ENTREPRENEURSHIP (MGT190 - HK2) EXAM 1 (2015)

Question 1

1.25 points

The service sector produces ____ percent of the jobs and ____ percent of the gross domestic product in the United States.

[removed]		a. 75; 27
[removed]		b. 83; 52
[removed]		c. 92; 85
[removed]		d. 95; 92

Question 2

1.25 points

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The key legal issue in the sale of an asset typically is the proper, lawful transfer of _______ from the seller to the buyer.

[removed]		a. good title
[removed]		b. liabilities
[removed]		c. liens
[removed]		d. contracts

Question 3

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The 3Rs of rapid prototyping are:

[removed]		a. rough, rapid, and right
[removed]		b. rapid, repeatable, and ready
[removed]		c. realistic, rapid, and reliable
[removed]		d. rough, rapid, and refined

Question 4

1.25 points

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The unique components of a product's identity that a company uses to create a product's image and to promote it is called its:

[removed]		a. trade costume
[removed]		b. trade dress
[removed]		c. trade wear
[removed]		d. trademark

Question 5

1.25 points

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Which of the following statements concerning family businesses is false?

[removed]		a. Family businesses account for just 10 percent of all of the companies in the United States.
[removed]		b. Family businesses employ 50 million people and account for over 55 percent of the nation's GDP.
[removed]		c. A significant threat to family businesses comes from within: only about 30 percent of them survive to the second generation.
[removed]		d. All of the above.

Question 6

1.25 points

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Start-up companies can expect to outgrow their capital base each time sales increase by _____ percent.

[removed]		a. 10-20
[removed]		b. 20-30
[removed]		c. 30-40
[removed]		d. 40-50

Question 7

1.25 points

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About 85 percent of the companies that are available for sale are:

[removed]		a. listed with business brokers.
[removed]		b. advertised in the "Businesses for Sale" section of major newspapers.
[removed]		c. found in the Internet.
[removed]		d. tucked away in the "hidden market" of companies that are for sale but are not advertised as such.

Question 8

1.25 points

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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?

[removed]		a. 1 to 2
[removed]		b. 3 to 4
[removed]		c. 6 to 7
[removed]		d. 10 to 12

Question 9

1.25 points

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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?

[removed]		a. only 1
[removed]		b. no more than 2
[removed]		c. no more than 3
[removed]		d. all 4, if the owners choose

Question 10

1.25 points

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Perhaps the best source of financing the purchase of a business is:

[removed]		a. a commercial bank.
[removed]		b. a venture capital company.
[removed]		c. the seller.
[removed]		d. an initial public offering (IPO).

Question 11

1.25 points

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A clearly defined vision:

[removed]		a. provides meaningful direction for a company.
[removed]		b. influences the decisions, both large and small, the people in an organization make.
[removed]		c. motivates employees to higher levels of performance.
[removed]		d. All of the above

Question 12

1.25 points

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The price paid for a business typically is ________ the terms on which the purchase was made.

[removed]		a. more important than
[removed]		b. less important than
[removed]		c. about as important as
[removed]		d. None of the above.

Question 13

1.25 points

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________ is the ability to see the similarities and connections among various data and events.

[removed]		a. Vertical thinking
[removed]		b. Lateral thinking
[removed]		c. Convergent thinking
[removed]		d. Divergent thinking

Question 14

1.25 points

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To form a limited liability company (LLC), an entrepreneur must file articles of organization and by-laws with the state corporation commission or secretary of state.

[removed]	True
[removed]	False

Question 15

1.25 points

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Each year, more than 500,000 businesses are sold, and __________ percent of those are valued at less than $5 million:

[removed]		a. 20
[removed]		b. 50
[removed]		c. 75
[removed]		d. 90

Question 16

1.25 points

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The first step a person considering buying a business should take is to:

[removed]		a. Develop a list of criteria that a potential business acquisition must meet
[removed]		b. Take a self-inventory to determine his or her skills, abilities, and interests.
[removed]		c. Prepare a list of potential acquisition candidates.
[removed]		d. Contact a business broker.

