Small Business Management (Midterm) - Flashcards

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Isabella overheard her customers discussing their desire for more baked treats suitable for diabetics. Immediately she added sugar-free items to her inventory. Isabella has strong:

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Opportunity obsession

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Using the criteria in the text to define a small business, Table Occasions will not be considered a small business when the company:

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Is operating in numerous states

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Geraldo often would rather go fishing than work his business. Geraldo lacks:

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Commitment

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Ben seems to have the Midas touch. He can recognize opportunity where others see only problems. His focus is on creating solutions for customers. Ben has a(n) _____________ personality.

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Entrepreneur

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Compared to large corporations, small businesses...

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Play just as important if not a larger part in the economy

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Francesca convinced her aunt to invest in her day spa in exchange for a percentage of the profits. Francesca is:

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Bootstrapping

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Calvin knew his small local hardware could not compete on price with the big-box discounters so he began offering classes for new homeowners and found other ways to provide services the bigger stores don't. Calvin's competitive edge is:

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Customer focus

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The term bootstrapping refers to the practice of bartering rather than buying with cash or credit. True False

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False

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Lydia works as a senior network administrator and is dissatisfied with the stifling bureaucratic environment of her job. She is considering venturing out on her own as a consultant. If she carries through with her intentions, she would be considered a(n)...

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Corporate refugee

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Evelyn opened a small boutique catering to a very narrowly defined target market. Evelyn's competitive edge is:

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The niche market

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By the time Jobs and Wozniak had moved out of the garage and into their first production facility, the business would have been labeled as a(n):

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Attractive Small Firm

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Eduardo took out a second mortgage on his home to finance his new business. He makes all the decisions and keeps all the profits. Eduardo is:

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An entrepreneur

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Adam has contracted with about a third of the dozens of artisans in his town in the mountains of South Carolina. His reputation has grown; he now believes the sky's the limit for this web page design and maintenance business. What kind of small business does Adam have?

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High-potential venture

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Josie's position was eliminated when the company moved its operations to another state so she started her own business. Josie is a reluctant entrepreneur. True False

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True

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Lance has set for his business the goal of increasing revenues by 20% and profits by 15% by the end of the year. Lance is likely high in:

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Motivation to excel

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Although Abner started the business by making his own product, his greater talent is planning for the future and arranging for growth. Abner has a(n)___________ personality.

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Manager

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The mission of XYZ Company is to reduce landfill waste by recycling plastic containers into other useful products. XYZ Company is a social entrepreneurship. True False

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True

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Franchisees are not really entrepreneurs because they have a contract with a franchising organization. True False

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False

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Martina expected to build her direct sales business it the point that she can quit her day job after six months. Five months later she barely has any customers. Martina:

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Has overestimated what she can do

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Legend holds that Abraham Lincoln walked miles to return two cents change to a customer. His actions demonstrate:

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Integrity and responsibility

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Devon believes now is the time to launch his welding business since the only competitor has just announced his retirement. Devon has identified:

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An entrepreneurial opportunity

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Entrepreneurs are more likely than large corporations to capitalize on innovations because:

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Larger corporations may be too focused on existing products

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A significant number of entrepreneurs are motivated by...

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Financial rewards

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Many small business owners fail to identify and capture new opportunities to grow their businesses. True False

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True

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A camera hobbyist starts a photographic supplies store. The most obvious reward for this entrepreneur is the opportunity to:

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Enjoy satisfying work

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Walter wanted to be able to make decisions about issues that directly affected his department but in his corporation, the managers made all the decisions. So Walter left the corporation and started his own firm. Walter was looking for:

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Independence

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According to the text, managers who buy out founders of existing firms may be classified as entrepreneurs. True False

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True

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The mission of XYZ Company is to reduce landfill waste by recycling plastic containers into other useful products. XYZ Company is a social entrepreneurship. True False

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True

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Using the criteria in the text to define a small business, Table Occasions will not be considered a small business one the company:

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Is operating in numerous states

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Adam has contracted with about a third of the dozens of artisans in his town in the mountains of South Carolina. His reputation has grown; he now believes the sky's the limit for this web page design and maintenance business. What kind of small business does Adam have?

