ENTR 187 Midterm Exam 1 | Questions and Answers (Complete Solutions)

ENTR 187 Midterm Exam 1 | Questions and Answers (Complete Solutions) Small businesses are usually: A. imitative in nature. B. characterized by the novelty of their products. C. the same as high-growth ventures. D. not affected by market fluctuations. The majority of new firms go through similar startup processes with those most likely to be successful following a four-step process: Finance, Construct, Promote, Demonstrate. FALSE The _____ is a U.S. government agency that helps people start a business and also provides them support and advocacy. A. Small Business Administration B. U.S. Department of Business Development C. U.S. Department of Commerce D. U.S. Entrepreneurial Administration A business run by the individual who owns it is referred to as a(n) _____. A. franchise B. owner-managed firm C. professionally-owned business D. novelty firm Which of the following is true of a small business? A. Its preferred funding source is other people's money. B. It sells more when it is facing bankruptcy. C. It considers sales as more important than marketing. D. It focuses more on effectiveness than on efficiency. In order to make profits from a small business, the company needs to make an actual product. FALSE Which of the following is true of a high-growth venture? A. It considers sales as more important than marketing. B. Its metastrategy is novelty. C. It focuses more on efficiency than on effectiveness. D. It does not allow for easy delegation of work or responsibilities. A person's belief in his or her ability to achieve a goal is called: A. growth rewards. B. bootstrapping. C. novelty. D. self-efficacy. Using low-cost or free techniques to minimize cost of doing business is referred to as bootstrapping. TRUE Which of the following is a difference between a small business and a high-growth venture? A. For a small business, the preferred funding source is other people's money, whereas for a high-growth venture, it is the owner's own money. B. For a small business, the personal control preference is to involve others, whereas a high-growth venture prefers to retain autonomy. C. A small business focuses on effectiveness, whereas a high-growth venture focuses on efficiency. D. A small business grows when necessary, whereas a high-growth venture grows when possible. The most frequently occurring element of the BRIE model is intention. TRUE One of the seven key strategies of the entrepreneurial way involves effectuation or an approach used to create alternatives in uncertain environments. TRUE The text defines an entrepreneur as: A. a person who purchases an existing business. B. working for yourself. C. characterized by being different or new. D. a person who owns or starts an organization, such as a business. _____ are the smallest full-time business. A. High-performing small businesses B. Traditional small businesses C. High-growth ventures D. Lifestyle businesses Which of the following terms is not one of the four steps in the successful entrepreneurial process? A. Seek. B. Do. C. Plan. D. Check. According to the BRIE model, _____ sets up a business as a firm. A. intention B. exchange C. franchise D. boundary According to the U.S. Small Business Administration, small businesses generate _____ times the number of patents per employee than do big businesses. A. 35 B. 2 C. 1 6 D. 50 During the start-up phase of a small business the emphasis is on conserving what little cash the new business has. TRUE In the U.S., government programs are the number one source for financing small businesses. FALSE After being in business for 24 months, Paul's auto spare parts company Chromson Inc. grows to a relatively stable size. Which of the following would be Paul's primary financial management need at this stage? A. Building owner's wealth B. Clearing all debts C. Implementing bootstrapping techniques D. Establishing internal control over assets Jacob has started a graphic design company called Interon Graphics. As Interon Graphics moves into the growth phase, which of the following would be Jacob's dominant financial management need? A. Obtaining increasing amounts of cash inflows B. Establishing internal control over assets C. Conserving the money that the business has D. Clearing all debts _____ measure a management's effectiveness in using the invested capital of the business to provide profits. A. Profitability ratios B. Gross margin ratios C. Return on investments D. Return on equity Tammy has just opened a donut shop called The Rabbit Hole. Given that The Rabbit Hole is in its start-up phase, which of these would be Tammy's immediate financial management need? A. Building owner's wealth B. Conserving what little money the business has C. Obtaining increasing amounts of cash inflows D. Minimizing debt and increasing asset value Uncertainty of returns in a business is referred to as _____. A. financial risk B. accelerated cash-out C. overpayment D. collateral There are two general sources of gift financing: A. institutional and personal. B. friends and family. C. consumer and commercial banks. D. angel and venture investors. _____ refers to the value of a business that exceeds the sum of the value of all individual assets but that cannot be sold separately from the business. A. Goodwill B. Collateral C. Inventory D. Debt The amount that revenues exceed expenses is referred to as _____. A. profit B. cash flow C. operating margin D. debt Orion Inc. was started as a small organization with five employees. After the first year's profits were made, the owners decided to invest the profits in expanding the business. This is an example of financing the business using _____. A. benchmarking B. bootstrapping C. piggybacking D. outside equity _____ is money from selling part of a business to people who are not and will not be involved in the management of the business. A. Dividend B. Bond C. Equity capital D. Outside equity Money contributed to businesses in return for part ownership of the business is called a(n) _____. A. debt B. equity capital C. gift D. loan The weighted average cost (WAC) refers to: A. a legal reduction in taxes by the government. B. the average equity capital costs incurred by a firm per year. C. the percentage cost of obtaining future funds. D. the expected average future cost of funds. People who buy ownership rights but are not part of the management of the business are known as outside equity investors TRUE When a business enters a phase of rapid growth, one of the challenges it faces is that very few sources of money are available to support its growth FALSE The majority of small business start-ups are funded by bootstrapping TRUE Most businesses run by teams are not family related FALSE With over 8.3 million businesses owned by women, they account for a quarter of small business revenue nationally FALSE Entrepreneurs get used to a do-it-yourself approach, which can be especially trying for second career entrepreneurs. TRUE Succession plans deal with the people who will take over, what roles they will fill, and what supports they will receive TRUE In family-owned