____ is a strategic action.

____ is a strategic action. 

A. Increasing marketing efforts

B. Using new distribution channels

C. Acquiring a competitor

D. Increasing prices

Answer: C

Which of the following is a tactical action?

Which of the following is a tactical action? 

A. New distribution channels

B. Mergers

C. New product introductions

D. Entering new markets

Answer: A

Which of the following is a strategic action?

Which of the following is a strategic action? 

A. Price cutting

B. Product enhancements

C. New product introductions

D. Increased marketing efforts

Answer: C

____ is the particular way a firm implements customer benefits that keeps the firm ahead of other firms in the market.

____ is the particular way a firm implements customer benefits that keeps the firm ahead of other firms in the market. 

A. Industry analysis

B. Competitive advantage

C. Resource distribution

D. Market relinquishment

Answer: B

In the context of entry wedges, which of the following is the key benefit of rule changes by the government?

In the context of entry wedges, which of the following is the key benefit of rule changes by the government? 

A. Place

B. Delivery

C. Quality

D. Technology

Answer: D

In the context of entry wedges, _____ occurs because government agencies, government-sponsored commercial contracts, and many big businesses have policies that provide for quotas for buying from small businesses.

In the context of entry wedges, _____ occurs because government agencies, government-sponsored commercial contracts, and many big businesses have policies that provide for quotas for buying from small businesses. 

A. second sourcing

B. favored purchasing

C. market relinquishment

D. customer contracting




Answer: B

Which of the following is true of the entry wedge of second sourcing?

Which of the following is true of the entry wedge of second sourcing? 

A. It occurs when business firms leave a market.

B. It occurs because many big businesses have policies that provide for set-asides for purchases from small businesses.

C. It offers the advantage of being globally based.

D. It provides a competitive pressure to ensure that suppliers keep providing the best service and prices.

Answer: D

Which of the following is a key benefit of the entry wedge of customer contracting?

Which of the following is a key benefit of the entry wedge of customer contracting? 

A. Scale savings

B. Lower costs

C. Scope savings

D. Technology

Answer: D

Which of the following statements is true regarding the entry wedge of supply shortage?

Which of the following statements is true regarding the entry wedge of supply shortage? 

A. It occurs when a new product is in demand.

B. It takes place in a stable market that doesn't change rapidly.

C. It takes place in a long-term market.

D. It occurs when certain physical resources are unutilized.

Answer: A

An opportunity that makes it possible for a new business to gain a foothold in a market is referred to as a(n) _____.

An opportunity that makes it possible for a new business to gain a foothold in a market is referred to as a(n) _____. 

A. parallel competition

B. incremental innovation

C. differentiation strategy

D. entry wedge

Answer: D

According to Shepherd, Shanley, and Porter, which of the following is a small business supra-strategy?

According to Shepherd, Shanley, and Porter, which of the following is a small business supra-strategy? 

A. Altruism

B. Single-mindedness

C. Scope savings

Answer: B

Which of the following is a generic strategy that targets a portion of the market, called a segment or niche?

Which of the following is a generic strategy that targets a portion of the market, called a segment or niche? 

A. Focus strategy

B. Differentiation strategy

C. Cost strategy

D. Value strategy

Answer: A

Which of the following is true of a differentiation strategy?

Which of the following is true of a differentiation strategy? 

A. It requires a firm to offer a combination of cost benefits that appeals to the customers.

B. It is generally pursued by all small businesses.

C. It is aimed at mass markets.

D. It is used by businesses that pursue a very low cost operation.

Answer: C

Differentiation strategy is a type of generic strategy aimed at:

Differentiation strategy is a type of generic strategy aimed at: 

A. clarifying how one product is unlike another in a mass market.

B. mass markets in which a firm offers a combination of cost benefits that appeals to the customers.

C. a portion of the market, called a segment or niche.

D. buying in bulk and selling or repackaging in smaller amounts.

Answer: A

____ are classic strategies for businesses of all types and they include differentiation, cost, and focus.

____ are classic strategies for businesses of all types and they include differentiation, cost, and focus. 

A. Personalization strategies

B. Altruistic strategies

C. Retrenchment strategies

D. Generic strategies

Answer: D

Gross profit is defined as:

