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test This has a total maximum score of 100 marks. Please answer the multiple choice questions on the test paper by selecting the one best answer to each question. Please answer the short answer and paragraph questions in the test booklet provided. 1. When comparing small businesses to their larger competitors, it is clear that: A) bigger is always better. B) small firms can always outperform big firms on a level playing field. C) small firms often can offer more personalized customer services than big firms. D) small firms are slower to respond to opportunities than are large firms. 2. Insider trading involves: A) an Internet activity that establishes a barter exchange system between businesses. B) investors using private company information to further their own fortunes. C) the exchange of assets between companies in the same industry. D) a payment or reward for socially conscious behaviour. 3. Mel is a major stockholder in Precision Transmission Services (PTS), a nationwide network of transmission repair shops founded by his father. Currently, PTS stock is sold on the open market, but Mel has talked to several relatives about his desire to get all of the PTS stock back in his family's hands. Mel is interested in: A) taking the firm private. B) a hostile takeover in the firm. C) converting the firm to a general partnership. D) forming a master limited partnership. 4. In a limited liability partnership, each partner's risk of losing personal assets is: A) limited to the amount that partner invested in the company. B) limited to losses that result from their own acts and omissions and the acts and omissions of those who work under their supervision. C) determined entirely by the maximum loss provision established by the articles of co-partnership. D) nonexistent. 5. The importance of entrepreneurs to our economy is found in their: A) impact on the political process. B) ability to create jobs for others. Page 1 C) contributions of money to organizations that help people in need. D) ability to influence national macroeconomics polices. 6. The largest source of capital for entrepreneurs is usually from A) venture capitalists. B) loansharks. C) provincial and municipal governments. D) personal savings. 7. After developing a code of ethics, it should be communicated to: A) everyone with whom the business has dealings. B) the police in jurisdictions where the business has operations. C) all levels of management. D) stockholders. 8. Lamont wants to improve his chances to be a successful entrepreneur and so he has written a business plan. One advantage of developing this plan is that it: A) meets federal reporting requirements of Revenue Canada. B) insures financing will be available from the venture capitalists. C) forces Lamont to think carefully about all aspects of his planned business. D) will enable him to switch from a sole proprietorship to a corporation without any further paperwork. 9. Three questions often help individuals and organizations in deciding if their decisions are ethical. All of the following are ethics check questions except: A) Is it legal? B) Is it balanced? C) Has it been done before? D) How will it make me feel about myself? 10. A major reason given for conglomerate mergers is that they: A) diversify business operations and investments. B) allow the firm to have a more dominant position in its market. C) enable the firm to enjoy a higher degree of specialization. Page 2 D) give the firm a more secure access to needed materials and components and better control over quality. 11. As a new employee, Vanessa has heard her boss say, "Do whatever it takes to meet your sales quota. However, anyone caught violating a law will be immediately fired." Vanessa recognizes this as a(n) ________-based code of ethics. A) Internet B) personal responsibility C) compliance D) integrity 12. An ethic of care is based on: A) justice B) fairness C) equality D) responsibility 13. Sally Wright has just taken early retirement, including a substantial retirement allowance. She wishes to continue working and wants to invest her retirement allowance in her own small business. She worked for the same employer in the same job all of her working career and therefore has no experience with running her own business. In starting her own business she would be well-advised to: A) start the business from scratch. B) buy an existing business. C) buy a franchise. D) work for someone in an existing small business for the next 10 years. 14. A(n) ________-based ethics code emphasizes the prevention of unlawful behaviour by increasing control and penalizing wrongdoers. A) legal B) corporate responsibility C) compliance D) integrity Page 3 15. Finley is a limited partner in Gettout & Associates. Heywood U. Gettout, one of the senior general partners in the company, must temporarily leave the company to attend to some personal matters. Heywood has asked Finley to temporarily perform his managerial duties while he is gone. As a limited partner, Finley: A) can fill in as a manager whenever necessary, as long as it is for only a limited time. B) can make managerial decisions as long as they do not involve the payment of money. C) cannot participate in the management of the partnership. D) can manage the firm as long as he gets approval from the company's other general partners. 16. A ____________ is the share of profits or percentage of sales a franchisee pays to a franchisor. A) royalty B) dividend C) premium D) co-pay 17. The majority of CEOs blame unethical employee conduct on: A) the breakdown of traditional religious institutions. B) a failure of leadership to establish ethical standards. C) the increase in lawsuits used to avoid personal responsibility. D) the nation's business schools that tolerate unethical behaviour in students. 18. Todd and Jorge have considered starting their own business but are concerned about the possibility of losing their personal assets if the business fails. One way for both Todd and Jorge to avoid this risk would be to organize their firm as a: A) general partnership. B) limited partnership. C) corporation. D) sole proprietorship. 19. Harold wants to start his own business. Harold would be most likely to favour organizing his new company as a sole proprietorship if he: A) expects rapid growth and wants to be able to raise a large sum of money. B) wants to make it easy to attract qualified employees. C) has a strong desire to be his own boss. Page 4 D) wants to minimize the financial risk he must accept as the owner of a business. 