Question 1

Compared to their larger competitors, small firms may be better positioned to provide good customer service because they

A.do not struggle as much with bureaucracy.

B.tend to have established corporate policies that emphasize a customer focus.

C.have a narrow range of products or services to offer.

D.refuse to be distracted by other developments in the industry

Question 2

The argument developed in Chapter 1 about entrepreneurial opportunities holds that

A.potentially profitable opportunities exist at all times.

B.the biggest barrier to seizing opportunities is lack of capital.

C.minoritiesare effectively blocked from exploiting opportunities.

D.approximately 99 percent of all opportunities involve some form of retailing.

Question 3

Which of the following is one of the factors that determines the nature and degree of competition in an industry, as identified by Michael Porter in his book Competitive Advantage?

A.The interest of small businesses

B.Bargaining power of competitors

C.Threat of substitute products or services

D.Themacroeconomy

Question 4

If a small firm is to maintain its performance over time, it is essential to

A.produce a continuous stream of competitive advantages.

B.extend the competitive advantage of the firm.

C.replicate the strategies that have led to success in the past.

D.retain the personnel who made the firm successful in the first place.

Question 5

Why does electronic commerce benefit small firms?

A.Small firms are often "tech savy", which allows them to embrace innovations more quickly
B.Large firms have complex business plans that fail to direct investment toward the Internet.
C.Without e-commerce, small firms often lack the resources to expand beyond local markets.
D.The government has committed significant resources to encourages small firms to go online.

Question 6

Economies of scale refers to

A.learning effects from manufacturing experience.

B.the incremental drop in costs that results from the doubling of output.
C.efficienciesthat are most common in low-tech operations.

D.gains from the spreading of investment across more units of production.

Question 7

The route most often thought of when discussing entrepreneurship is

A.startups.

B.buyouts.

C.family business.

D.franchises.

Question 8

None of the asset-based cost valuation approaches allow for or recognize

A.the time value of money.

B.the firm as a going concern.

C.the firm's replacement value.

D.the amount of capital that could be recovered through liquidation.

Question 9

All of the following are considered attractive characteristics of franchising except

A.higher success rates than for alternative methods.

B.entrepreneurial independence.

C.financial and training assistance.

D.operating benefits.

Question 10

To avoid a stifling atmosphere for nonfamily employees in a family business, the owner should

A.promote only nonfamily members.

B.avoid all special consideration for family members.

C.makeclear the extent of opportunity for nonfamily members.

D.minimize discussion about future management changes.

Question 11

Writing a business plan should be thought of as

A.the means to an end product.

B.an ongoing process.

C.an absolute essential to the startup of businesses.

D.a mental exercise.

Question 12

In a business plan, the key statement in the financial plan is the

A.break-even analysis.

B.estimate of returns and allowances.

C.salary expense statement.

D.cash flow statement.

Question 13

Entrepreneurs should base their market assessments, production schedules, inventory policies, and personnel decisions on

A.techniques of observation.

B.qualitative analysis.

C.intuition alone.

D.the sales forecast.

Question 14

A disadvantage of a sole proprietorship is

A.the complexity of the organization.

B.the cost of starting the business.

C.the lack of limits on personal liability.

D.the difficulty of distribution.

Question 15

In a partnership, each partner has agency power, which means that

A.upon the death of one partner, the remaining partners can operate the business.

B.a partner can legally bind all members of the firm.

C.an executor can act as a partner.

D.a partner can compete in business and remain a partner.

Question 16

For small service or retail businesses, the top priority in location decisions is

A.personal preference

B.resource availability

C.customer accessibility.

D.environmental conditions.

Question 17

The most valuable area in a retail store in terms of sales is

A.right front.

B.left front.

C.right center.

D.middle center.

Question 18

The _____ shows the results of a firm's operations over a period of time, usually one year.

A.income statement

B.balance sheet

C.statement of cash flow

D.statement of financial position

Question 19

Though often assumed to be the same, profits shown on a company's income statement are not the same as its

A.owners' total compensation.

B.financial performance.

C.cash flows.

D.taxable income.

Question 20

When forecasting capital requirements for a proposed venture, the analyst should consider

A.the investment needed for startup, since capital needs for future growth can be assessed later.
B.personal expenses, especially when the entrepreneur receives no income from other sources.
C.only the most optimistic scenario for the business.

D.only the most pessimistic scenario for the business.

Question 21

If a firm finances with equity rather than debt, net income will be greater because

A.equity financing almost always leads to better firm performance than debt financing.

B.the terms of equity financing are more stable than the terms of debt financing.

C.this impacts asset selection for the better.

D.there is no interest expense.

Question 22

Though not as common as using personal savings, one of the more often used sources of financing is

A.asset-based lenders.

B.personal charge card accounts.

C.wealthy individuals.

D.venture capitalists.

Question 23

The availability of exit options is an important determinant of the appeal of the firm to

A.suppliers.

B.investors.

C.the employees of the company.

D.the management of the company.

Question 24

Regarding IPOs, the primary motivation of the issuing firm and that of the investment banker are

A.the same-maximizing the price of the firm.

B.similar-completing the sale.

C.very different because they are compensated for different outcomes.
D.impossible to know since every deal is structured differently.

Question 25

Post-harvest entrepreneurs may become disillusioned when they realize their sense of identity

A.was associated with the quest for wealth.

B.derived from interactions with employees.

C.was intertwined with their business.

D.does not return after joining in social or charitable work.