Entrepreneurship and Small Business Certification Exam Actual Questions and Answers with complete solution

Entrepreneurship and Small Business Certification Exam Actual Questions and Answers with complete solution Elements of the Design Thinking Process Stage 1: Emphasize- Research Your Users' Needs Stage 2: Define- State Your Users' Needs and Problems Stage 3: Ideate- Challenge Assumptions and Create Ideas Stage 4: Prototype- Start to Create Solutions Stage 5: Test- Try Your Solutions Out Difference between small businesses and entrepreneurs? Small businesses are not always interested in taking on new business opportunities. Entrepreneurs set up a business with the aim to make a profit. Compensation Types 1. Piece work- compensation on a per-unit basis. EX: an employer can choose to pay mechanics a fixed rate for each vehicle they repair instead of paying an hourly rate. 2. Salary- employee receives a set amount of pay each month without overtime compensation for extra hours worked. 3. Hourly- Employees most affected by minimum wage laws are compensated hourly. 4. Commission- An employee who is paid a percentage of a sale. 5. Equity- Non-cash compensations offered to employees in place of or in addition to a lower salary. Types of Sales Channel 1. Business-to-Business (B2B): a transaction or business conducted between one business and another, such as a wholesaler and retailer. Transactions tend to happen in the supply chain, where one company will purchase raw materials from another to be used in the manufacturing process. 2. Business-to-Consumer (B2C): process of businesses selling products/services directly to consumers, with no middle person. Typically refers to online retailers who sell products/services to consumers through the Internet. Online B2C became a threat to traditional retailers, who profited from adding a markup to the price. 3. Retail: sell items or services to customers. They typically sell items in-store or may be sold online. 4. Wholesale: the act of buying goods in bulk from a manufacturer at a discounted price and selling to a retailer for a higher price, for them to repackage and in turn resell in smaller quantities at an even higher price to consumers. Acquisition Costs These costs include shipping, sales taxes, and customs fees, as well as the costs of site preparation, installation, and testing. When acquiring property, acquisition costs can include surveying, closing fees, and paying off liens. Angel Investor a wealthy private investor who provides capital for a business start-up for a stake in the business in return. Asset A tangible item a business owns. They can generate revenue or be converted into cash. They can be physical items, such as machinery, or intangible, such as intellectual property. Balance Sheet A financial statement used for evaluating the performance of a business. It compares ASSETS to LIABILITIES plus owner's EQUITY on a specific date. EX: Equipment- Long term assets Bank loans- Current liabilities Inventory- Current assets Mortgage payments- Long term liabilities Bootstrapping A TYPE OF FUNDING. A business owner that uses their own money to fund their business. Break-Even Point The point where a business's revenue matches its expenses over a given period. AKA there is no loss or gain for your small business; you've reached the level of production at which the costs of production equals the revenues for a product. Break-Even Point = Fixed Cost / (selling price per unit - variable cost per unit) Budget The amount of money a business plans on spending during a given period. Burn Rate A calculation used to measure a business's monthly cash flow. AKA the amount of $ your business needs in a certain period (usually a month) to cover all expenses. In other words, burn rate tells you how quickly your business "burns through" capital. This calculation helps business owners understand how long they can continue to operate at this rate before running out of money. Burn Rate = (Month starting Balance - Month ending Balance) Business Plan A business plan is a written document that describes in detail how a business defines its objectives and how it is to go about achieving its goals. Lays out a written roadmap for the firm from marketing, financial, and operational standpoints. Legal structures for a corporation 1. C Corp: C Corporation: the owners (shareholders) are taxed separately from the entity. Are also subject to corporate income taxation. The taxing of profits from the business is at both corporate AND personal levels, creating a DOUBLE TAXATION situation. - Owners are not personally liable. - separates owners' assets and income from that of the corporation. Limits the liability of investors and firm owners since the most that they can lose in the business's failure is the amount they have invested in it. 2. S Corp: Shareholders of S corps report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corps to avoid double taxation on the corporate income. - Owners are not personally liable. - protects business owners' personal assets from any corporate liability and passes through income, usually in the form of dividends, to avoid double corporate and personal taxation. Provides LIMITED LIABILITY protection but also offers corporations with 100 shareholders to be taxed as a partnership. 3. Limited Liability Corp (LLC): A limited liability company, which is a type of legal entity that can be used when forming a business that offers protection to the owner(s) from personal liability for debts and other obligations that a business might incur. This means that creditors CANNOT go after the owner's personal assets. In other words, the personal assets of the owner can not be used for legal claims against the business. - Owners are not personally liable. **** An LLC is a legal business structure, while S Corporation is a tax classification that's available to some small businesses. Both LLCs and corps can elect S Corp taxation by filing a form with the IRS. 4. Sole Proprietorship: easy to form and gives you complete control of your business. You're automatically considered to be a sole proprietorship if you do business activities but don't register as any other kind of business. Your business assets and liabilities are not separate from your personal assets and liabilities. You can be held personally liable for the debts and obligations of the business. - Unlimited personal liability. - good choice for low-risk businesses and owners who want to test their business idea before forming a more formal business. 5. Partnership: simplest structure for two or more people to own a business together. 2 common kinds of partnerships: limited partnerships (LP) and limited liability partnerships (LLP). - Unlimited personal liability unless structured as a limited partnership. - LP: have only one general partner with unlimited liability, and all other partners have limited liability. The partners with limited liability also tend to have limited control over the company, which is documented in a partnership agreement. Profits are passed