20. Art comes up with new ideas or innovations for his company. He is an example of a(n): A) intrapreneur B) entrepreneurial team C) micropreneur D) all of the above 21. When seeking financial backing from a venture capitalist, a small business owner should realize that the venture capitalist will: A) charge an interest rate that is much higher than any other lender. B) not be interested in the management of the business. C) expect an ownership stake in the company in exchange for the financial backing. D) demand that the money be repaid within 90 days or less. 22. When two companies in the same industry combine, the result is called a: A) vertical merger B) joint venture. C) monopoly. D) horizontal merger. 23. Corporate social responsibility describes the firm's: A) responsibility to their stockholders. B) ability to plan for the unexpected. C) commitment to a management training program. D) concern for the welfare of society. 24. In a sole proprietorship, the profits earned by the business are: A) taxed as income for the business, but are exempt from the personal income tax paid by the owner. B) taxed at the lowest corporate rate. C) the property of the owner, except for taxes owed to the government. D) tax-free if the appropriate exemption is filed with the local government. Page 5 25. The form of business ownership that is best suited to raising large amounts of money for expansion is the: A) sole proprietorship. B) partnership. C) corporation. D) co-operative. 26. A group of experienced people from different areas of a business joined together to develop, produce, and market a new product is known as a(n): A) entrepreneurial team. B) joint venture. C) self-directed functional team. D) managerial task force. 27. An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing is called a(n): A) golden parachute. B) arbitrage agreement. C) factor transaction. D) leveraged buyout. 28. Motivated by his desire to operate his own business, Caleb is considering the purchase an existing business. As he carefully weights this option, he is likely to find that: A) very few owners of small businesses have any interest in selling. B) his potential for success would greatly improve if he started his own new firm. C) the value of an existing business is determined by what the business owns, what it earns, and what makes it unique. D) any entrepreneur willing to sell their business is experiencing serious financial problems. 29. An ethical dilemma refers to a situation where you must: A) treat someone unfairly. B) choose between equally unsatisfactory alternatives. C) choose between a correct and an incorrect option. D) balance the concerns of profit and legality. Page 6 30. A phone call to a government official by an employee of the Enron Corporation disclosed the deception and dishonesty of the firm's accounting records. This employee played the role of a: A) whistleblower. B) horn blower. C) cheerleader. D) moral policeman. Page 7 Please answer only THREE the following short answer questions in the test booklet provided (point form is acceptable) (15 marks each) 1) Identify and discuss the three questions that an ethics-based manager should ask when facing a potentially unethical 2) action. Although most new firms start out as sole proprietorships, few large firms are organized this way. Why is the sole proprietorship such a popular form of ownership for new firms? What features of the sole proprietorship make it unattractive to growing firms? 3) Franchising has certainly become a key component of the Canadian economy. What do you see as the major advantages and disadvantages of franchising? 4) Since the 1970s, we have seen significant growth in the emergence of female entrepreneurs. Discuss seven factors that have contributed to the growth in the number of female entrepreneurs. Please answer ONE of the following two essay question in the test booklet provided: (25 marks) (Essay format please!) 1) John has been working as head chef for a major restaurant chain for the past 5 years. He has recently inherited $250,000 and is considering starting up a restaurant of his own. He vaguely remembers from his Introduction to Business 1 course that there are 3 ways of starting a small business, but has turned to you for some advice. What 3 ways of starting a small business should John consider? What are some of the advantages and disadvantages of each? 2) Mary has developed an exciting new business concept and cant wait to get started operating her own business! As part of the financing for her new business, Mary has convinced several investors to invest $10,000 each into her business venture as owners. She is considering alternate forms of business ownership for her new business and has turned to you for some advise. Discuss the options that Mary should consider. This is the end of the Test! Page 8 Answer Key Answer Key 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. C B A B B D A C C A C D C C C A B C C A C D D C C A D C B A Short Answer Solutions: Question ONE: (15 marks) A) Is it legal? Am I violating any company policy? Regardless of the situation, this is the most basic step in an ethics-based management system. B) Is it balanced? Am I acting fairly? Would I want to be treated this way? If a situation arises where one party wins everything at the expense of another party, the future may bring retaliation from the loser. While every situation cannot be completely balanced, it is important for the health of business relationships that we avoid major imbalances over time. An ethics-based manager maintains a win-win attitude. C) How will it make me feel about myself? Will I feel proud when my family learns of my decision? Decisions that go against our sense of right and wrong make us feel bad and cause us to lose our self-esteem. Note to marker: Answer must include a brief discussion of each of the 3 questions, if students only list the 3 questions, without any discussion or elaboration, only give 5 Page 9 marks) Page 10 Question TWO: Sole proprietorships have many features which are attractive to people starting a new business, including the following: They are relatively easy and inexpensive to set up.(1) The owner can be his or her own boss, which appeals to many entrepreneurs who want to do things their own way, without the need to consult others.(1) The owner can keep all of the profits (except the share the government takes in taxes). (1) Proprietors can take a great deal of pride in owning their own independent business and running it as they see fit.