Q1. The period of time allowed for the subconscious to reflect on information that has been gathered is called:
a. marination
b. reflection
c. illumination
d. incubation
Q2. The _____ specialized a business is, the _____ the likelihood that a bargain may be found.
a. more; greater
b. more; lesser
c. less; greater
d. less; lesser
Q3. In a competitive profile matrix, a factor that represents a major strength to a company would receive a rating of:
a. 1
b. 2
c. 3
d. 4
Q4. Today, home-based businesses:
a. are confined primarily to the traditional areas of arts and crafts.
b. are booming because of their low start-up costs, flexibility, and ability to take advantage of modern technology.
c. are so small that they produce negligible incomes for their owners.
d. all of the above.
Q5. Small businesses:
a. account for about 99 percent of all businesses in the United States.
b. employ 53 percent of the nation's private sector work force.
c. create more jobs than do large companies
d. produce 51 percent of the U.S. GDP.
e. all of the above
Q6. A rule of thumb for valuation of a business is to offer the owner 2.7 times the company's earnings.
a. true
b. false
Q7. A primary difference between an S-corporation and a C-corporation is that:
a. the C-corporation offers the advantage of limited liability to its stockholders, and an S-corporation does not.
b. the C-corporation itself pays taxes based on a corporate tax structure, and the S-corporation passes all of its profits (or losses) through to its individual shareholders where they are taxed at the individual rate.
c. the founders of an S-corporation are protected from the potential loss of control that occurs when the founders of C-corporations sell shares of stock to raise the capital needed for growth.
d. S-corporations are much easier and less expensive to form than C-corporations, which require their founders to file a certificate of incorporation with the state and to pay incorporation fees.
Q8. The Uniform Franchise Offering Circular (UFOC):
a. is not required from franchisers with fewer than 10 franchised outlets.
b. must be checked, verified, and approved by the Federal Trade Commission before franchisers can use it.
c. is designed to provide franchisees with important information about a franchise and must be given to franchisees before they sign a franchise contract or pay any money to the franchiser.
d. All of the above.
Q9. Studies of the small business failure rate suggest that after six years, about __________ percent of new businesses will have failed.
a. 33
b. 49
c. 63
d. 82
Q10. Bizcomp found the average sale price for small businesses across the United States was _____ times earnings.
a. 15
b. 25
c. 0.05 to 0.10
d. 2.7
Q11. __________ is the ability to develop new ideas and to discover new ways of looking at problems and opportunities.
a. Innovation
b. Creativity
c. Entrepreneurship
d. Brainstorming
Q12. A company's __________ spell(s) out the ends toward which a company is moving; its __________spell(s) out how it plans to reach those ends
a. mission, goals, and objectives; core competencies
b. strategy; core competencies
c. mission, goals and objectives; strategy
d. core competencies; strategy
Q13. _________ are negative internal factors that act as roadblocks in a company's quest to meet its mission, goals, and objectives.
a. Strengths
b. Weaknesses
c. Opportunities
d. Threats
Q14. Which form of ownership has the greatest ability to attract capital?
a. sole proprietorship
b. partnership
c. corporation
d. S-corporation
Q15. Bennett is considering buying a business and has collected the following information: Projected net earnings for next year = $117,000; rate of return on a similar risk investment = 27%. Hoping to use the market approach, Bennett has located three similar companies, whose stock is publicly traded. Their price-earnings ratios are 2.84, 2. 95, and 3.12. Under the market approach, how much is the business worth?
a. $117,000
b. $433,333
c. $93,822
d. $347, 490
Q16. The essence of what a franchisee buys from a franchiser is ___________.
a. a steady source of capital.
b. the franchiser's experience
c. a marketing system.
d. an efficient building design.
Q17. Locating franchised outlets in high-traffic, non-traditional locations such as airports, hospitals, zoos, sports arenas, and others is based on the principle of:
a. conversion franchising
b. intercept marketing
c. master franchising
d. piggyback franchising
Q18. The primary motivating force behind entrepreneurs is:
a. money
b. fame.
c. achievement.
d. recognition.
Q19. Approximately __________ percent of the small companies that are up for sale ever get sold.
a. 25 to 33
b. 40 to 50
c. 65 to 73
d. 80 to 85
Q20. __________ partners cannot take an active role in the operation of a business, but if the business fails, they stand to lose only what they have invested in the company.
a. General
b. Limited
c. Master
d. Insulated
Q21. The limited liability company (LLC) offers entrepreneurs
a. the tax advantages of a partnership.
b. the legal protection of a corporation.
c. maximum flexibility in the way it operates.
d. all of the above
Q22. Studies show that more than __________ percent of all business acquisitions fail to meet the buyer's expectations.
a. 10
b. 30
c. 50
d. 70
Q23. By setting its products apart from those of competitors, Straus Family Creamery, a family business that produces organic, all-natural dairy products, is using which strategy?
a. low-cost
b. differentiation
c. focus
d. maintenance
Q24. How many of the following characteristics may a limited liability company (LLC) have: 1) limited liability, 2) continuity of life, 3) free transferability of interest, and 4) centralized management?
a. only 1
b. no more than 2
c. no more than 3
d. all 4, if the owners choose
Q25. Which element of the strategic management process addresses the first question of any business venture: "What business am I in?"
a. vision
b. mission
c. SWOT analysis
d. Strategy
Q26. Which of the following statements concerning franchising is true?
a. Franchise sales total more than $1 trillion.
b. Franchises account for 44 percent of all retail sales.
c. A new franchise opens somewhere in the world every six-and-a-half minutes
d. All of the above.
