Questions such as these address which type of marketing information?
a. geographic
b. demographic
c. psychographic
d. monolithic
Q49. Markup is:
a. the difference between the cost of a good or service and its selling price.
b. the variable expenses required to produce a product divided by the sales revenue it generates.
c. the sum of a product's fixed costs per unit and its variable costs per unit.
d. the portion of a product's sales price that is left over to contribute to covering its variable expenses and earning a profit after deducting its fixed expenses.
Q50. Radio advertisements reach __________ percent of all customers each week.
a. 25
b. 55
c. 75
d. 95