Question 1

Only 20 percent of small businesses survive after five years of operation.

Accepted Answer

A) True 
 B)False

Question 2

When borrowing money from friends or family members,you should ________.

Accepted Answer

A)  ask for more money than you think you will need so that you have room to negotiate, recognizing that if they give all that you ask for you do not need to accept all of it 
B)  provide the person from whom you borrowed money a document indicating how and when you intend to pay them back 
C)  ask the person from whom you borrow money for advice about how to run your business since they obviously know how to make money 
D)  provide the person from whom you borrow money a monthly financial report and budget and always ask their opinions before making business decisions 
E)  explain to the person that this is not a professional relationship, and that it is likely they will not be repaid

Question 3

What is the worst thing that could happen to small business owners who use credit cards as a source of financing?

Accepted Answer

A)  They might have to get a second credit card to pay for additional expenses. 
B)  They might need to significantly increase their revenues. 
C)  They might pay fines for using personal cards for business purchases. 
D)  They might spend more than they can afford to pay back. 
E)  They might need to ask for an increase in their credit limit.

Question 4

If an individual needs funds to finance a small business and does not want to finance the business using loans,what other sources of funding might be available? Briefly describe each potential source of funding and indicate what kind of business enterprise would be the ideal candidate for each source of funding.

Accepted Answer

The answer of If an individual needs funds to finance...

Question 5

Which of the following is LEAST likely to be a characteristic of successful entrepreneurs?

Accepted Answer

A)  likes to take risks 
B)  is motivated to succeed 
C)  prefers not to work around other people 
D)  prefers not to work for other people 
E)  is flexible and self-directed

Question 6

Only two-thirds of start-up businesses survive the first two years,and just over half survive after five years of operation.What are the most significant reasons that account for such a high rate of start-up business failures?

Accepted Answer

The answer of Only two-thirds of start-up businesses survive the...

Question 7

In the United States,small businesses hire a larger proportion of part-time workers than large corporations do.

Accepted Answer

A) True 
 B)False

Question 8

Maggie wants to start a fine dining restaurant in her town and dreams someday of having a chain of restaurants all over the country.She can be considered a growth entrepreneur because she ________.

Accepted Answer

A)  hopes that her restaurant will attract customers 
B)  believes that revenues from her restaurant will grow rapidly 
C)  plans to have her business expand beyond her original restaurant 
D)  understands that there is an increasingly large market for dining experiences 
E)  wants to be able to run her business out of her home

Question 9

Isaac is a franchise owner of a fast food restaurant.When another franchisee is accused of using artificial meat in its hamburgers,sales at Isaac's franchise location drop dramatically.What disadvantage of franchising is BEST demonstrated by Isaac's situation?

Accepted Answer

A)  competition 
B)  sharing common problems 
C)  lack of advertising support 
D)  lack of control 
E)  poor initial training

Question 10

Franchisees are independent third-party operators who market and sell a company's products or services under the company's name.

Accepted Answer

A) True 
 B)False

Question 11

Many e-commerce businesses failed in the late 1990s because ________.

Accepted Answer

A)  their online stores were a source of identity fraud 
B)  they were owned by young entrepreneurs 
C)  there was an economic decline called the "dot-com bust" 
D)  they did not plan for rapid growth and lacked sufficient inventory to fulfill orders 
E)  they had too many other online competitors

Question 12

Which of the following is NOT an advantage of buying an existing business?

Accepted Answer

A)  It is simpler than beginning a new business from scratch. 
B)  There is a reduction in start-up time and energy. 
C)  An existing business has less competition. 
D)  An existing business has an existing customer base. 
E)  It might be easier to obtain financing to purchase the existing business.

Question 13

Which of the following does a franchise company offer to people who want to start a business?

Accepted Answer

A)  creative control and flexibility 
B)  lower initial costs than when starting a business from scratch 
C)  guaranteed freedom from local competition 
D)  marketing and financial tools to run a business 
E)  geographic and demographic studies of the best location to open a new store

Question 14

Peter has applied for a loan to purchase a franchise of a popular convenience store in an area that is experiencing rapid population growth.If the loan is approved,it will MOST likely be because ________.