Q27. Women-owned businesses have a lower survival rate than U.S. businesses overall.
a. true
b. false
Q28. Start-up companies can expect to outgrow their capital base each time sales increase by _____ percent.
a. 10-20
b. 20-30
c. 30-40
d. 40-50
Q29. The broad, long-range attributes that a business seeks to accomplish are called:
a. goals
b. objectives
c. strategies
d. key success factors
Q30. In which of the following countries is entrepreneurial activity most prevalent?
a. Japan
b. Germany
c. Great Britain
d. United States
Q31. Which of the following statements about choosing a form of ownership is false?
a. The choice of a form of ownership can have far-reaching effects on almost every aspect of a business and its owner.
b. Each form of ownership has its own unique set of advantages and disadvantages
c. The S-corporation is the best form of ownership for entrepreneurs.
d. All of the above.
Q32. The primary reason most entrepreneurs choose to incorporate their businesses is:
a. to gain the benefit of limited liability for the corporation's stockholders.
b. the ability of the business to continue indefinitely.
c. the ability to avoid the disadvantage of double taxation.
d. that the corporation offers the least expensive and least complex process of business formation.
Q33. _________ is the difference between an established, successful business and one that has yet to prove itself.
a. Goodwill
b. Opportunity cost
c. Equity
d. Consideration
Q34. The first rule of negotiating is never confuse price with value.
a. true
b. false
Q35. A corporation doing business in a state other than the one in which it is incorporated is called a __________ corporation
a. domestic
b. alien
c. foreign
d. closely-held
Q36. A company whose owner wants to sell to her employees by establishing an employee stock ownership plan (ESOP) should:
a. be profitable
b. have at least 15 to 20 employees
c. have an annual payroll of at least $500,000
d. all of the above
Q37. Which of the following statements concerning core competencies is false?
a. Core competencies are a unique set of capabilities that a company develops in key operational areas that allow it to vault past competitors.
b.
b. Small companies' core competencies often originate from the advantages their size offers.
c. Entrepreneurs must constantly change their core competencies.
d. Developing core competencies does not necessarily require a company to spend a great deal of money.
Q38. Every partnership must have at least one __________ partner.
a. general
b. limited
c. silent
d. master
Q39. Which of the following factors acts as fuel to feed the nation's entrepreneurial fire?
a. Greater opportunities for entrepreneurial education
b. The shift from an industrial economy to a service economy
c. Increasingly powerful technological advancements that are available at affordable prices.
d. All of the above.
Q40. Most entrepreneurs work ______ hours per week.
a. 1-39
b. 40-50
c. 50-60
d. more than 60
Q41. Increasingly, entrepreneurs are starting businesses because they see an opportunity to make a difference in a cause that is important to them.
a. true
b. false
Q42. You are using the excess earnings approach to determine the value of a business you have determined to be a "normal risk" business. What "years of profit" figure should you use to estimate the value of the intangible assets?
a. 1 to 2
b. 3 to 4
c. 6 to 7
d. 10 to 12
Q43. The most valuable financial resource any small business can have is:
a. cash
b. accounts receivable
c. bank line of credit
d. retained earnings
Q44. When evaluating the assets a company owns, a prospective buyer should be most interested in their __________ value.
a. book
b. par
c. market
d. stated
Q45. In most business sales,
a. the buyer pays the seller 100 percent of the purchase price at the closing of the deal.
b. the seller finances 100 percent of the purchase price over a 30-year time period.
c. the buyer makes a down payment up front with the seller financing the remaining 30 to 80 percent of the purchase price over three to ten years.
d. the actual price the buyer pays is much more important than the structure and the terms of the deal.
Q46. Which of the following factors plays a role in determining the rate of return used to value a business using one of the earnings approaches?
a. the basic, risk-free rate of return
b. an inflation premium
c. the risk allowance for investing in that particular business
d. all of the above
Q47. A paradigm is:
a. a tool used for determining the value of a business that is for sale.
b. a preconceived idea of how the world should operate.
c. a rule for overcoming the barriers to creativity.
d. a tool entrepreneurs use to launch successful business ventures.
Q48. Given the fact that most small companies lack the resources to reach a national or international market, many entrepreneurs choose to pursue a __________ strategy in which they specialize in meeting the needs of a specific target market segment.
a. low-cost
b. differentiation
c. focus
d. maintenance
Q49. The price paid for a business typically is ________ the terms on which the purchase was made.
a. more important than
b. less important than
c. about as important as
d. None of the above.
Q50. Which of the following items should be included on a business buyer?s checklist
a. Inventory
b. Tax returns
c. Lawsuits
d. All of the above