Gross profit is defined as: 

A. what is left after deducting the cost of goods sold.

B. what is left after deducting the operating expenses of the business.

C. the amount of money the owner takes out of the firm annually.

D. the profit earned by a company when its product is in the maturity stage of the product life cycle.

Answer: A

A research process that provides the entrepreneur with key information about other firms in the same line of business as his or her, the current situation and trends is known as:

A research process that provides the entrepreneur with key information about other firms in the same line of business as his or her, the current situation and trends is known as: 

A. SWOT analysis.

B. VRIO analysis.

C. value chain analysis.

D. industry analysis.

Answer: D

Retrenchment is:

Retrenchment is: 

A. the third life cycle stage.

B. a stage marked by a stabilization of demand.

C. a type of life cycle stage following a boom in which there is a rapid decrease in the number of firms.

D. an organizational life cycle stage in which established firms must find new approaches to improve the business.

Answer: D

In an industry life cycle, the shake-out phase ends when:

In an industry life cycle, the shake-out phase ends when: 

A. the firms introduce new products or services.

B. the competition between firms increases.

C. the rapid die-off of firms stops.

D. the growth phase begins.

Answer: C

____ is a type of life cycle stage following a boom in which there is a rapid decrease in the number of firms in an industry.

____ is a type of life cycle stage following a boom in which there is a rapid decrease in the number of firms in an industry. 

A. Shake-out

B. Growth stage

C. Maturity stage

D. Retrenchment

Answer: A

In which of the following stages is there an explosion of choices in terms of products and services?

In which of the following stages is there an explosion of choices in terms of products and services? 

A. Introduction stage

B. Growth stage

C. Maturity stage

D. Decline stage

Answer: B

Which of the following is characteristic of the boom stage in the life cycle of a product?

Which of the following is characteristic of the boom stage in the life cycle of a product? 

A. Most customers are unaware of the offerings.

B. Many firms close down.

C. Firms begin to compete on features and prices.

D. Established firms must find new approaches to improve the business.

Answer: C

A type of life cycle growth stage marked by a very rapid increase in sales in a relatively short time is called the _____.

A type of life cycle growth stage marked by a very rapid increase in sales in a relatively short time is called the _____. 

A. maturity stage

B. retrenchment

C. shake-out

D. boom

Answer: D

Growth stage is an industry life cycle stage in which:

Growth stage is an industry life cycle stage in which: 

A. customer purchases increase at a dramatic rate.

B. a product or service is being invented and initially developed.

C. sales and profits of the firms in the industry begin a falling trend.

D. an industry eventually reaches a relatively stable number of firms.

Answer: A

Which of the following is true of the introduction stage of a product?

Which of the following is true of the introduction stage of a product? 

A. Sales are almost always high.

B. Most customers are unaware of the offerings.

C. Firms begin to compete on features and prices.

D. Some products turn out to be extremely popular.

Answer: B

The life cycle stage in which a product or service is being invented is known as the _____.

The life cycle stage in which a product or service is being invented is known as the _____. 

A. growth stage

B. boom

C. introduction stage

D. shake-out

Answer: C

Changes in competitors, sales and profits in an industry over time are referred to as:

Changes in competitors, sales and profits in an industry over time are referred to as: 

A. industry dynamics.

B. retrenchment.

C. shake-out.

D. transformational competency.

Answer: A

As a firm gets more experience, it can often work with fewer mistakes and greater efficiencies, thereby lowering costs. This leads to the cost benefit of _____.

As a firm gets more experience, it can often work with fewer mistakes and greater efficiencies, thereby lowering costs. This leads to the cost benefit of _____. 

A. personalization

B. scope savings

C. learning

D. altruism

Answer: C

Buying in volume usually produces savings. This leads to the cost benefit of _____.

Buying in volume usually produces savings. This leads to the cost benefit of _____. 

A. scope savings

B. lower costs

C. scale savings

D. learning

Answer: C

Which of the following types of value benefits is most likely to be offered by a product if it helps the community, a group, the environment, or the world?