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High-potential value

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A primary reason for becoming an entrepreneur is to create a product or service that improves the lives of customers. True False

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True

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Skimming is an unethical business practice involving...

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Failure to report all income on tax returns

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Karl Eller reports in his book, Integrity Is All You've Got, which of the following characterizes entrepreneurial businesses with integrity?

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The entrepreneur with integrity gives the company a competitive edge

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An eBay retailer selling counterfeit Gucci and Louis Vuitton handbags is a violation of laws related to...

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Intellectual property

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If a student copies a favorite CD and gives it away to a friend to use, the student is engaged in the theft of _____ property.

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Intellectual

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A small computer retailer makes every effort to satisfy customer needs both before and after the sale. However, this retailer regards social problems as being beyond the scope of his business. This firm's management has recognized...

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Ethical obligations to customers but not social responsibilities

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A digital ID tag that is electronically sent to the customer's computer when other requested materials are downloaded from a Web site is known as...

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A cookie

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Environmentalism poses the greatest threat to small...

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Medical waste disposal businesses

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PortionPac Chemical's dedication to its customers, employees, and the environment is an example of:

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A sustainable small business

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The type of tax most likely to be a problem for entrepreneurs is:

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Employee payroll taxes

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Floyd would like to be able to monitor his employees' Internet activity because:

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Such activity hinders workplace productivity

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Members of a community will react _____ to a business they trust.

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Positively

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A code of ethics becomes increasingly appropriate and necessary as a small business...

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Grows larger, with a consequent lessening of the owner's personal influence

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Perhaps the greatest benefit of integrity in business is the _____ it generates.

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Trust

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Entrepreneurs often come up short on their tax commitments because of a single-minded focus on their product or service and/or _____.

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Casual accounting systems

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Clark, the owner of DEF LLC, bragged about hiding company income from the IRS but was surprised when he learned his sales manager was accepting kickbacks from customers. Clark should have remembered:

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Lapses in integrity can easily be passed down from superiors to subordinates

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Candace sells the muffins in her bakery at a higher price than the big-box grocery but she has a steady stream of customers willing to pay what she asks. Candace also supports local charities. What would likely happen if she lowered her prices and stopped her charitable contributions?

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Customers would go elsewhere

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In drawing up a code of ethics, a small business owner should adopt a code...

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That outlines ethical principles and gives examples

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Annabelle often shops for clothing and household goods online while at work. Which of the following best describes this situation?

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Inappropriate internet use at work

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Milton Friedman argues that businesses...

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Are justified in being socially responsible only if doing so increases the firm's value

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Abner sometimes shorts the customer when weighing out bulk merchandise, believing the practice leads to higher profits so it is acceptable. We could infer that...

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Abner lacks integrity

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Garner developed a code of ethics for his growing business because:

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He wanted to define the ethical expectations for all his employees

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A band who fails to record the cash they collected for admission to their shows could be charged with what illegal practice?

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Skimming

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An effective way for an entrepreneur to establish legitimacy is:

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To insist on professional behavior from all customer-contact employees

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A firm's employees would be considered __________________ in the business.

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Stakeholders

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Marketplace Farms is a regional cooperative of apple and orange growers. In order to compete against larger regional growers, the company relies on inexpensive packaging processes and lower cost labor instead of machines. Marketplace Farms is relying on what type of strategy?

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Cost-based

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According to the feasibility analysis framework, an entrepreneur who has a vision of a multi-unit company will...

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Be satisfied with an attractive niche if it would serve as a point of entry for long-term potential

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Janis wants to open a restaurant. She is not interested in a franchise; she wants to build her business literally from the ground up. When she does, her business will be classified as a:

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Startup

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As China's production of exportable goods increases, Chinese workers have more money to spend on consumer items. Other developing countries are experiencing the same growth. Which type of trend does this represent?

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Global

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The State of Maryland has recently imposed a "rain tax" based on the amount of non-water-absorbing surfaces on real estate. Which type of trend does this represent?