businesses, the board of directors can only be comprised of family members FALSE Which of the following is one of the prime challenges faced by most second career entrepreneurs? A. Keeping personal finances out of the business B. Avoiding overconfidence C. Lacking resources D. Deciding whether to return to work The challenge of _____ refers to when woman or minority-owned businesses are simply excluded from the opportunities offered to firms owned by white males. A. consistency B. access C. flexibility D. mutuality The two fastest growing minority groups that represent the largest segments of minority business owners are: A. Hispanics and African Americans. B. Hispanics and Pacific Islanders. C. Asians and African Americans. D. Asians and Pacific Islanders. Which of the following is true with regard to minorities in small businesses? A. Minority-owned firms have not grown much in recent years and are a slow growing sector. B. The establishment of both public and private funding and networking initiatives has helped to level the business playing field for minority entrepreneurs. C. There is a phenomenal decline in the number of minority entrepreneurs despite the growth of racial and ethnic groups within the U.S. population. D. Minority entrepreneurs do not face the challenge of access anymore. Which of the following statements about entrepreneurial teams is true? A. Most entrepreneurial teams are family related. B. The majority of new businesses have an entrepreneurial team of a minimum five co-owners. C. The trend is toward even more businesses being developed by a solo entrepreneur. D. Only 10 percent of teams are spouses or life partners working together. Which of the following challenges is typical to family businesses? A. Motivation and nepotism B. Role conflict and succession C. Succession and finances D. Leadership and finances Martin runs a successful house painting business. He runs his business out of his garage, which he converted into office space. Martin, who had previously worked as a house painter in another company had good knowledge of how to run a house-painting business. After a storm destroyed public properties in his neighboring town, he contracted with the mayor of that town to fulfill any painting jobs required during the town's reconstruction. In order to meet this demand and expand business, he hired more house painters. According to the BRIE model, which of the following is an example of Martin's opportunity competency? A. Martin hiring more house painters to meet demand B. Martin contracting with the mayor to help paint during reconstruction C. Martin setting up the business's office in his garage D. Martin deciding to set up his own business after quitting his previous job Which of the following stages of the business life cycle do most small business never go through? A. The takeoff stage. B. The emergence stage. C. The existence stage. D. The entrepreneur stage. This stage of the business life cycle is characterized by a stable level of sales and profits over several years. The functional areas, the market, and the products or services are all being dealt with consistently and efficiently. A. The success stage. B. The existence stage. C. The resource maturity stage. D. The takeoff stage. The competency suggested by _____ relates to the organizational and business processes of a firm. A. intention B. resource C. exchange D. boundary Which of the following is true with regard to minimalized business professionalization? A. The entrepreneur does nearly everything in the simplest way possible. B. The entrepreneur is passionate about one or two of the key business functions. C. The entrepreneur meets or exceeds the industry's standards. D. The entrepreneur brings the highest levels of trust among customers. Which of the following statements about certification with regard to women- or minority-owned small business is true? A. Most corporate certification programs require a business to be in operation at least five years. B. Certification is for every women or minority-owned small business. C. For those businesses that qualify, certification provides a ready means of access to opportunity and to networks of businesses and government agencies. D. For corporations, certification is handled by organizations that are affiliated with the government or big business. Being a small business makes managing organizational culture harder than in larger businesses FALSE The goal of any small business owner is to manage external relations in order to minimize social capital FALSE Social networking helps build long-lasting relationships into a person's day-to-day business operations. TRUE As the owner of a business, quickly admitting that the firm is in trouble indicates a lack of accountability. FALSE In making moral decisions, it is possible to find oneself in the legal "right" but still unable to make a viable business decision by pursuing legal recourse TRUE Small businesses are often the first to try something innovative. TRUE Small businesses are often the first to try something innovative. FALSE _____ refers to the sum total of forces outside of an entrepreneur and a firm. A. Environment B. Organizational climate C. Corporate governance D. Social capital Following the BRIE model in starting a business, an entrepreneur creates a boundary within the environment, setting his firm apart from the rest of the environment. In doing this, the entrepreneur gives the firm an _____. A. organizational citizenship B. organizational identity C. organizational diversity D. organizational collusion Thomas has started a new business venture for which he has been using highly economical resources, such as the market research data available in public libraries, low-interest funds borrowed from national banks, and equipments hired on lease. This technique used by Thomas to overcome resource constraints in his start-up firm is best known as _____. A. caveat emptor B. moonlighting C. bootstrapping D. collective bargaining _____ are considered as a part of the internal environment of a firm. A. Employees B. Suppliers C. Competitors D. Unions _____ refers to a set of shared beliefs, basic assumptions, or common, accepted ways of dealing with problems and challenges within a company that demonstrate how things get done. A. Organizational portfolio B. Organizational ergonomic C. Organizational culture D. Organizational layout Lisa runs a dog grooming business and is always looking for new trends, reading articles, keeping notes, and talking to customers and suppliers about what is needed in the industry. What important function is Lisa performing? A. Lisa is building social capitalism. B. Lisa is recruiting for new employees. C. Lisa is building an organizational culture. D. Lisa is scanning the environment. Factors such as the ages, races, and gender of customers would be an element of the firm's _____ environment. A. general B. internal C. task D. ownership The _____ of an organization will be a part of its task environment. A. owners B. board of directors C. competitors D. employees Which of the following statements is true about the general environment?