Which of the following types of value benefits is most likely to be offered by a product if it helps the community, a group, the environment, or the world? 

A. Scope savings

B. Personalization

C. Altruism

D. Scale savings

Answer: C

____ is a value benefit that can come from the products or services that a business owner offers, or from his or her firm's reputation.

____ is a value benefit that can come from the products or services that a business owner offers, or from his or her firm's reputation. 

A. Brand

B. Scale savings

C. Learning

D. Scope savings



Answer: A

A perceptual map is:

A perceptual map is: 

A. a chart that maps changes in competitors, sales and profits in an industry over time.

B. a graphic display which positions products according to their scores on important strategic dimensions.

C. a chart that indicates the changes in the magic number of a business owner.

D. a graphic display which indicates the various stages of the lifecycle of a product.

Answer: B

Which of the following is an advantage of picking customer-desired benefits that a business owner's competitors do not offer?

Which of the following is an advantage of picking customer-desired benefits that a business owner's competitors do not offer? 

A. They results in lower pricing.

B. They help business owners to set realistic goals.

C. They help a business owner in identifying the magic number.

D. They make the firm stand out from the competition.



Answer: D

Value benefits are important because:

Value benefits are important because: 

A. they lead to scope savings.

B. they lead to higher prices.

C. they result in scale savings.

D. they lead to reduced costs.

Answer: B

Which of the following types of customers are likely to generate more potential customers than any other type?

Which of the following types of customers are likely to generate more potential customers than any other type? 

A. Loyal customers

B. Local customers

C. Passionate customers

D. Corporate customers

Answer: C

In the goal step of the strategic planning process, the key is to:

In the goal step of the strategic planning process, the key is to: 

A. focus on the kind of customers the business wants to deal with.

B. bring together the decisions that underlie the business plan.

C. offer state-of-the-art or leading-edge technology.

D. build a brand reputation through the products or services.

Answer: B

Market scope is important because:

Market scope is important because: 

A. it helps business owners in determining the size of the target market.

B. it helps business owners to decide where to focus their sales and advertising efforts.

C. it helps business owners in designing a product.

D. it helps business owners in calculating their magic number.

Answer: B

Which of the following is true of niche markets?

Which of the following is true of niche markets? 

A. They are broad markets.

B. They target all the customers in the entire market.

C. They are specific and narrow.

D. They involve large portions of the population.

Answer: C

A _____ is a narrowly defined segment of the population that is likely to share interests or concerns.

A _____ is a narrowly defined segment of the population that is likely to share interests or concerns. 

A. niche market

B. mass market

C. primary market

D. parallel market

Answer: A

A customer group that involves large portions of the population is referred to as a _____.

A customer group that involves large portions of the population is referred to as a _____. 

A. niche market

B. secondary market

C. local market

D. mass market

Answer: D

_____ refers to the size of the market, whereas _____ refers to the geographic range covered by the market.

_____ refers to the size of the market, whereas _____ refers to the geographic range covered by the market. 

A. Scope; scale

B. Mass; niche

C. Scale; scope

D. Niche; mass

Answer: C

Which of the following is true of a blue ocean strategy?

Which of the following is true of a blue ocean strategy? 

A. It results in a new product or service.

B. It is the business equivalent of cloning.

C. It involves patterning a business on existing firms.

D. It matches the precision of copying as seen in franchising.

Answer: A

Amy plans to open a laundromat with a gym. She got the idea from the laundromat with a bar and game rooms, which she visits regularly. She wants to test her idea by starting out in a small space with the focus on the laundromat and a small space allocated for gym equipments. Amy's idea is an example of _____.

Amy plans to open a laundromat with a gym. She got the idea from the laundromat with a bar and game rooms, which she visits regularly. She wants to test her idea by starting out in a small space with the focus on the laundromat and a small space allocated for gym equipments. Amy's idea is an example of _____. 

A. a blue ocean strategy

B. a pure innovation

C. an altruistic approach

D. an incremental innovation

Answer: D

An overall strategic approach in which a firm patterns itself on other firms, with the exception of one or two key areas is referred to as _____.