Accepted Answer

A)  there is less risk associated with a franchise than with an independent business start-up 
B)  the franchise company will provide the financing 
C)  the population growth justifies the market need for the store 
D)  the franchise company will prevent other franchisees from operating in the same area 
E)  the franchise company has influence over the bank's loan decisions

Question 15

Joe is very confident about his purchase of a franchise from a well-known full-service restaurant company.What is one of the things he MOST likely did before he bought the franchise?

Accepted Answer

A)  spent months researching the franchisor's background and track record 
B)  developed a menu of innovative dishes that would differentiate his restaurant from competitors 
C)  came up with a unique plan to streamline the daily operations of the franchise 
D)  trained staff to help him run the business 
E)  hired a designer to design the restaurant's layout and decor

Question 16

When a wealthy individual invests his or her own money into a business project or start-up company with little intention to influence decision making,he or she is MOST often called a(n)________.

Accepted Answer

A)  angel investor 
B)  venture capitalist 
C)  financier 
D)  shadow partner 
E)  business incubator

Question 17

Small business owners interested in venture capital funding should know that venture capitalists ________.

Accepted Answer

A)  charge interest rates for balances owed and set monthly minimum repayment requirements 
B)  fund multiple projects but only with a limited amount of money for each 
C)  provide funding only for capital expenses such as buildings and equipment 
D)  look for the potential of a public stock offering before investing in a company 
E)  do not seek a management position or control of the business

Question 18

Advisory boards generally do NOT have the authority to ________.

Accepted Answer

A)  offer guidance 
B)  make decisions 
C)  provide financial knowledge 
D)  suggest operational improvements 
E)  act as mentors

Question 19

A franchise is a method of doing business in which ________.

Accepted Answer

A)  an entrepreneur sets up and manages a small business based on an innovative idea or product 
B)  a company's products or services are sold to independent third-party operators under the company's name 
C)  a company buys ownership of another company and absorbs its employees and customer base into its own structure 
D)  a business is able to achieve rapid sales growth in the service sector due to taking advantage of many advertising opportunities 
E)  a small company is bought by a larger one and is absorbed into its existing structure

Question 20

Sam is eager to start a local magazine that will include articles about health and fitness and provide a place for local health and fitness professionals to advertise their services.Which of the following does he NOT need to include in his business plan?

Accepted Answer

A)  risk analysis 
B)  financial plan 
C)  product plan 
D)  operational plan 
E)  marketing plan

Exam 5: Small Business and the Entrepreneur

Only 20 percent of small businesses survive after five years of operation.

When borrowing money from friends or family members,you should ________.

What is the worst thing that could happen to small business owners who use credit cards as a source of financing?

Which of the following is LEAST likely to be a characteristic of successful entrepreneurs?

Only two-thirds of start-up businesses survive the first two years,and just over half survive after five years of operation.What are the most significant reasons that account for such a high rate of start-up business failures?

In the United States,small businesses hire a larger proportion of part-time workers than large corporations do.

Maggie wants to start a fine dining restaurant in her town and dreams someday of having a chain of restaurants all over the country.She can be considered a growth entrepreneur because she ________.

Isaac is a franchise owner of a fast food restaurant.When another franchisee is accused of using artificial meat in its hamburgers,sales at Isaac's franchise location drop dramatically.What disadvantage of franchising is BEST demonstrated by Isaac's situation?

Franchisees are independent third-party operators who market and sell a company's products or services under the company's name.

Many e-commerce businesses failed in the late 1990s because ________.

Which of the following is NOT an advantage of buying an existing business?

Which of the following does a franchise company offer to people who want to start a business?

Peter has applied for a loan to purchase a franchise of a popular convenience store in an area that is experiencing rapid population growth.If the loan is approved,it will MOST likely be because ________.

Joe is very confident about his purchase of a franchise from a well-known full-service restaurant company.What is one of the things he MOST likely did before he bought the franchise?

When a wealthy individual invests his or her own money into a business project or start-up company with little intention to influence decision making,he or she is MOST often called a(n) ________.

Small business owners interested in venture capital funding should know that venture capitalists ________.

Advisory boards generally do NOT have the authority to ________.

A franchise is a method of doing business in which ________.

Sam is eager to start a local magazine that will include articles about health and fitness and provide a place for local health and fitness professionals to advertise their services.Which of the following does he NOT need to include in his business plan?