Question 17

1.25 points

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A valid copyright last for:

[removed]		a. the life of the creator.
[removed]		b. 20 years from the date of publication and can be renewed once.
[removed]		c. 50 years.
[removed]		d. the life of the creator plus 50 years.

Question 18

1.25 points

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Bennett is considering buying an existing business and has collected the following information: Projected net earnings for next year = $117,000; owner's salary = $34,000; rate of return on a similar risk investment = 27%. Using the capitalized earnings approach, how much is the business worth?

[removed]		a. $151,000
[removed]		b. $433,333
[removed]		c. $307,407
[removed]		d. $40,770

Question 19

1.25 points

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Women entrepreneurs:

[removed]		a. are opening businesses in record numbers although it is at a pace much slower than that of men.
[removed]		b. launch businesses that are smaller than those of men.
[removed]		c. launch businesses that have a higher survival rate than that of U.S. businesses overall
[removed]		d. All of the above.
[removed]		e. B and C only.

Question 20

1.25 points

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A strategy that involves dividing a mass market into smaller, more homogeneous units and then attacking only certain of these units is called:

[removed]		a. segmenting
[removed]		b. positioning
[removed]		c. contesting
[removed]		d. None of the above.

Question 21

1.25 points

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When evaluating the assets a company owns, a prospective buyer should be most interested in their __________ value.

[removed]		a. book
[removed]		b. par
[removed]		c. market
[removed]		d. stated

Question 22

1.25 points

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Increasingly, entrepreneurs are starting businesses because they see an opportunity to make a difference in a cause that is important to them.

[removed]	True
[removed]	False

Question 23

1.25 points

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__________ 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.

[removed]		a. strategic management
[removed]		b. differentiation
[removed]		c. knowledge management
[removed]		d. paradigm busting

Question 24

1.25 points

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Innovation is the ability to develop new ideas and to discover new ways of looking at problems and opportunities.

[removed]	True
[removed]	False

Question 25

1.25 points

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The most valuable financial resource any small business can have is:

[removed]		a. cash
[removed]		b. accounts receivable
[removed]		c. bank line of credit
[removed]		d. retained earnings

Question 26

1.25 points

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__________ 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.

[removed]		a. master
[removed]		b. conversion
[removed]		c. multiple-unit
[removed]		d. Piggyback

Question 27

1.25 points

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A corporation doing business in a state other than the one in which it is incorporated is called a __________ corporation

[removed]		a. domestic
[removed]		b. alien
[removed]		c. foreign
[removed]		d. closely-held

Question 28

1.25 points

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Experts estimate that __________ percent of franchisers are dishonest.

[removed]		a. 5 to 10
[removed]		b. 15 to 20
[removed]		c. 25 to 30
[removed]		d. 45 to 50

Question 29

1.25 points

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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.

[removed]		a. straight business sale
[removed]		b. selling a controlling interest
[removed]		c. selling to company employees through an employee stock ownership plan (ESOP)
[removed]		d. selling to the seller's children by establishing a family limited partnership

Question 30

1.25 points

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Women-owned businesses have a lower survival rate than U.S. businesses overall.

[removed]	True
[removed]	False

Question 31

1.25 points

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Locating franchised outlets in high-traffic, non-traditional locations such as airports, hospitals, zoos, sports arenas, and others is based on the principle of:

[removed]		a. conversion franchising
[removed]		b. intercept marketing
[removed]		c. master franchising
[removed]		d. piggyback franchising

Question 32

1.25 points

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The disclosure document that is designed to help prospective franchisees evaluate franchise opportunities and to protect themselves from unscrupulous franchisers is the:

[removed]		a. Trade Regulation Rule
[removed]		b. Federal Trade Commission Report
[removed]		c. Franchisee Protection Prospectus
[removed]		d. Uniform Franchise Offering Circular

Question 33

1.25 points

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The primary motivating force behind entrepreneurs is:

[removed]		a. money
[removed]		b. fame.
[removed]		c. achievement.
[removed]		d. recognition.