An overall strategic approach in which a firm patterns itself on other firms, with the exception of one or two key areas is referred to as _____. 

A. pure innovation

B. niche strategy

C. incremental innovation

D. blue ocean strategy

Answer: C

Imitation plus one degree of similarity results in:

Imitation plus one degree of similarity results in: 

A. patterning a business on existing firms.

B. creating previously unseen products or services.

C. creating products or services that have no competitors.

D. characterizing a business based on the returns it offers.

Answer: A

An imitative business that competes locally with others in the same industry is referred to as _____.

An imitative business that competes locally with others in the same industry is referred to as _____. 

A. incremental competition

B. niche business

C. linear competition

D. parallel competition

Answer: D

Which of the following is true of imitation?

Which of the following is true of imitation? 

A. It does not involve patterning a business on existing firms.

B. It does not match the precision or completeness of copying seen in franchising.

C. It involves the creation of new products or services which have no competitors.

D. It results in the creation of previously unseen products or services.

Answer: B

Which of the following is an advantage of using an imitative strategy?

Which of the following is an advantage of using an imitative strategy? 

A. It allows entrepreneurs to do something that is very different from what others are doing.

B. It allows business owners to buy existing technologies.

C. It allows entrepreneurs to fit their businesses to their own ideas and preferences.

D. It allows business owners to create unique settings.

Answer: B

In an imitative strategy, an entrepreneur:

In an imitative strategy, an entrepreneur: 

A. creates a new product or service which has no competitors.

B. considers prospective customers before creating a product or service.

C. seeks to do something that is very different from what others are doing.

D. does more or less what others are already doing.

Answer: D

North American industry classification system (NAICS) codes have _____ digits.

North American industry classification system (NAICS) codes have _____ digits. 

A. three

B. six

C. eight

D. nine

Answer: B

Standard industrial classification system (SIC) codes have _____ digits.

Standard industrial classification system (SIC) codes have _____ digits. 

A. four

B. six

C. seven

D. nine

Answer: A

Which of the following are the two major classification systems that code industries?

Which of the following are the two major classification systems that code industries? 

A. NAICS and SIC

B. SCALE and SCOPE

C. SWOT and VRIO

D. OLC and SWOT

Answer: A

_____ is the general name for the line of product or service being sold, or the firms in that line of business.

_____ is the general name for the line of product or service being sold, or the firms in that line of business. 

A. Industry

B. Market

C. Scope

D. Niche group

Answer: A

Which of the following is the advantage of knowing the magic number?

Which of the following is the advantage of knowing the magic number? 

A. It helps in evaluating if the proposed business can deliver the desired return.

B. It helps in retaining customers.

C. It seeks out customers who are already being serviced by another firm.

D. It helps in making incremental product improvements.

Answer: A

Magic number is defined as:

Magic number is defined as: 

A. the number of employees hired by a start-up in the first year.

B. the post-tax income the entrepreneur personally seeks from the business.

C. the number of loyal customers.

D. the income a start-up is able to generate from quarterly sales.

Answer: B

Industry analysis is defined as the technique used to:

Industry analysis is defined as the technique used to: 

A. determine the magic number in a particular industry.

B. determine the extent to which a product is similar to another product.

C. study the dynamics and trends of an industry.

D. study the effects of low cost on an industry.

Answer: C

The fourth step of a small business' strategic planning process involves:

The fourth step of a small business' strategic planning process involves: 

A. considering the customers and the benefits to offer them.

B. refining the firm's capabilities in order to maintain a competitive advantage.

C. determining the best strategic direction and strategy for the firm.

D. studying the dynamics and trends of the industry.

Answer: C

Which of the following is the second step of a small business' strategic planning process?

Which of the following is the second step of a small business' strategic planning process? 

A. Reviewing and confirming the goals that define the firm

B. Knowing the magic number

C. Studying the dynamics and trends of the industry

D. Considering the customers and the benefits to offer them

Answer: D

The first step of the strategic planning process for a small business is:

The first step of the strategic planning process for a small business is: 

A. performing a SWOT analysis.

B. reviewing and confirming the goals that define the firm.

C. mapping the prospective customers.

D. studying the dynamics and trends of the industry.

Answer: B

Most small businesses are more _____ than _____.