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Political/legal

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Jeff Bezos' original business plan involved taking orders for books and having the items shipped directly from the publisher to the customer. He modified the plan to include other products such as toys and decided to buy the toys from the producers and ship them from his own warehouse. This modification of the original plan is called:

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A pivot

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When Jeff Bezos launched Amazon.com, his idea of selling items he did not own from a website was unique. Which type of startup is this?

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New technology idea

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Mike and Jane opened a franchise sporting goods store. Neither was athletic; neither had ever managed a retail store; and the business failed within one year. Which statement best explains these results?

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They lacked factors critical to the success of the enterprise

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A company that is the lowest-cost producer within the market will have what type of strategy?

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Cost-based

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Miles' startup company began well but within a couple months he found he was unable to pay invoices from suppliers. He didn't understand how he could have this problem. He hired experts; his business idea was sound; and he had many new customers. What went wrong?

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Miles lacked cash resources

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Which action is a cause for erosion of a small firm's focus strategy?

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The focus strategy is imitated

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Which statement is an example of a global trend?

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The E.U. declares an increase in tariffs on all agricultural goods

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Many direct sales organizations suggest that the new "member" begin selling the product part-time while continuing to work at his/her regular job. Which explanation best fits this recommendation?

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The business can be tested cheaply and expanded incrementally

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Consuela noticed significant growth in the Hispanic population in her mid-size town. The local grocery carried mostly traditional American products. She knew her neighbors would want familiar foods so she decided to open a food market catering to their preferences. Which kind of startup will her store be?

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New market idea

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Carol enjoyed yarn crafts but there were no yarn shops in her small town. She reasoned that there were many others nearby who might appreciate being able to purchase yarns and supplies without a long drive. Within a year her shop was profitable and expanding into larger space.Which of these statements best describes this situation?

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Carol turned her hobby into a thriving business

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Kitty-Kat Korner fabric shop caters to the quilters in the region. Other fabric shops carry fabrics for all types of clothing along with floral, yarn, and other craft supplies. Kitty-Kat carries only items related to quilting. Which of the following best describes Kitty-Kat's strategy?

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Focus

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As the success of the athletic teams at O-MY-U skyrocketed, so did attendance at the games. Out-of-town visitors found all the hotels fully booked. So Bob and Shirley opened their home to guests on weekends, operating as a bed-and-breakfast. Soon many of their neighbors did the same and Bob and Shirley found they could no longer fill all their rooms every game weekend. How would Michael Porter explain this?

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The focus strategy was imitated

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Containers Etc. manufactures household containers. In contrast to traditional market designs, all of the products are microwaveable, child-proof and come in an assortment of 35 colors. Accordingly, Containers Etc. is pursuing a _____ strategy.

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differentiation-based

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An example of an idea for a new startup from a hobby is...

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A coin collector, who bought and sold coins for years to build a personal collection, deciding to become a coin dealer

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Isabella listens whenever someone says "Someone ought to make a ..." She expects one of these ideas to develop into a profitable business. Isabella possesses:

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Entrepreneurial alertness

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The quote "Good artists borrow; great artists steal" is the principle that launched which company?

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Apple

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Noland has identified an underserved market for his product. Competitors are not likely to notice his efforts to attract his target market, and his product fills a need for these customers. Noland has found:

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An opportunity sweet spot

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Many commuters grab a cup of coffee and drink it during their ride to work. So someone invented specially shaped cups that don't tip and lids with sip openings that close and don't spill. Which of these innovative ways of thinking best fits this situation?

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Study an existing product and explore ways to improve its function

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One of the drawbacks of SWOT analysis is:

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Its focus on present conditions

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Using a cost-based strategy, a company would take steps to increase efficiency and hold down costs. True False

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True

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Intangible resources include:

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A good reputation, a respected brand name, and an extensive personal network

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Verlin worked in a cabinet shop until he became frustrated that his ideas for improving efficiency were falling on deaf ears. So he left and started his own cabinet shop where he could implement those ideas. From which source did his ideas for his startup come?

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From work experience

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Today's smartphones bear little resemblance to the original analog cell phones of the early 1990s. Their capabilities exceed those of the early desktop computers. It seems nearly every adult carries at least one cell phone. Which of the trends does this represent?