Question 34

1.25 points

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Which of the following statements concerning franchising is true?

[removed]		a. Franchise sales total more than $1 trillion.
[removed]		b. Franchises account for 44 percent of all retail sales.
[removed]		c. A new franchise opens somewhere in the world every six-and-a-half minutes
[removed]		d. All of the above.

Question 35

1.25 points

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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.

[removed]	True
[removed]	False

Question 36

1.25 points

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In which of the following countries is entrepreneurial activity most prevalent?

[removed]		a. Japan
[removed]		b. Germany
[removed]		c. Great Britain
[removed]		d. United States

Question 37

1.25 points

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The broad, long-range attributes that a business seeks to accomplish are called:

[removed]		a. goals
[removed]		b. objectives
[removed]		c. strategies
[removed]		d. key success factors

Question 38

1.25 points

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To validate an idea is accurate and useful, entrepreneurs may:

[removed]		a. conduct experiments
[removed]		b. run simulations
[removed]		c. test market
[removed]		d. build prototypes
[removed]		e. All of the above.

Question 39

1.25 points

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Only businesses who have registered their product or service with the Library of Congress are allowed to use ®.

[removed]	True
[removed]	False

Question 40

1.25 points

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Which of the following is not a factor behind the current wave of entrepreneurial activity?

[removed]		a. Changing competitive conditions that favor fleet-footed, agile, rapidly-responding, smaller companies.
[removed]		b. Relaxed bankruptcy laws that have reduced the penalty for failing in business.
[removed]		c. The shift in the nation's economy from an industrial base to a knowledge base.
[removed]		d. The downsizing of corporate America that has all but destroyed the long-standing notion of job security in large corporations.

Question 41

1.25 points

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A company whose owner wants to sell to her employees by establishing an employee stock ownership plan (ESOP) should:

[removed]		a. be profitable
[removed]		b. have at least 15 to 20 employees
[removed]		c. have an annual payroll of at least $500,000
[removed]		d. all of the above

Question 42

1.25 points

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The Uniform Franchise Offering Circular (UFOC):

[removed]		a. is not required from franchisers with fewer than 10 franchised outlets.
[removed]		b. must be checked, verified, and approved by the Federal Trade Commission before franchisers can use it.
[removed]		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.
[removed]		d. All of the above.

Question 43

1.25 points

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_________ are negative internal factors that act as roadblocks in a company's quest to meet its mission, goals, and objectives.

[removed]		a. Strengths
[removed]		b. Weaknesses
[removed]		c. Opportunities
[removed]		d. Threats

Question 44

1.25 points

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The very abilities that make an entrepreneur successful often lead to managerial ineffectiveness.

[removed]	True
[removed]	False

Question 45

1.25 points

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The primary consideration in negotiating a purchase agreement is to ensure the deal:

[removed]		a. does not jeopardize the future financial health or cash flows of the business.
[removed]		b. provides the buyer a good value and the seller fair compensation.
[removed]		c. guarantees a minimum level of profitability for the business to remain viable.
[removed]		d. provides a money back guarantee and a no-fault cancellation clause.

Question 46

1.25 points

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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?

[removed]		a. $117,000
[removed]		b. $433,333
[removed]		c. $93,822
[removed]		d. $347, 490

Question 47

1.25 points

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Which of the following statements about the human brain is true?

[removed]		a. The brain is divided into two asymmetric hemispheres.
[removed]		b. The right side of the brain processes information intuitively, relying heavily on images, and uses kaleidoscopic, lateral thinking.
[removed]		c. The left side of the brain processes information in a step-by-step, logical fashion and uses linear, vertical thinking.
[removed]		d. All of the above.

Question 48

1.25 points

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Which of the following forms of ownership is taxed differently from the others

[removed]		a. the sole proprietorship
[removed]		b. the partnership
[removed]		c. the corporation
[removed]		d. the S-corporation

Question 49

1.25 points

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The basis for the global economy today is __________ capital.