Most small businesses are more _____ than _____. 

A. cost-directed; profit-directed

B. imitative; innovative

C. profit-directed; cost-directed

D. innovative; imitative

Answer: B

____ is the idea and actions that explain how a firm will make its profits.

____ is the idea and actions that explain how a firm will make its profits. 

A. Strategy

B. Objective

C. Mission

D. Goal

Answer: A

Which of the following would avoid intra family strife when the family business is passed down to the next generation?

Which of the following would avoid intra family strife when the family business is passed down to the next generation? 

A. Providing each member of the family business with the opportunity to obtain education and experience within the business.

B. Allowing each family member who does wish to enter the business to find out and do those functions and activities that he or she does best.

C. Being certain that all family members know and accept that they must join the business to continue the family business.

D. Always assume that the leadership of the business must come from within the family.

Answer: B

Which of the following statements about family businesses succession is true?

Which of the following statements about family businesses succession is true? 

A. Turning over management authority is not easy for most founders.

B. Fewer than 10 percent of family-owned businesses are successfully transferred to a second generation.

C. It is easy for the heir of the founder to assume authority.

D. Fewer than 5 percent family-owned businesses succeed long enough to be inherited by the third.

Answer: A

Which of the following is a disadvantage of buying a franchise?

Which of the following is a disadvantage of buying a franchise? 

A. It is more expensive than starting a new business.

B. You give up control of marketing and operations.

C. You compete with the franchise company itself.

D. You receive no training and management support.

Answer: B

In many franchises the franchiser oversees (or even manages) the selection of location, the construction of facilities, the acquisition and installation of necessary equipment, and the initial inventory with which to open business. Which of the following terms best represents this type of franchising?

In many franchises the franchiser oversees (or even manages) the selection of location, the construction of facilities, the acquisition and installation of necessary equipment, and the initial inventory with which to open business. Which of the following terms best represents this type of franchising? 

A. Cannibalization

B. Turnkey

C. Liquidation

D. Consignment

Answer: B

_____ provides an organization through which independent businesses may combine resources.

_____ provides an organization through which independent businesses may combine resources. 

A. Product distribution franchising

B. Trade name franchising

C. Conversion franchising

D. Business format franchising

Answer: C

Which of the following holds true for product distribution franchising?

Which of the following holds true for product distribution franchising? 

A. It provides the franchisee with specific brand named products, which are resold by the franchisee in a specified territory.

B. It provides an organization through which independent businesses may combine resources.

C. It is an agreement that provides only the rights to use the franchisor's trade name and/or trademarks.

D. It is an agreement that provides a complete business format.

Answer: A

Which of the following is an agreement that provides only the rights to use the franchisor's trade name and/or trademarks?

Which of the following is an agreement that provides only the rights to use the franchisor's trade name and/or trademarks? 

A. Product distribution franchising

B. Trade name franchising

C. Conversion franchising

D. Business format franchising

Answer: B

The value of a franchise is determined by:

The value of a franchise is determined by: 

A. the rights granted.

B. the conditions and standards set.

C. the operating permissions granted.

D. the value of assets acquired.

Answer: A

Which of the following is one important advantage of key resource allocation?

Which of the following is one important advantage of key resource allocation? 

A. It has a financial plan for the future, based on a single level of operations; a quantitative expression of the use of resources necessary to achieve a business's strategic goals.

B. As only assets are acquired, a subsequent business, regardless of its legal form, is not responsible for any of the acts or transactions made prior to purchasing the business.

C. It has an agreement between two or more entities to pool resources in order to complete a project.

D. It specifies the time that is required for a business to acquire resources, convert them into product, sell the product, and receive cash from the sale.