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Technological

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Wilma needed wine glasses but all she had were candlestick holders and 8-ounce canning jars. Gluing the two together, she created what she called "mountain crystal" which became a big hit. The local crafters' association asked her to make enough for them to sell, and her business took off. This is an example of building a business from:

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Accidental discovery

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A focus strategy is best described as...

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A strategy that isolates the firm from market forces

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Which statement is an example of a political/legal trend?

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Congress passes legislation that increases the tax rates on corporations

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Tangible resources include:

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Cash, technology, and raw materials

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Milton's Auto Service is a small auto maintenance and repair shop located in a small town in a garage behind Milton's house. Milton doesn't charge as much as auto dealerships so he has a steady stream of local customers. Which of the following best describes Milton's strategy?

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Cost-based

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Many businesses are formed because an entrepreneur saw ways to improve or modify a product as a result of previous work experience. True False

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True

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For the past several years the borrowing interest rates has been very low in the United States. This is an example of a(n) ______________ trend.

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Economic

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According to a study by the National Federation of Independent Business Foundation, the most common source of new product ideas for small business startups is

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Prior work experience

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When Konrad purchased his business, he purchased it as a total entity. As a result,

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Konrad assumed responsibility for all outstanding debts incurred by the business.

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A Starbucks franchise located inside a Target store is called ______ franchising.

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piggyback

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Which of the following reasons for buying a business is also a reason for purchasing a franchise?

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Reduction of uncertainty

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Caron signed a contract with Devon allowing her to provide services using Devon's trademark, logo, and business model. This business is:

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A franchise

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In addition to the regular monthly payment of a percentage of gross sales to her franchisor, Wilma is required to submit a smaller percentage for advertising costs. She is willing to do this because:

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The franchisor promotes the business both locally and nationally, reinforcing the brand name

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The franchising strategy whereby an individual or firm is granted the legal right to own more than one unit of a franchised business is known as

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Multiple-unit ownership

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Union contracts are among the many _____ factors in valuing a business.

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Nonquantitative

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Edward signed a contract allowing Francine to use sell products using his brand name so long as the product meets Edward's quality standards. Edward is:

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A franchisor

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A franchising strategy whereby a single franchisee owns more than one unit in a given area is typically referred to as an area developer strategy. True False

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True

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When is a bargain price for an existing business not a good deal for the buyer?

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When the seller intends to open a competing business in the same locality When the business is losing money When the neighborhood is deteriorating

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What question is the least important when developing a franchise from an independent business?

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Who will develop the operations manual?

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A nondisclosure agreement signed by a prospective buyer shows the seller that the buyer intends to purchase the business. True False

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False

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Which factor is a non-quantitative factor of valuing a business?

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Future community development

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The cost of a franchise may include...

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Royalty payments

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A franchise is able to control costs because:

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Franchise networks have greater buying power

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In many cases, a franchisor will receive payments in the form of royalties that are based on a percentage of the franchisee's gross income. True False

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True

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Jeffrey's job is to identify potential business people in his country who might want to do business using a particular brand name. When the contract is signed, Jeffrey then provides training to the business person. Jeffrey is ost likely:

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A mastery license

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Franchising offers both a proven line of business and reduced risk. True False

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True

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The unscrupulous actions by franchisors to void contracts of franchisees in order to sell the franchise to someone else and collect an additional fee is called chewing. True False

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False The term is churning

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The buyer of an existing business typically acquires its personnel, inventories, physical facilities, established banking connections, and ongoing relationships with trade suppliers. True False

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True

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Fred's company specializes in bringing together buyers and sellers of businesses. Fred is:

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A business broker

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Quality Dining, Inc. operates several different restaurant franchises including Burger King, Olive Garden, Dairy Queen, and several others. Quality Dining has its own corporate structure and stockholders. This corporation is an example of:

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Multibrand franchising

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The practice of putting one franchise right next to another is referred to as piggyback franchising. True False

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False

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The Pepsi-Cola Company is an example of a product and trade name franchisor. True False

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True

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Conducting a thorough due diligence should always be accomplished if purchasing an existing corporation or franchise, but is unnecessary if acquiring a sole proprietorship. True False

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False

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Harold was given the chance to examine the tax returns and financial statements of a business he is considering for purchase. The seller asked him to sign a _____________ that prohibits Harold from sharing this confidential information with anyone else.

