Question 1
Cost of goods sold is located on which financial statement?
Statement of
cash flows
Balance sheet
Income statement
All of the
above
Question 2
Which of the following was not identified as one of the four
main financial objectives of a firm?
timeliness
efficiency
stability
profitability
liquidity
Question 3
Which of the following is an
example of a long-term liability or debt?
owner’s
equity
current
portion of real estate mortgage
real estate mortgage
accrued
expenses
accounts
payable
Question 4
Which of the financial statements used by businesses to keep
track of their financial affairs is the most similar to an ordinary person’s
end-of-the month bank statement?
statement of
cash flows
balance sheet
statement of
ratio analysis
income statement
statement of
owners’ equity
Question 5
A firm’s working capital is its:
total assets
minus its total liabilities
cash and cash
equivalents minus its current liabilities
accounts
receivable minus its total accounts payable
inventory and
accounts receivable minus its current liabilities
current assets minus its current liabilities
Question 7
________ reflect past performance and are usually prepared on a
quarterly and annual basis.
Pro forma
financial statements
Ad-hoc
financial statements
Concurrent
financial statements
Historical financial statements
Chronological
financial statements
Question 8
________ are an estimate of a firm’s future income and expenses,
based on its past performance, its current circumstances, and its future plans.
Forecasts
Calculation
statements
Prediction
statements
Financial
statements
Statements of
cash flow
Question 9
The strength and vigor of a firm’s overall financial posture is
referred to as:
profitability
liquidity
efficiency
effectiveness
Stability
Question 10
Jamie Diehl has spent the
past several days pouring over her historical financial statements and her
projections for future sales periods based on forecasts. Jamie’s objective is
to develop a set of financial statements that she can show to an investor,
which will reflect the projected financial status of her firm for the next
two-three years. Jamie is working on creating a set of ________ financial
statements.
ad-hoc
investor
pro forma
simulated
concurrent
Question 11
Which of the following statements about pro forma financial
statements is incorrect?
Pro forma
financial statements are projections for future periods based on forecasts.
Pro forma
financial statements are typically completed for two to three years into the
future.
Pro forma financial statements are required by
the SEC.
Pro forma
financial statements are strictly planning tools.
Most companies
consider their pro forma financial statements to be confidential and reveal
them to outsiders only on a “need to know basis.”
Question 12
Analyzing financial ratios could alert a business owner to which
of these problems?
Too much debt
Overextending
credit
Excessive
inventory
All of the above
Question 13
Thomas has a growing and
profitable Surfboard manufacturing business. Last month he received orders from
two large chains. They will purchase a total of 900 boards. These orders are
much larger than usual. But the retailers will require terms of 5% down and net
90 and a refund on all unsold boards is required. Thomas has been paying his
vendors at the time of purchase. He does not have a lot of cash in the bank. If
he takes the orders what is the danger he needs to be concerned about that can
put him out of business?
A
loss of his line of credit
A
cash gap in his cash
flow
A
cash profit loss on the income statement
A
loss of owners equity on the balance sheet
A
cash loss in inventory
Question 14
Cash plus items that are readily convertible to cash, such as
accounts receivable, marketable securities, and inventories are classified as
________ on a firm’s balance sheet.
intermediate
term assets
temporary
assets
other assets
fixed assets
current assets
Question 15
Many entrepreneurs go about the task of raising capital
haphazardly because:
they haven’t
completed a feasibility analysis or business plan
they are
uncomfortable talking about money and they haven’t written a business plan
they are
intimidated by the process and they are unsure of how much money they need
they are
focused on the nuts and bolts of starting their business
they lack experience in this area and because
they don’t know much about their choices
Question 16
Which of the following was not
identified (in class or in the book) as a common (and sound) bootstrapping
strategy?
obtain
payments in advance from customers
hire
interns
buy equipment rather than lease
equipment
coordinate
purchases with other businesses
minimize
personal expenses
Question 17
A(n) ________ is an institution, such as Credit Suisse First
Boston, that acts as an underwriter or agent for a firm engaged in an initial
public offering.
public bank
statutory bank
investment bank
fiduciary bank
venture bank
Question 18
Which of the following
statement is not correct regarding business angels?
Business
angels are valuable because of their willingness to make relatively small
investments.
Business
angels are easier to find today than in the past.
Business
angels are accreditited investors.
The number of angel investors has
decreased dramatically over the past 5 years.
Business
angels invest in more startups on a yearly basis than venture capitalists.