Answer: B

_____ are the only way a sole proprietorship may be purchased.

_____ are the only way a sole proprietorship may be purchased. 

A. Buy-ins

B. Takeovers

C. Key resource acquisitions

D. Buyouts

Answer: C

The primary advantage to a buyout is its:

The primary advantage to a buyout is its: 

A. hands-off approach.

B. significantly less cost.

C. simplicity.

D. employee stock option plan.

Answer: C

Seizing of control of a business by purchasing its stock to be able to select the board of directors refers to a(n):

Seizing of control of a business by purchasing its stock to be able to select the board of directors refers to a(n): 

A. buy-in.

B. takeover.

C. merger.

D. earn-out.

Answer: B

The price at which a buyer is indifferent about buying or not buying the business is called:

The price at which a buyer is indifferent about buying or not buying the business is called: 

A. the balance point.

B. the point of indifference.

C. caveat emptor.

D. the reversing point.

Answer: B

Which of the following refers to income capitalization?

Which of the following refers to income capitalization? 

A. Regular and systematic reduction in income that transfers asset value to expense over time.

B. Dividing projected net income excluding depreciation, interest, and owner draws, by the best return that you could expect to obtain in other investments.

C. Multiplying your estimate of future earnings by the net income to equity ratio.

D. The amount of profit earned by a business before calculating the amount of income tax owed.

Answer: B

_____ are rules of thumb that are commonly used to estimate firm value in relation to some easily observable characteristic of the business.

_____ are rules of thumb that are commonly used to estimate firm value in relation to some easily observable characteristic of the business. 

A. Synergies

B. Spin-offs

C. Codicils

D. Heuristics

Answer: D

The ratio of the value of a firm to its annual earnings is called:

The ratio of the value of a firm to its annual earnings is called: 

A. unappropriated profit.

B. accumulated earning.

C. retained earning.

D. the earnings multiple.

Answer: D

Which of the following is commonly used to estimate the value of a business?

Which of the following is commonly used to estimate the value of a business? 

A. Synergy

B. Comparable sales of other firms

C. Spin-offs

D. Industry heuristics

Answer: B

The amount for which an asset would sell, less the costs of selling the asset is called:

The amount for which an asset would sell, less the costs of selling the asset is called: 

A. book value.

B. replacement value.

C. net realizable value.

D. earnings multiple.

Answer: C

The difference between original acquisition cost and the amount of accumulated depreciation is called the:

The difference between original acquisition cost and the amount of accumulated depreciation is called the: 

A. replacement value.

B. book value.

C. earnings multiple.

D. discounted cash flow.

Answer: B

____ analysis is based on the concept that the longer you have to wait to receive money, the less valuable it is right now.

____ analysis is based on the concept that the longer you have to wait to receive money, the less valuable it is right now. 

A. Discounted cash flow

B. Replacement value cash flow

C. Free cash flow

D. Book value cash flow



Answer: A

____ are the cash flows that have been reduced in value because they are to be received in the future.

____ are the cash flows that have been reduced in value because they are to be received in the future. 

A. Book value cash flows

B. Replacement value cash flows

C. Free cash flows

D. Discounted cash flows

Answer: D

Patents and trade secrets are examples of:

Patents and trade secrets are examples of: 

A. employee stock option plans.

B. heuristics.

C. franchising.

D. intangibles.

Answer: D

Which of the following is a financial statement that will be checked during due diligence when buying an existing business?

Which of the following is a financial statement that will be checked during due diligence when buying an existing business? 

A. White paper

B. Balance sheet

C. Codicil

D. Amicus brief



Answer: B

Which of the following is the primary goal for performing due diligence?

Which of the following is the primary goal for performing due diligence? 

A. Finding any inefficiencies, unnoticed opportunities, waste, and mismanagement

B. Conducting extensive interviews with the sellers of the business

C. Identifying the potential competitors of the company

D. Studying the competitive strategies of the company

Answer: A

Which of the following terms means "let the buyer beware"?

Which of the following terms means "let the buyer beware"? 

A. Caveat lector

B. Spin-off

C. Caveat emptor

D. Synergy

Answer: C

Which of the following is the last step for performing due diligence?

Which of the following is the last step for performing due diligence? 