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Non-disclosure agreement

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JKL Corporation grants another party the right to conduct business according to specified methods and terms. JKL is a:

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Franchisor

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When hiring non-family employees it is only fair to identify the positions, if any, that are reserved for family members. True False

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True

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Mayer's philosophy of never using debt to finance operations or expansion was born during the Great Depression and passed on to his sons when they joined the family business. Today the multi-million dollar organization proudly follows Mayer's practice under the leadership of Mayer's great-grandsons and -daughters. This family's commitment is based on:

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Emotional attachment of family members

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Bret first opened his hardware store in 1946. His sons took over when Bret retired, and now Bret's grandchildren run the store. This type of family business is known as:

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A cousin consortium

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A family retreat can bring family members closer together as well as strengthen the family business. True False

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True

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Betsy had always had decisions made for her, first by her parents then by her husband. So when her father asked her to take over the family business, she was afraid of:

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Failure

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A family business involving two or more children may experience either sibling cooperation or sibling rivalry. True False

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True

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A nonfamily employee of a family business complains that the recent promotion of a family member was unfair. The owner should...

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Enter into a discussion of the roles and opportunities for both family members and outsiders

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Family retreats are best handled by an outside facilitator, who can help develop an agenda and establish ground rules for discussion. True False

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True

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Patricia, a nonfamily employee of a family business, is concerned about competing with family members for future career opportunities. To protect her personal interests, she should...

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Ask that the owner/manager clarify the extent of opportunities considering her skill set

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A key factor of success in a family business is:

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Family unity

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Liam's mentor had worked with him for several months to prepare him for the promotion. Now that the offer has been made, Liam is hesitant. His hesitation is likely based on:

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Fear of disappointing his mentor

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A family firm's special patterns and beliefs comprise the firm's organizational culture. True False

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True

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Kinder's Deli has been in business for three generations. A place was found for every Kinder child to work in the shop. The name Kinder meant fine deli meats. This family's commitment is based on:

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Identification with the firm

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In-laws not working in the family business may have a bad attitude about the company because of only hearing one side of an argument. True False

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True

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An inherent problem for couples involved in a family business is that...

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Conflicts in the business tend to carry over into family life

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As the only son, Eduardo's father expected to one day turn over management of the business to him despite Eduardo's protests that he wanted no part of it. Following graduation from college, Eduardo realized he did not want his father to let some outsider take over the business. Eduardo's commitment is based on:

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Family control

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A parent might attempt to resolve a transfer of ownership by giving active children in the firm's management _____ stock and giving nonactive children _____ stock.

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Common, preferred

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A family retreat is designed to...

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Bring family members together to openly discuss business matters

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When considering the long term health of a company during the transfer of ownership, tax advantages should be the primary concern. True False

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False

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A common problem for a founder in passing the business on to a daughter or son is...

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Deciding whether the child has the necessary temperament and ability

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Jim, the founder of a family business specializing in real estate, is contemplating turning the business over to his five children. One possibility, the founder believes, is to divide ownership equally among the children. This action would...

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Potentially hinder the future functioning of the business

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When a senior generation member is planning for succession, planning should encompass family members, employees and the owners. True False

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True

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Which statement is the most correct about in-laws and possible complications in a family business?

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In-laws will impact the business as they increase the number of persons who are either directly or indirectly involved in the family business.

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Bequeathing equal shares of ownership to children in a family business will probably create havoc in the future functioning of the business. True False

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True

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Sibling rivalry in a family business

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May create disagreements

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In considering the role of younger family members, the best philosophy is to recognize that...

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Children should have a right to choose their own careers

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The recruiter from IBM made William an offer almost too good to be true. The problem was William's dad, who always expected William to join him in running the family business. William's difficulty in accepting either offer may be based on the fear of:

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Disappointing his father

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Family retreats, which open lines of communication...

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May result in formation of a family council to continue discussion

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A founder's core values may become part of the family business culture because...