(1) The owner's work establishes a legacy on which future generations may build.(1) There are no special taxes on proprietorships.(1) However, proprietorships also have some disadvantages that limit their growth potential: With only one owner, sole proprietorships have limited access to the financial capital needed by rapidly growing firms.(1) As the firm grows and becomes more complex, the owner may become overwhelmed with the tasks of running the firm and need to attract qualified help.(1) Unfortunately, qualified professional workers are often reluctant to work in a sole proprietorship.(1) One of the biggest drawbacks for sole proprietorships is the unlimited liability of the owner. (2) Limited Life (1) Hard to attract talented employees (1) Many growing companies decide to change their form of ownership to a corporation to overcome these drawbacks. (2) Question THREE: Page 11 Students should be able to identify and discuss the following advantages: Management assistance: most franchisors offer franchisees advice and managerial assistance.(2) Lower failure rates than non-franchised businesses (1) Use of a nationally recognized name/proven product: Many franchises have established a national reputation.(2) Financial advice and assistance: Franchisors often provide franchisees with expert financial advice and may even be willing to provide financing to franchisees.(2) Again, students can select from several disadvantages cited in the text. Among them are: Large start-up costs to obtain the franchise.(2) Sharing profits with the franchisor, or paying commission based on sales to the franchisor.(2) Management regulations: franchisees have to follow rules and regulations set by the franchisor that can limit their freedom. Thus, even though the franchisees own their business, they do not have as much control as owners of independent small businesses do.(2) Negative coattail effects: the owners of a successful outlet can be adversely affected by the problems and poor performance of less successful franchisees in the same franchise.(2) Page 12 Question Four Students should identify these 7 factors: 1. Financial need with real incomes declining and unemployment fluctuate many women stepped into the work force and start their own small business (2) 2. Lack of promotion opportunities most positions in higher management are still dominated by men (2) 3. Women returning to the workforce women who return to the job market may find that their skills are outdated (2) 4. Family and personal responsibility high rate of divorced women and single mothers in recent years my turn to self employment (2) 5. Public awareness of women in business (2) 6. Part-time occupation- allows for balance while raising children / family (2) 7. Higher rate of success for women better success rate than men (less pressured than men to achieve quick results, more cautious and make fewer mistakes, and accept advise more readily than men).(3) Essay Question One: (Note to marker, the following is the suggested solutions, however other advantages and disadvantages might be acceptable if they make sense. Look for 25 valid points) Answers should include the following and include a discussion of some of the benefits and disadvantages of each: 1) Start from Scratch (1) Advantages: -total control and freedom (1) -self esteem from starting a business from nothing (1) -No past history to taint customer perceptions (1) Disadvantages:-difficult to finance (1) -no track record (1) -start with no customers as unknown in market(1) -highest risk (1) 2) Buy an Existing Business (1) Advantages: -established business with employees, proven products, customers & employees (1) -easier to project future (1) -easier to finance, and vendor may provide financing (1) -lower risk than starting from scratch (1) D isadvantages:-hard to value the business and determine purchase price (1) -inherit the problems of the business (obsolete equip, bad location, liabilities, etc) (1) -previous owner might compete against you (1) -hard to maintain customer loyalty (1) 3) Buy a new or existing Franchise(1) Advantages: -proven business concept (1) -may be lots of support from franchisor, training, set up assistance, etc (1) -easier to finance (1) -franchisees have lower failure rates than non-franchised businesses (1) Disadvantages:-loss of flexibility and control (1) -heavy costs in terms of franchise fee and royalty payments (1) -coattail effects (1) Page 13 Essay Question Two: (Note to marker, the following is the suggested solutions. The solutions must discuss Partnerships and Corporations, and must include a discussion on the differences between a general and limited partnership, however other advantages and disadvantages might be acceptable if t hey make sense. Look for 25 valid points) A) Partnership (1) Advantages: -No special taxes (1) -shared risk (1) -shared management/knowledge(1) Disadvantages:-Unlimited liability (1) -Shared profits (1) -Partner disagreements (1) -difficult to terminate(1) Answer should discuss the differences between a general partnership and a limited partnership, since both options are viable alternatives. In the general partnership, all partners have unlimited l iability and are able to participate in the management of the business. In a Limited partnership, t he limited partners liability is limited to the amount of their investment, and cannot participate i n the management of the business. All Limited partnerships must have 1 general partner (Mary) who will manage the business, but have unlimited liability (5 marks) B) Private Corporation (2 marks, only give one mark if just indicate corporation, as it is impt to differentiate between a public corporation) Advantages -limited liability (2) -perpetual life (1) -ease of ownership change, shareholders may sell shares (1) -easier to raise more money for future investment by selling more shares (1) Note: Students might also list some of the other advantages discussed in the text such as separation of ownership and management, ease of attracting talented employees, etc, however these are not really appropriate given the nature of this small business, and apply to corporations in general. D isadvantages -cost to set up (1) -double taxation (1) -more reporting/regulations/bureaucracy (1) -difficult to terminate (1) -more complex taxation, and must file separate tax return for corporation (1) Page 14 ... View Full Document

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