A. Obtain sufficient capital to purchase and operate the business.

B. Conduct extensive interviews with the sellers of the business.

C. Interview customers and suppliers of the business.

D. Study the financial reports and other records of the business.

Answer: A

Which of the following is the first step for performing due diligence?

Which of the following is the first step for performing due diligence? 

A. Study the financial reports and other records of the business.

B. Conduct extensive interviews with the sellers of the business.

C. Obtain sufficient capital to purchase and operate the business.

D. Make a personal examination of the site (or sites) of the business.

Answer: B

The process of investigating a business to determine its value is called:

The process of investigating a business to determine its value is called: 

A. synergy.

B. spin-off.

C. heuristics.

D. due diligence.

Answer: D

Which of the following is an excellent way to find businesses for sale?

Which of the following is an excellent way to find businesses for sale? 

A. Statistical surveys

B. Local community center

C. Networking

D. Universities

Answer: C

Which of the following is a disadvantage of purchasing an existing business?

Which of the following is a disadvantage of purchasing an existing business? 

A. Need for sufficient demand for the products and services to operate profitably.

B. Purchasing a business being significantly more expensive than a start-up.

C. Need to hire many new employees when buying an existing business.

D. Existing managers and employees resisting change.

Answer: D

If Sarah were to buy an existing business, which of the following disadvantages would you point out?

If Sarah were to buy an existing business, which of the following disadvantages would you point out? 

A. Difficulty in determining the worth of the business.

B. Possibility of established customers leaving due to change.

C. Need for establish production processes.

D. Buying a business being more expensive than starting one.

Answer: A

Which of the following is most likely to be an advantage of buying an existing business?

Which of the following is most likely to be an advantage of buying an existing business? 

A. It is easy to find an appropriate existing business for sale given the technology today.

B. Purchasing a business often requires less cash outlay than for creating a start-up.

C. Existing managers and employees embrace change due to continuing operations that provide job security.

D. New technology needs are eliminated when buying an existing business.

Answer: B

Sam used his management skills to start a loans advising website. He started seeing clients at his home before it grew into a well-established company in the next ten years. Which of the following entrepreneurial methods did he use in the beginning, to reduce the financial risk of his start-up?

Sam used his management skills to start a loans advising website. He started seeing clients at his home before it grew into a well-established company in the next ten years. Which of the following entrepreneurial methods did he use in the beginning, to reduce the financial risk of his start-up? 

A. Franchise

B. Consignment

C. Lean method

D. Liquidation

Answer: C

Which of the following is essential to the success of all start-ups when one uses the "lean" entrepreneurial methods?

Which of the following is essential to the success of all start-ups when one uses the "lean" entrepreneurial methods? 

A. Having experience managing large firms

B. Not encouraging standardizing repetitive characteristics of a business

C. Starting a business with a sole founder

D. Keeping in touch with one's customers

Answer: D

Which of the following is essential to the success of all start-ups?

Which of the following is essential to the success of all start-ups? 

A. Starting a business with low margins

B. Not going into competition with one's employer

C. Building trust in one's "story"

D. Not starting a business with one's established customers

Answer: C

A business that is created by separating parts of an operating business into a separate entity is called a:

A business that is created by separating parts of an operating business into a separate entity is called a: 

A. synergy.

B. franchise.

C. spin-off.

D. turnkey project.



Answer: C

The amount by which sales prices exceed product costs refers to:

The amount by which sales prices exceed product costs refers to: 

A. high margins.

B. synergy.

C. spin-off.

D. asset.

Answer: A

The single greatest hurdle to a successful start-up is obtaining and maintaining sufficient cash to support both operations and growth. Which of the following is needed by a successful start-up to overcome this hurdle?

The single greatest hurdle to a successful start-up is obtaining and maintaining sufficient cash to support both operations and growth. Which of the following is needed by a successful start-up to overcome this hurdle? 

A. Reserve price

B. High margins

C. Spin-off

D. Liquidation

Answer: B

Which of the following provides a buffer for the mistakes made by a start-up business?

Which of the following provides a buffer for the mistakes made by a start-up business? 