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Others in the firm absorb traditions and values established by the founder

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Jane and Joe are experiencing a strain with their family relationship after running their family business for 5 years. Which issue might be the most likely underlying cause of the tension?

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Their difference of opinions about a business matter is spilling over into their family time

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Jim is developing a business plan and has limited funds. Which person would be the best fit to offer assistance to Jim?

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A SCORE representative

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In writing the business plan, an entrepreneur should remember that...

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Certain features will be appealing to investors, while others are distinctly unappealing.

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The company description section of a business plan should include the company's __________ if the business is already in existence.

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History

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A potential investor's single goal is to...

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Maximize returns while minimizing personal risk

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Julie has decided to hire a consultant to review her business plan. Which suggestion is the most critical?

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Have a legal contract that specifies exactly what will be done for what price

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When describing the product in the business plan, the entrepreneur should...

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Use layman terms

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A business plan is a written document that sets out the basic idea underlying a business and its related startup considerations. True False

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True

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A business plan should represent the entrepreneur's vision and goals for the proposed company. True False

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True

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Two resources often in short supply for entrepreneurs are:

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Time and money

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The ___________ type of executive summary is better suited to a business that intends to market a new product or enter a new market.

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Narrative

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Martin is creating the part of his business plan that includes the name, address, website, and logo of his company. Martin is working on:

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The cover page

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The industry, target customer, and competitor analysis section should:

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Provide the context of the opportunity and demonstrate that a market segment is understood

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The financial plan section of a business plan should include balance sheets and income statements on an annual basis and cash flow statements on a monthly basis, all projected out for 2-3 years. True False

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False

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The primary outside users of business plans are...

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Investors and lenders

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Describing a product or service should be in lay terms even if the product is technical in nature. True False

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True

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A business plan is best described as a...

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Game plan

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Which group would be the most interested in a business plan for a new venture?

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Lenders

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Though all financial statements are important, the cash flow statement deserves special attention. True False

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True

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Nelson is writing about how he will attract and retain customers, how he will price his product, and how and where he will offer it for sale. Nelson is working on the __________ section of his business plan.

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Marketing plan

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The cost structure of a business model...

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Drives the company's cost and expenses

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Before beginning to write a business plan, the entrepreneur should complete:

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A feasibility analysis

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Business plans should be prepared so that they are attractive in appearance and well organized. True False

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True

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Items such as marketing research studies and the resumes of key executives are placed in the __________ of the business plan.

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Appendix

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The discussion of the opportunity in the business plan should reflect:

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The potential and attractiveness of the market industry

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The most beneficial plan when facing significant change in the external environment is a...

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Comprehensive

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The narrative form of an executive summary...

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Is a better format for ventures that have one dominant advantage

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Even if the business plan reveals sensitive information (e.g., details of an advanced technology or the specifics of a marketing plan), prospective investors can be trusted with that knowledge. True False

answer

False

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When Abigail buys salt, the core product and the actual product are:

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Seasoning for the food and the salt itself

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A firm's marketing mix consists of ____ activities.

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Product, pricing, promotion, and distribution

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Because many small business owners have strong production skills, they often attend mostly to the marketing side of the business to compensate. True False

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False

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Personal interview surveys are attractive as a marketing research method because these are inexpensive to conduct. True False

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False

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Adopting a consumer-oriented marketing philosophy is most consistent with...

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Eventually achieving long-term market success

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The most detailed and scrutinized section of a formal marketing plan is the...

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Marketing strategy

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A detailed analysis of competitors is an important part of a firm's formal marketing plan. True False

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True

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The initial step in the marketing research process is to...

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Identify informational needs

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The _____ method is probably the oldest form of research in existence.

answer

Observational

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Sales forecasts are typically expressed in dollars or units. True False

answer

True

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When a strategist divides the total market for a product and/or service into groups with similar needs, so that each group is likely to respond to the same marketing strategy, he or she is engaging in a practice called market segmentation. True False

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True

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The forecasting process can be characterized by the point at which the process is started and the nature of the predicting variable. True False

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True

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Small businesses typically conduct less marketing research than big businesses, partly because they lack an understanding of the basic marketing research process. True False

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True

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In the analysis of a market, the customer profile should include a...