[removed]		a. financial
[removed]		b. manufacturing
[removed]		c. intellectual
[removed]		d. economic

Question 50

1.25 points

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Small business strategic management should include each of the following except:

[removed]		a. setting objectives
[removed]		b. using a short planning horizon
[removed]		c. thinking strategically
[removed]		d. encouraging employee participation

Question 51

1.25 points

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A grant from the U.S. federal government that gives a person an exclusive right to make or sell a product is called a:

[removed]		a. monopoly
[removed]		b. patent
[removed]		c. copyright
[removed]		d. trademark

Question 52

1.25 points

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Studies show that more than __________ percent of all business acquisitions fail to meet the buyer's expectations.

[removed]		a. 10
[removed]		b. 30
[removed]		c. 50
[removed]		d. 70

Question 53

1.25 points

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Which of the following items should be included on a business buyer?s checklist

[removed]		a. Inventory
[removed]		b. Tax returns
[removed]		c. Lawsuits
[removed]		d. All of the above

Question 54

1.25 points

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A primary difference between an S-corporation and a C-corporation is that:

[removed]		a. the C-corporation offers the advantage of limited liability to its stockholders, and an S-corporation does not.
[removed]		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.
[removed]		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.
[removed]		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.

Question 55

1.25 points

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The aggregation of factors that sets a small business apart from its competitors and gives it a unique position in the market is its:

[removed]		a. mission
[removed]		b. competitive advantage
[removed]		c. SWOT
[removed]		d. Strategy

Question 56

1.25 points

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A key success factor defines a relationship between a controllable variable and a critical factor affecting the firm's ability to compete.

[removed]	True
[removed]	False

Question 57

1.25 points

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A rule of thumb for valuation of a business is to offer the owner 2.7 times the company's earnings.

[removed]	True
[removed]	False

Question 58

1.25 points

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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.

[removed]		a. low-cost
[removed]		b. differentiation
[removed]		c. focus
[removed]		d. maintenance

Question 59

1.25 points

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__________ 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.

[removed]		a. tradename
[removed]		b. product distribution
[removed]		c. pure (or business format)
[removed]		d. process

Question 60

1.25 points

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The balanced scorecard:

[removed]		a. gives managers a comprehensive view of an organization's performance from both a financial and an operational perspective.
[removed]		b. operates on the premise that relying on any single measure of a company's performance is dangerous.
[removed]		c. measures a company's performance by viewing it from a financial perspective, a customer perspective, an internal business perspective, and an innovation and learning perspective.
[removed]		d. all of the above.

Question 61

1.25 points

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Nearly two years ago, Terry launched a business that has just failed. As a typical entrepreneur, what will Terry most likely do?

[removed]		a. go to work for a major corporation.
[removed]		b. try to learn from his failed venture so that he will not make the same mistake in the future.
[removed]		c. give up on becoming a successful entrepreneur.
[removed]		d. spend the rest of his life wondering what happened to his business.

Question 62

1.25 points

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The balance sheet technique of business valuation is ___________.

[removed]		a. commonly used and recommended.
[removed]		b. commonly used but not recommended.
[removed]		c. not commonly used but recommended.
[removed]		d. neither commonly used nor recommended.

Question 63

1.25 points

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The period of time allowed for the subconscious to reflect on information that has been gathered is called:

[removed]		a. marination
[removed]		b. reflection
[removed]		c. illumination
[removed]		d. incubation

Question 64

1.25 points

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Which of the following requirements must an S-corporation meet?

[removed]		a. It must be a domestic corporation.
[removed]		b. It can issue only one class of common stock, but it can issue voting and nonvoting shares of common stock.
[removed]		c. It cannot have more than 75 shareholders.
[removed]		d. All of the above.

Question 65

1.25 points

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A study by the Federal Trade Commission found that __________ percent of new franchisees sign their franchise contracts without reading them.

