Business vocab test 2

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acquisition
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A corporate restructuring in which one firm buys another.
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Articles of incorporation
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The document filed with a state government to establish the existence of a new corporation.
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board of directors
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The individuals who are elected by stockholders of a corporation to represent their interests.
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business format franchise
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A broad franchise agreement in which the franchisee pays for the right to use the name, trademark, and business and production methods of the franchisor.
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C corporation
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The most common type of corporation, which is a legal business entity that offers limited to all of its owners, who are called stockholders.
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conglomerate merger
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A combination of tow firms that are in unrelated industries
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Corporate bylaws
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The basic rules governing how a corporation is organized and how it conducts its business.
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distributorship
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a type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it.
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divestiture
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The transfer of total or partial ownership if some of a firms operations to investors or to another company.
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franchise
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A licensing arrangement under which a franchisor allows franchisees to use it’s name, trademark, products, business methods, and other property in exchange for monetary payments and other considerations.
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franchise agreement
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The contractual arrangement between a franchisor and franchisee that spells out the duties and responsibilities of both parties.
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Franchise disclosure document (FDD)
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A detailed description of all aspects of a franchise that the franchisor must provide to the franchisee at least fourteen calendar days before the franchise agreement is signed.
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franchisee
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The party in a franchise relationship that pays for the right to use resources supplied by the franchisor.
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franchisor
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The business entity in a franchise relationship that allows others to operate its business using resources it supplies in exchange for money and other considerations.
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general partnership
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A partnership in which all partners can take an active role in managing the business and have unlimited liability for any claims against the firm.
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horizontal merger
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a combination of two firms that ARE in the SAME industry.
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institutional investor
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An organization that pools contributions from investors, clients, or depositors and uses these funds to buy stocks and other securities.
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laws
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Rules that govern the conduct and actions of people within a society that are enforced by the government.
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limited liability
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when owners are not personally liable for claims against their firm. Owners with limited liability may lose their investment in the company, but their other personal assets are protected.
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limited liability company (LLC)
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A form of business ownership that offers both limited liability to its owners and flexible tax treatment.
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Limited liability partnership (LLP)
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A form of partnership which all partners have the right to participate in management and have limited liability for company debts.
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limited partnership
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A partnership that includes at least one general partner who actively manages the company and accepts unlimited liability and one limited partner who gives up the right to actively manage the company in exchange for limited liability.
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merger
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A corporate restructuring that occurs when two formerly independent business entities combine to form a new organization
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nonprofit
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A corporation that does not seek to earn a profit and differs in several fundamental respects from C corporations.
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S corporation
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A form of corporation that avoids double taxation by having its income taxed as if it were a partnership.
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sole proprietorship
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A form of business ownership with a single owner who usually actively manages the company.
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Statutory close (or closed) corporation
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A corporation with a limited number of owners that operates under simpler, less formal rules than a C corporation.
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stockholder
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An owner of a corporation
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vertical merger
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A combination of firms at different stages in the production of a good or service.
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alternative lenders
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Typically private firms that change very high interest rates, structure loans to be repaid in months rather than years, and often collect payments daily or weekly to reduce risk. They also tend to make decisions quickly and are more willing to overlook lower credit scores.
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angel investors
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individuals who invest in start-up companies with high growth potential in exchange for a share of ownership.
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business plan
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a formal document that describes a business concept, outlines core business objectives, and details strategies and timelines for achieving those objectives.
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external locus of control
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a deep-seated sense that forces other than the individual are responsible for what happens in his or her life.
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internal locus of control
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a deep-seated sense that the individual is personally responsible for what happens in his or her life.
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market niche
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a small segment of a market with fewer competitors than the market as a whole. Market niches tend to be quite attractive to small firms.
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SCORE (Service Corps of Retired Executives)
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An organization affiliated with the small business Administration, that provides free, comprehensive business counseling for small business owners from qualified volunteers.
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services
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intangible products
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Small Business Administration (SBA)
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An agency of the federal government designed to maintain and strengthen the nations economy by aiding, counseling, assisting, and protecting the interests of small businesses.
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Small Business Development Centers (SBDC’s)
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local offices affiliated with the Small Business Administration that provide comprehensive management assistance to current and prospective small business owners.
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venture capital firms
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companies that invest in start-up businesses with high growth potential in exchange for a share of ownership.
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which of the following is a disadvantage of sole proprietorship?
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The company ceases to exist if the owner withdrawls.
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Who among the following manages a corporation on a daily basis?
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The CEO and corporate officers.
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Which of the following is a characteristic of a statutory closed corporation?
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The firm operates under simpler arrangements than conventional corporations.
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Two friends invest to form a small firm that provides career counselling for students who just graduated from college. They agree on their specific roles in the firm and their profit shares without any written document. Which of the following types of ownerships is the firm likely to have?
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general partnership
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A vertical merger is defined as a:
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combination of firms that are at different stages in the production of a good.
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Chris Corp., a clothing manufacturer, has licensed a firm to operate under its name and trademark. The firm has even bought the rights to use Chris Corp.’s production and business methods. This scenario is an example of a _____.
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business format franchise
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Which of the following is a disadvantage of franchising?
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The franchisee has no flexibility as it is required to follow the franchisor’s procedures to the letter.
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A _____ is a type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it.
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distributorship
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Which of the following is an advantage of a C corporation?
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The shareholders have limited liability in the firm.