Question 19
In regard to the stages (or rounds) of venture capital funding,
the stage of funding that occurs when an investment is made very early in a
venture’s life to fund the development of a prototype and feasibility analysis
is referred to as:
startup
funding
seed funding
second-stage
funding
mezzanine
financing
first-stage
funding
Question 20
Entrepreneurs have access to two different types of capital,
________ and ________ .
layered;
equity
debt;
leveraged
debt; retained
debt; equity
Question 21
The seed money that gets a company off the ground typically
comes from:
commercial
banks
governmental
agencies
the founders of the firm
angel
investors
venture
capitalists
Question 22
A brief carefully constructed statement that outlines the merits
of a business opportunity is called a(n):
bootstrap
speech
teaser speech
elevator speech
sway speech
subway speech
Question 23
The main difference between the
SBIR and the STTR programs is that the STTR program requires the participation
of:
researchers
working at universities or other research institutions
a
certified public accountant
a
venture capitalist
a
government agency in
conducting the research
an
attorney
Question 24
Entrepreneurs needing between $100,000 and $3 million in the
current financial environment will likely find acquiring financing to be:
attainable.
easy.
challenging.
confusing.
Question 25
Bill and Megan Tempelton are
planning to open a smoothie restaurant near a large soccer complex in Greeley,
Colorado, and need $75,000 to get started. They have $15,000 of their own
money, which leaves $60,000. After getting turned down by a couple of banks,
they decided to turn to their relatives and acquaintances for help.
Fortunately, they were able to raise the money through a gift from Bill’s
grandfather, a loan from Megan’s parents, and a small investment by Bills best
friend in college, Kevin. The money that an entrepreneur raises in this manner
is referred to as:
networking
money
bootstrapping
legacy
money
friends and family
compassion
money
1.5 points
Question 26
The three most common forms of
equity funding are:
initial public offerings, business
angels, venture capitalists
friends
and family, business angels, bootstrapping
friends
and family, venture capital, bank loans
SBIR
grants, SBA guaranteed loans, bank loans
SBIR
grants, venture capital, initial public offerings
Question 27
A(n) ________ is when a company
raises capital by selling shares of its stock to the general public for the
first time.
debt
equity arrangement
venture
capital offering
private
equity offering
partnership
initial public offering
Question 28
The most notable SBA program
available to small
businesses is the:
7(A) Guaranty Program
SBA
1060 Guaranty
SBA
101 Program
Code
604 Guaranty Program
Small
Business 401 Program
Question 29
When done correctly, the due diligence process will:
rarely prove
to be beneficial.
be time
consuming and expensive.
most often
result in the purchase of the business.
reveal both the positive and negative aspects of
an existing business.
Question 30
In a ________ , a franchisee has the right to create a
semi-independent organization in a particular territory to recruit, sell, and
support other franchisees.
master
franchise
cobranding franchising
conversion
franchising
multiple-unit
franchising
Question 31
Which of the following statements is incorrect regarding
business format franchises?
Automotive
services and convenience stores are well-known examples of business format
franchises.
Arby’s sells
business format franchises.
The business format franchisor obtains the
majority of its income from selling its products to its dealers at a markup.
A business
format franchise can be very rigid and demanding.
In a business
format franchise, the franchisor provides a formula for doing business to the
franchisee along with training and other forms of support.
Question 32
Franchisors are required by law to disclose all their costs in a
document called the:
Franchise Disclosure Document
Standardized
Franchise Code
Franchise Code
of Conduct
Fairness in
Franchising Certificate
Consistent
Franchise Offering Code
Question 33
Clark Jensen recently opened a Planet Smoothie franchise. So far,
he is very satisfied with Planet Smoothie because in exchange for an initial
franchise fee and an ongoing royalty payment, Planet Smoothie has provided
Clark a formula for doing business along with training, advertising, and other
forms of assistance. Clark purchased a ________ franchise.
product and
trademark
sales
extension
business
extension
formula driven
business format
Question 34
Franchising is a form of business ownership in which a firm that
already has a successful product or service licenses its trademark and method
of doing business to another business in exchange for:
an initial
franchise fee and an equity position in the new business
an equity
position in the new business
a one-time
franchise fee
an initial franchise fee and an ongoing royalty
an ongoing
royalty
Question 35
Which of the following is not a
potential advantage of franchising for the franchisee?
Centralized
buying power
National
advertising program
Limited product line
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Question 36
When evaluating the financial position of a business he or she
is considering buying, an entrepreneur should examine:
its income tax
returns for the past three to five years.
its income
statements and balance sheets from the past three to five years.
the owner’s
compensation and that of relatives.
All of the above
Question 37
An ideal and often easy
source of financing the purchase of an existing business a buyer should
consider or hope for is:
Bill Gates
the Small Business Administration.
an insurance company.
a venture capitalist.
the seller of the business.