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Detailed discussion of major customer benefits provided by the product and/or service

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Paul is a CPA (certified public accountant). He offers a variety of services depending on the needs of his customers. Some hire him to perform bookkeeping activities; others have him prepare their tax return. Pau's market is segmented based on:

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Benefit variables

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Morton sells salt; Domino sells sugar. The best strategy for either of these products would be:

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The unsegmented strategy

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In preparing a sales forecast, it is desirable to have forecasts covering the "most likely", "best case" and "_____ case" scenarios.

answer

Worst

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If an entrepreneur anticipates several target markets, each individual segment must have its own corresponding customer profile. True False

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True

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Oliver figured if people were willing to pay for bottled water, they would also be willing to pay for bottled air. Oliver has forgotten that customers will buy only if they have:

answer

Unsatisfied needs

question

Rhoda describes her typical customer as female between the ages of 22 and 35 with at least two years of college and a household income above $50,000 annually. Rhoda is using _________ to describe her customers.

answer

Demographic variables

question

Caution is advised when relying on blogs for secondary data because:

answer

Information in blogs may not be factually correct

question

Every day, associates of Sewell Motors, a Dallas-based auto retailer, strive to exceed the company's expectations of treating the customer as its number one priority. Every action, policy, and ultimate sale is conducted professionally, with consumers' needs in mind. Sewell Motors subscribes to the ____ marketing philosophy.

answer

Consumer-oriented

question

Small business owners can now buy inexpensive personal computer software that can perform statistical calculations and generate report-quality graphics. True False

answer

True

question

Miguel is deciding how to get his product to his customers. His options include a fixed location, a mobile location, working out of his home, and the Internet. Miguel is making the ___________ decision.

answer

Place

question

Special consideration should be given to the selection of the ____________ and the logic of this selection should be explained in the marketing plan.

answer

Company name

question

When prior sales information is available, indirect forecasting is the best method to predict future sales. True False

answer

False

question

Larry Knave, MD, is an owner in a professional corporation. If Dr. Knave is sued for malpractice, what is the liability of the rest of the owners?

answer

They are protected from liability for his actions

question

Because the corporation is a legal entity, one of its responsibilities is to:

answer

File annual tax returns

question

An ownership interest does not automatically confer a right to act for or to share in the management of a corporation. True False

answer

True

question

An owner in a professional corporation is shielded from...

answer

The liability of other owners

question

What legal form has the smallest percentage of new businesses?

answer

C Corporations

question

To maintain status as a corporation, the corporation must:

answer

Hold annual meetings of both shareholders and the board of directors

question

Millie has a sole proprietorship which is her only source of income What legal action should she take to prevent the business from being ruined if she became incapacitated?

answer

Give someone who is competent power of attorney to continue the business

question

An advisory board, as compared to a board of directors...

answer

May be perceived as less of a threat to an owner than a board

question

A basic legal principle involving stockholders is that...

answer

An ownership interest in a corporation does not confer a legal right to manage the firm

question

Which legal form allows owners to contribute no capital but still play a part in managing the business and share in its profits?

answer

Partnership

question

An entrepreneur can best build social capital by...

answer

Using reciprocation

question

For the best success, strategic alliance partners should sign contracts with stated expectations and an "easy out" clause. True False

answer

True

question

A significant difference between a board of directors and an advisory board is:

answer

The advisory board has no legal authority over the owner or the company

question

Jeanne, a Canadian citizen, would like to invest in Ingrid's startup. If Ingrid organizes her business as a(n) ________________________, Jeanne is prohibited from investing.

answer

S Corporation

question

A partnership agreement states explicitly the rights and duties of partners with each party assuming joint and several liability. True False

answer

True

question

A corporate charter should...