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Lisa owns stocks in her father’s firm, but she does not have the right to vote in stockholders’ meetings. Lisa is a(n) _____ in the firm.
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preferred stockholder
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In a carve-out, a firm:
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distributes the stock of its new company to outside investors.
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Ibrahim, the owner of a local magazine, is not able to cover stories of exciting travel destinations in and around the state due to lack of funding. He also finds it tough to hire talented journalists and keep them for long. Which of the following types of ownership is the magazine run by?
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Sole proprietorship
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The firm being purchased in an acquisition is called the _____.
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. target firm
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Ben and Jessica have started a department store. They have both agreed that they would each manage the store three days a week and that the profits will be shared equally between them. They will also have unlimited liability for any debts that the store incurs. This scenario is an example of a _____.
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general partnership
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A form of business ownership in which the business is considered a legal entity separate and distinct from its owners is known as a _____.
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corporation
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A _____ is a type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it.
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distributorship
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Chris Corp., a clothing manufacturer, has licensed a firm to operate under its name and trademark. The firm has even bought the rights to use Chris Corp.’s production and business methods. This scenario is an example of a _____.
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business format franchise
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Which of the following is a consequence of a corporation being a separate entity from its owners?
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The owners are not personally responsible for the obligations of a company.
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Crystal Inc., a jewelry maker, has joined with Tazzy Inc., an apparel company. This is an example of a _____ merger.
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conglomerate
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A limited partnership is different from a limited liability partnership in that in a limited partnership:
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only the members with unlimited liability are allowed to manage the firm.
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While raising start-up funds from friends and family, it is:
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a. essential to be professional in dealing with them.
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Which of the following statements is true of alternate lenders?
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They are private firms.
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Which of the following statements best describes venture capital firms?
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Firms that invest in start-up businesses with high growth potential in exchange for a share of ownership
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Debra has envisioned a pub in the heart of the city. She decides to have a music band right next to the bar playing her favorite rock ballads. She also has creative ideas for the items on the menu. She already has the funds needed to start the pub. Which of the following suggestions is most likely to help Debra realize her dream?
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Debra should start from scratch as she can implement her own concepts, designs, and structures.
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Entrepreneurs who mortgage their homes for the business and stake their reputation on the success of an unproven product demonstrate:
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high tolerance of uncertainty.
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Faheem, after retiring as the CEO of Solitaire, decides to donate his time and expertise to assist new and established small businesses. He hears of an organization called Service Corps of Retired Executives (SCORE), which is supported by SBA, and joins it as a volunteer. As a SCORE volunteer, in which of the following activities is Faheem expected to be involved?
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Providing free business counseling and mentoring for small businesses
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Which of the following is a primary reason for necessity entrepreneurs to launch their own business?
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They believe it is their only economic option.
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Which of the following is an advantage of buying a franchise?
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The franchise package includes management expertise and consulting.
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Small Business Administration (SBA):
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aids, assists, and protects the interests of small businesses.
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Ida has recently finished her high school exams. When the results are announced, she finds out that she has not done well in the exams. Ida believes that the bad results are because of her lack of concentration in class. She comes with a(n) _____.
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internal locus of control
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Most sole proprietorships are small businesses with net incomes that lag far behind those of partnerships and corporations.
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true
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A statutory close (or closed) corporation cannot have more than 100 stockholders, and each stockholder must be a U.S. citizen or permanent resident of the United States.
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false
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Which of the following is NOT a function of the board of directors of a corporation?
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the board usually takes an active role in the day-to-day management of the company
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In a general partnership, each partner incurs unlimited liability only for claims resulting from his or her own negligence.
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false
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Which of the following represents the basic ownership interest in a corporation?
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common stock
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One drawback of an S corporation is that its earnings are taxed by the IRS, which also taxes the dividends it pays to its stockholders. This results in the double taxation of an S corporation’s earnings.
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false
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A general partnership is a voluntary partnership in which all partners can take an active role in managing the business and have unlimited liability for any claims against the firm.
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true
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Steiner Inc., a well-known construction company in California, bought Horizon Inc., a small pool-building company, so that they could build pools in all their apartment projects at a lesser cost. In this case,:
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horizon is the target firm.
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A disadvantage of a statutory close corporation is that:
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not all states allow formation of this type of corporation
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Once the form of ownership for a business is chosen by entrepreneurs it is not possible to convert it to another form.
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false
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A _____ is a formal document that describes a business concept and outlines the core business objectives while detailing the strategies and timelines for achieving those objectives.
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business plan
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Harry’s business venture recently experienced a massive failure. He is of the opinion that the business went down because of new competitors and a bank officer rejecting his loan. Harry has a high:
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external locus of control
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Which of the following is NOT a recommended strategy for small business owners to succeed over the long term?
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learn from your own business experiences
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_____ are companies that invest in start-up businesses with high growth potential in exchange for a share of ownership.
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venture capital
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Which of the following is a powerful contribution made by small businesses to the U.S. economy?
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vitalizing inner cities
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A country that provides strong unemployment insurance is likely to experience high rates of entrepreneurship.
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false
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Which of the following bodies assists entrepreneurs by guaranteeing loans from local commercial lenders?
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small business admin
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For research purposes, the Small Business Administration (SBA) defines small businesses as companies with up to_____ employees, including the self-employed.
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500
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Cultural and political factors help explain why the United States has a much higher entrepreneurship rate than Japan and many European nations.
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true
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Buying an established business may involve inheriting old mistakes that can range from poor employee relations to pending lawsuits.
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true

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