Question 38
Clark Jensen recently opened a
Smoothie King franchise. So far, he is very satisfied with Smoothie King
because in exchange for an initial franchise fee and an ongoing royalty
payment, Smoothie King has provided Clark a formula for doing business along
with training, advertising, and other forms of assistance. Clark purchased a
________ franchise.
Trade
name format
business format
business
extension
sales
extension
product
Question 39
Important factors to investigate regarding the business to be
purchased include:
reviewing
accounts receivable and business records.
assessing the
physical assets of the business.
reviewing
contractual arrangements and assessing intangible assets.
All of the above
Question 40
Advantages to buying an existing business that you do not have
with a startup include:
greater
access to venture capital.
inventory is in place and trade credit is
established.
the
opportunity to participate in a national advertising campaign.
easy
implementation of innovations and changes from past policies.
Question 41
In the majority of cases, a franchisee pays the franchisor a
royalty based on:
a
predetermined fixed weekly or monthly amount
weekly or
monthly net income
the size of
the franchise outlet
the age of the
franchise outlet
weekly or monthly gross income
Question 42
Brenda Berry is thinking about
starting a computer company. After doing some research, she has decided that
the computer industry can be divided into the following product categories:
hand-held computers, laptops, PCs, minicomputers, and mainframes. She is now
trying to decide which product category she is the most interested in competing
in. The process that Brenda is going through is called:
market
separating
market
splitting
market
targeting
market segmentation
market
dividing
Question 43
The unique selling proposition (USP) focuses on:
a feature that is unlike others found in
competing products that answers the question: What is different?
a premier
priced product that answers the question: What product offers the highest
quality?
a unique
customer benefit that answers the question: What’s it in for me?
emulating the
most successful products in the industry.
Question 44
Which of the following statements concerning marketing research
is false?
Small
businesses cannot afford to miss their target markets and market research can
help them focus their efforts.
Small companies are at a distinct disadvantage
compared to larger ones when conducting market research since it is so
expensive.
Market
research is the vehicle for gathering the information that serves as the
foundation for the company’s marketing plan, helps avoid costly marketing
mistakes, and can uncover unmet customer needs the business can serve.
Market
research involves systematically collecting, analyzing, and interpreting data
pertaining to the small company’s market, customers, and competitors.
Question 45
Entrepreneurs should make sure they do not fall victim to any of
the e-commerce myths. Which of the following is not an
e-commerce myth?
If I launch a
site, customers will flock to it.
Setting up a
business on the Web is easy and inexpensive.
Making money
on the Web is easy.
Privacy and site security is an important issue
on the Web.
Question 46
Which of the following is not one of the
objectives a guerrilla marketing plan should accomplish?
Determine how
the company will be able to serve all customers.
Determine customer needs and wants through
market research.
Create a
marketing mix that meets customer needs and wants.
Analyze the
firm’s competitive advantages and build a marketing strategy around them.
Question 47
________ is the process of communicating a company’s unique
selling proposition to its target customers in a consistent and integrated
manner.
Selling
Marketing
Branding
Entertailing
Question 48
Which of the following guerrilla marketing tactic(s) allow a
small company to utilize relationship marketing successfully?
Launch a
loyalty or frequent buyer program .
Organize and
sponsor a service- or community-oriented project.
Keep in close contact with customers with
“thank yous” and other personal communication techniques.
All of the
above
Question 49
Small businesses can compete
with larger rivals with bigger budgets by employing unconventional, low-cost
creative techniques known as:
astonishing
customer service.
psychographics.
guerrilla marketing strategies.
market
research.
Question 50
A firm’s marketing mix consists of the following four elements:
passion,
pleasure, product, and price
product, price, promotion, and place
place,
promotion, passion, and product
enthusiasm,
passion, product, and price
passion,
pride, promotion, and place
Question 52
Andy Sanders owns a sporting goods store that appeals to hunters
and fishermen. The market that Andy is trying to appeal to is called his:
critical
market
objective market
target market
focal market
intention
market
Question 53
Which of the following statements concerning a company’s target
market is false?
A “shotgun approach” to
marketing-trying to appeal to everyone rather than to only a small market
segment-is the most effective way to compete with large companies and their
bigger marketing budgets.
Most
successful small businesses have well-defined portraits of the customers they
are trying to attract.
Marketing
experts contend that the greatest marketing mistake small companies make is
failing to clearly define the target market to be served.
Small
companies are usually better suited to pinpointing target markets that their
larger rivals overlook or consider too small to be attractive.
Question 54
Which of the following is an important issue that business
owners should consider before launching an e-commerce effort?