[removed]		a. 10
[removed]		b. 20
[removed]		c. 40
[removed]		d. 60

Question 66

1.25 points

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Which of the following activities comes first in the strategic management process?

[removed]		a. Formulate a meaningful mission statement
[removed]		b. Identify the company's strengths, weaknesses, opportunities, and threats.
[removed]		c. Identify the key factors for success in the business
[removed]		d. Develop a clear vision for the business.

Question 67

1.25 points

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Which of the following should alert a potential franchisee that a franchiser is dishonest?

[removed]		a. Claims that the franchise contract is a standard one and that "you don't need to read it."
[removed]		b. No written documentation to support claims and promises the franchiser makes about the franchise, its operation, and its performance.
[removed]		c. Reluctance to provide a list of existing franchisees to talk to.
[removed]		d. All of the above.

Question 68

1.25 points

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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?

[removed]		a. the basic, risk-free rate of return
[removed]		b. an inflation premium
[removed]		c. the risk allowance for investing in that particular business
[removed]		d. all of the above

Question 69

1.25 points

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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?

[removed]		a. low-cost
[removed]		b. differentiation
[removed]		c. focus
[removed]		d. maintenance

Question 70

1.25 points

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The _____ specialized a business is, the _____ the likelihood that a bargain may be found.

[removed]		a. more; greater
[removed]		b. more; lesser
[removed]		c. less; greater
[removed]		d. less; lesser

Question 71

1.25 points

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__________ are entrepreneurial couples who work together as co-owners of their business.

[removed]		a. Dropouts
[removed]		b. Copreneurs
[removed]		c. Castoffs
[removed]		d. Angels

Question 72

1.25 points

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The biggest disadvantage of a sole proprietorship is

[removed]		a. its high cost of formation.
[removed]		b. the complexity involved in discontinuing it.
[removed]		c. the unlimited personal liability the owner has for the business's debts.
[removed]		d. the owner's limited access to capital.

Question 73

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A family limited partnership can be used to transfer the vast majority (99%) of the shares in a business to family members (e.g., children) while enabling the entrepreneur to maintain absolute control over the business because of:

[removed]		a. the IRS' rules for family limited partnerships.
[removed]		b. state laws for the establishment of family limited partnerships.
[removed]		c. the nature of the business.
[removed]		d. the terms of the limited partnership agreement.

Question 74

1.25 points

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Studies of the small business failure rate suggest that after six years, about __________ percent of new businesses will have failed.

[removed]		a. 33
[removed]		b. 49
[removed]		c. 63
[removed]		d. 82

Question 75

1.25 points

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Which form of ownership has the greatest ability to attract capital?

[removed]		a. sole proprietorship
[removed]		b. partnership
[removed]		c. corporation
[removed]		d. S-corporation

Question 76

1.25 points

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The most common form of business ownership in the United States is the:

[removed]		a. sole proprietorship
[removed]		b. the partnership
[removed]		c. the corporation
[removed]		d. the S-corporation

Question 77

1.25 points

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A ________ gives one the right to exclude others from making, using, or selling something.

[removed]		a. trade secret
[removed]		b. trademark
[removed]		c. copyright
[removed]		d. patent

Question 78

1.25 points

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Which of the following is not a barrier to creativity?

[removed]		a. Blindly following the rules
[removed]		b. Searching for more than one "right" answer
[removed]		c. Viewing play as frivolous
[removed]		d. Becoming overly specialized

Question 79

1.25 points

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Bizcomp found the average sale price for small businesses across the United States was _____ times earnings.

[removed]		a. 15
[removed]		b. 25
[removed]		c. 0.05 to 0.10
[removed]		d. 2.7

Question 80

1.25 points

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Today, home-based businesses:

[removed]		a. are confined primarily to the traditional areas of arts and crafts.
[removed]		b. are booming because of their low start-up costs, flexibility, and ability to take advantage of modern technology.
[removed]		c. are so small that they produce negligible incomes for their owners.
[removed]		d. all of the above.

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