answer

Be in accord with state law

question

The sole proprietorship is a business owned by two or more people but operated by only one person. True False

answer

False

question

Creating a partnership allows a business to pool the managerial talents and capital of those individuals joining together as partners. True False

answer

True

question

The LLC differs from the C corporation in that the LLC avoids financial complications from double taxation. True False

answer

True

question

Dylan has purchased stock in a new corporation. As proof of ownership, Dylan will receive:

answer

A stock certificate

question

Effective leadership is more important for prospective managerial personnel than for investors. True False

answer

False

question

Partners must contribute capital or assets to form a partnership. True False

answer

False

question

A nonprofit corporation can be for civic, educational, charitable, or religious purposes and must pass the organizational test of not making a profit. True False

answer

False

question

In a limited partnership, which partner remains bound by all debts of the business?

answer

General partner

question

A corporate charter should be...

answer

Broad in the statement of the firm's power

question

Zeno, Zella, and Zorro wish to form a partnership. Zeno is putting up 60 % of the capital; Zella is putting up 40%, and Zorro is putting in no capital but will manage the business. In the absence of a provision in the partnership agreement, how will the liability and profits be distributed?

answer

Equally

question

The management team of a small business should focus on competent insiders as opposed to outside specialists. True False

answer

False

question

In the B2B model, the customers are...

answer

Businesses

question

Blogs and podcasts are among the emerging options for an online presence. True False

answer

True

question

Which statement is true about location decisions?

answer

Franchisors assist entrepreneurs with location decisions

question

The role of a website can range from merely offering content and information to enabling complex business transactions. True False

answer

True

question

Garland uses the family room of his home for his business. The children share his computer for their homework and games. The family room also contains the TV and homework space for the children. The IRS is likely to disallow his deduction for this space because:

answer

A separate space must be clearly set aside for the sole use of the business

question

Annie is starting her photography business and is locating it in her family home. Which aspect is critical in the balance between her business and her family?

answer

Making sure family members don't spoil the image of the business when clients arrive Having a professional studio area that is separate from the family area Shielding her family from the business taking over the home

question

All other factors being equal, retail and services businesses will find little advantage in selecting a location near the center of the market. True False

answer

False

question

Roger is analyzing regional differences in seeking a location for a new firm and is looking at states with favorable tax laws. Based on this information, he should look at which state?

answer

Wyoming

question

Sometimes an attorney can insert special clauses into a lease agreement that will allow the lessee to exit the agreement under certain circumstances. True False

answer

True

question

A home location is still almost always considered a temporary situation until the business grows. True False

answer

True

question

For many new firms, the most important reason to lease rather than buy a facility is...

answer

Avoidance of a large cash outlay

question

To maximize sales and profits, a discount shoe store should create an atmosphere similar to higher price point shoe stores as the customers will expect the same atmosphere. True False

answer

False

question

Bart is ready to look for a site for his new business. To help him in his search he should:

answer

Check into site selection software

question

Because B2B success stories generally receive more publicity than B2C ventures, the potential for B2C opportunities are overlooked. True False

answer

False

question

Many entrepreneurs recognize the value of talking to local realtors to determine site availability and appropriateness. True False

answer

True

question

Jason has neither a website nor a storefront. Instead, he lists his products for sale on a site that provides customers with the ability to list products for potential buyers. Jason is using a ______ site.

answer

C2C

question

Steve started a Web-based business offering a mechanism for buying and selling antiques. He has set up his company using the ____ model.

answer

Transaction-based

question

The major difference between the information-based model and the content-based model is:

answer

The presence of ads in the content-based model

question

An important advantage an entrepreneur gains by leasing rather than buying a facility is...

answer

A decrease in investment risk

question

Customer accessibility is the most critical factor in evaluating a specific site for a...

answer

Drugstore

question

For many entrepreneurs, choosing a location for a small business is a one-time decision—made only when the business is first established or purchased. True False

answer

True

question

Emma is looking for a building for her homestyle cooking restaurant. A major consideration would be:

answer

The building should be on one level

question

Allison plans to open a boutique, a trendy retail shop. She will rely heavily on walk-in customers to support her business. Allison will need:

answer

A brick-and-mortar facility

question

Allison plans to open a boutique, a trendy retail shop. She will rely heavily on walk-in customers to support her business. Allison will need:

answer

A brick-and-mortar facility

Small Business Management (Midterm) – Flashcards

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