Q1. A grant from the U.S. federal government that gives a person an exclusive right to make or sell a product is called a:
Q2. The first step a person considering buying a business should take is to:
a. Develop a list of criteria that a potential business acquisition must meet
b. Take a self-inventory to determine his or her skills, abilities, and interests.
c. Prepare a list of potential acquisition candidates.
d. Contact a business broker.
Q3. 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.
Q4. The aggregation of factors that sets a small business apart from its competitors and gives it a unique position in the market is its:
b. competitive advantage
Q5. A ________ gives one the right to exclude others from making, using, or selling something.
a. trade secret
Q6. 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
Q7. 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.
Q8. 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. 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.
Q9. The very abilities that make an entrepreneur successful often lead to managerial ineffectiveness.
Q10. The failure rate for franchises is __________ the failure rate for independent businesses.
a. lower than
b. higher than
c. the same as
d. cannot be determined
Q11. When evaluating the assets a company owns, a prospective buyer should be most interested in their __________ value.
Q12. The primary motivating force behind entrepreneurs is:
Q13. A valid copyright last for:
a. the life of the creator.
b. 20 years from the date of publication and can be renewed once.
c. 50 years.
d. the life of the creator plus 50 years.
Q14. 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
Q15. An exclusive right that protects the creator of original works is called a:
d. All of the above.
Q16. In which of the following countries is entrepreneurial activity most prevalent?
c. Great Britain
d. United States
Q17. An effective strategy makes the customer its focus.
Q18. __________ 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.
Q19. _________ is the difference between an established, successful business and one that has yet to prove itself.
b. Opportunity cost
Q20. 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
Q21. The period of time allowed for the subconscious to reflect on information that has been gathered is called:
Q22. Although this exit strategy is the safest path for a business owner selling out, it is also the most expensive, given the tax liability it generates for the seller.
a. straight business sale
b. selling a controlling interest
c. selling to company employees through an employee stock ownership plan (ESOP)
d. selling to the seller's children by establishing a family limited partnership
Q23. A strategy that involves dividing a mass market into smaller, more homogeneous units and then attacking only certain of these units is called:
d. None of the above.
Q24. 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
Q25. Which of the following strategies works best when a company is appealing to price-sensitive customers and competes with firms that sell the same commodity products?
Q26. The primary consideration in negotiating a purchase agreement is to ensure the deal:
a. does not jeopardize the future financial health or cash flows of the business.
b. provides the buyer a good value and the seller fair compensation.
c. guarantees a minimum level of profitability for the business to remain viable.
d. provides a money back guarantee and a no-fault cancellation clause.
Q27. 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.
Q28. _________ are negative internal factors that act as roadblocks in a company's quest to meet its mission, goals, and objectives.
Q29. Which of the following statements concerning entrepreneurship in the United States is true?
a. A new business is born every 11 seconds in the United States
b. One out of every 12 Americans is actively involved in trying to start a new business.
c. A study found that 78 percent of influential Americans believe that entrepreneurship will be the defining trend of this century.
d. All of the above
Q30. Every partnership must have at least one __________ partner.
Q31. A process in which a small group of people interact with very little structure with the goal of producing a large number of ideas is called mind-mapping.
Q32. 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.
Q33. __________ is the practice of gathering, organizing, and disseminating the collective wisdom and experience of a company's employees for the purpose of strengthening its competitive position.
a. strategic management
c. knowledge management
d. paradigm busting
Q34. To validate an idea is accurate and useful, entrepreneurs may:
a. conduct experiments
b. run simulations
c. test market
d. build prototypes
e. All of the above.
Q35. __________ is the ability to develop new ideas and to discover new ways of looking at problems and opportunities.
Q36. A study by the Federal Trade Commission found that __________ percent of new franchisees sign their franchise contracts without reading them.
Q37. 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
Q38. __________ franchising involves combining two or more complementary franchises, such as a Texaco gas station, a Burger King restaurant, and a TCBY yogurt franchise, in the same location.
Q39. The broad, long-range attributes that a business seeks to accomplish are called:
d. key success factors
Q40. The key legal issue in the sale of an asset typically is the proper, lawful transfer of _______ from the seller to the buyer.
a. good title
Q41. ________ is the ability to see the similarities and connections among various data and events.
a. Vertical thinking
b. Lateral thinking
c. Convergent thinking
d. Divergent thinking
Q42. Nearly two years ago, Terry launched a business that has just failed. As a typical entrepreneur, what will Terry most likely do?
a. go to work for a major corporation.
b. try to learn from his failed venture so that he will not make the same mistake in the future.
c. give up on becoming a successful entrepreneur.
d. spend the rest of his life wondering what happened to his business.
Q43. Experts estimate that __________ percent of franchisers are dishonest.
a. 5 to 10
b. 15 to 20
c. 25 to 30
d. 45 to 50
Q44. Innovation is the ability to develop new ideas and to discover new ways of looking at problems and opportunities.
Q45. The most common form of business ownership in the United States is the:
a. sole proprietorship
b. the partnership
c. the corporation
d. the S-corporation
Q46. __________ franchising is a system in which a franchiser provides franchisees with a complete business system, including a license for the tradename, the products or services to be sold, the physical plant, the methods of operation, a marketing plan, and other necessary business services.
b. product distribution
c. pure (or business format)
Q47. Which of the following forms of ownership is taxed differently from the others
a. the sole proprietorship
b. the partnership
c. the corporation
d. the S-corporation
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.
Q49. 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
Q50. If a business buyer purchases assets that, unknown to him, have liens against them, who has financial responsibility for them?
a. the buyer
b. the seller
c. the business broker
d. none of the above
1B, 2 A 3 D 4 B 5 C 6 C 7A 8D 9B 10D 11C 12C 13B 14C 15D... View the full answer