How to exploit
the interconnectivity and the opportunities it creates to transform relationships
with its suppliers, customers, and external stakeholders
How to develop
long-term relationships with customers
How to measure
the success of its Web-based sales effort
All of the above
Question 55
Which of the following
statements is not true regarding the attributes of the founder or founders of
a firm?
Evidence suggests that important entrepreneurial skills are enhanced
through higher education.
Founders with prior entrepreneurial experience are more successful.
Founders with broad social and professional networks have an
advantage.
New ventures that are started
by a team rather than an individual have an advantage.
Founders with experience in the same industry as their new ventures
will typically have “blinders” on to new opportunities and are
typically not as effective as founders with no industry experience.
Question 56
Which of the following is notone of the
vital tasks small business leaders must perform?
Keep flexible and do not be concerned about
preparing for the next generation of management.
Create a
culture for retaining employees.
Hire the right
employees to the team and constantly improve their skills.
Plan for
“passing the torch” to the next generation of leadership.
Question 57
Which of the following is nota behavior
typically exhibited by effective leaders?
Respect and
support their employees.
Create an
environment in which people have the motivation, the training, and the
freedom to achieve the goals they have set.
Define and
constantly reinforce the vision they have for the company.
Require employees to gather necessary resources
to complete their tasks; they will be more likely to “feel
ownership” than if you did it for them.
Question 58
Which of the following statements is untrue regarding founding
teams?
The members of
heterogeneous teams are diverse in terms of their abilities and experiences.
It is generally believed that new ventures
started by an individual have an advantage over new ventures started by a
team.
Teams that
have worked together before have an edge.
Studies show
that more than one individual starts 50 to 70 percent of all new firms.
The members of
homogenous teams are very similar in terms of their abilities and
experiences.
Question 59
Melissa Jones just launched a firm in the wireless
communications industry. Shortly after the company was launched, Melissa
announced that a prominent Silicon Valley venture capitalist had agreed to
serve on her board of directors. Melissa knows that such a high quality
appointment will send an important message to her potential business partners
and clientele. This phenomenon is referred to as:
trumping
indicating
profiling
championing
signaling
Question 60
Which of the following
statements about a company’s culture is false?
Culture
arises from an entrepreneur’s consistent and relentless pursuit of a set of
core values that everyone in the company can believe in.
It
is allow the company’s culture to evolve.
Company culture manifests itself in a
variety of ways, from how workers dress and act to the language they use.
Company
culture remains constant.
All
of the above are true.
Question 61
William Woods recently launched
a printing company. One thing William is thinking about creating is a panel of
experts who can provide him ongoing direction and advice regarding the future
of his business. William is thinking about creating an:
discussion
board
accountability
panel
advisory board
suggestion
panel
analysis
panel
Question 62
A board of directors has three
formal responsibilities:
appoint
the officers of the firm, conduct the annual meeting, and submit the firm’s
annual report to the Securities & Exchange Commission
write
the firm’s strategic plan, declare dividends, and conduct the annual meeting
appoint the officers of the firm,
declare dividends, and oversee the affairs of the corporation
periodically
update the firm’s business plan, declare dividends, and write the firm’s
marketing plan
provide
funding to the firm, write the firm’s strategic plan, and submit the firm’s
annual report to the Securities & Exchange Commission
Question 63
Doris
Harrison is in the process of launching a financial services firm. She plans
to incorporate the firm. Because the firm will be incorporated, Doris is
legally required to have a:
panel of
advisors and peers
board of
investors
board of
directors
customer
advisory board
board of
advisors
Question 64
Which of the following statements about advisory boards is incorrect?
An advisory board is a panel of experts who are asked by a firm’s managers
to provide counsel and advice on an ongoing basis.
An advisory board can be established for general purposes or can be set up
to address a specific issue or need.
A growing number of startups are forming advisory boards.
Similar to a board of directors, an advisory board has legal responsibility
for the firm in certain areas.
The fact that a corporation has a board of directors does not preclude it
from establishing one or more advisory boards.
Question 65
Kate Harrison is in the process of launching an educational services firm. She
plans to incorporate the firm. Because the firm will be incorporated, Kate is
legally required to have a:
panel of advisors and peers
board of investors
customer advisory board
board of advisors
board of directors
Question 66
Which of the following qualities was not identified as a preferred attribute
of the founder or founders of a firm?
prior entrepreneurial experience
firm started by a team
higher education
relevant industry experience
prior experience working in a government or university position
Question 67
Andy Zackery
just launched a firm in the sporting good industry. On the day the company was
launched, Andy issued a press release, indicating that the president of Nike,
had agreed to serve on his board of directors. Andy knows that such a high
quality appointment will send an important message to his potential clientele.
This phenomenon is referred to as:
indicating
profiling
championing
signaling
trumping