A. Liquidation

B. High margins

C. Effectuation

D. Mindshare

Answer: B

A combination in which the whole is greater than the sum of its component parts refers to:

A combination in which the whole is greater than the sum of its component parts refers to: 

A. revolving credit.

B. synergy.

C. microinventory.

D. spin-off.

Answer: B

Which of the following is accomplished by a small business when it secures outside investment?

Which of the following is accomplished by a small business when it secures outside investment? 

A. Business can be started by a sole individual.

B. Founders take part in a mentoring program.

C. It indicates a level of belief in the business and the owner.

D. Business can be started by an individual without prior experience.

Answer: C

In _____ executive volunteers contribute their time and energy in assisting start-up and struggling small businesses as a public service.

In _____ executive volunteers contribute their time and energy in assisting start-up and struggling small businesses as a public service. 

A. mentoring programs

B. consultancies

C. trade associations

D. franchising outlets

Answer: A

Which of the following ensures that a new business will be critically examined by outsiders who have no vested interest in the owners' idea, product, or service?

Which of the following ensures that a new business will be critically examined by outsiders who have no vested interest in the owners' idea, product, or service? 

A. Securing outside investment

B. Starting with more than one founder

C. Having previous experience of managing small firms

D. Having a detailed start-up budget

Answer: A

____ strengthen the local economy by helping create jobs through the establishment of successful small businesses.

____ strengthen the local economy by helping create jobs through the establishment of successful small businesses. 

A. Joint venture firms

B. Consultancies

C. Business incubators

D. Trade associations

Answer: C

A _____ is an organization that provides financial, technical, and managerial help to start-up businesses.

A _____ is an organization that provides financial, technical, and managerial help to start-up businesses. 

A. business incubator

B. trade association

C. venture capital firm

D. consultancy

Answer: A

Which of the following is most likely to increase the odds of start-up successes?

Which of the following is most likely to increase the odds of start-up successes? 

A. Starting business in a business incubator

B. Securing investment from family or friends

C. Having experience of managing large firms

D. Starting with one founder

Answer: A

Which of the following is most likely to be the best indicator of successful start-ups?

Which of the following is most likely to be the best indicator of successful start-ups? 

A. Level of experience of the founders

B. Social background of the founders

C. Financial background of the founders

D. Specific educational courses taken by the founder

Answer: A

The specific concept that leads to a start-up business usually comes from the _____ of the person starting the business.

The specific concept that leads to a start-up business usually comes from the _____ of the person starting the business. 

A. credentials

B. interests

C. education

D. experience

Answer: D

A(n) _____ credit is a credit agreement that allows the borrower to pay all or part of the balance at any time; as the loan balance is paid off, it becomes available to be borrowed again.

A(n) _____ credit is a credit agreement that allows the borrower to pay all or part of the balance at any time; as the loan balance is paid off, it becomes available to be borrowed again. 

A. revolving

B. installment

C. social

D. primary

Answer: A

Which of the following terms best represents something a business owns that has economic value or is expected to have economic value in the future?

Which of the following terms best represents something a business owns that has economic value or is expected to have economic value in the future? 

A. Asset

B. Revolving credit

C. Cash flow

D. Synergy

Answer: A

Which of the following is a disadvantage of a start-up?

Which of the following is a disadvantage of a start-up? 

A. It cannot begin with a "clean slate."

B. It cannot easily gain revolving credit.

C. It does not provide the owner with the opportunity to use the most up-to-date technologies.

D. It cannot provide new, unique products or services.

Answer: B

Which of the following would be a plus point for starting a new business?

Which of the following would be a plus point for starting a new business? 

A. Initial name recognition

B. Clean slate to begin

C. "Legacy" locations, buildings, and equipment

D. Accessibility to experienced managers and workers

Answer: B

Which of the following is most likely to be an advantage of a start-up?

Which of the following is most likely to be an advantage of a start-up? 

A. It begins with a clean slate.

B. It has initial name recognition.

C. It is easy to establish and it immediately provides positive cash flow.

D. It has easy access to revolving credit.

Answer: A

Which of the following is true for start-ups?

Which of the following is true for start-ups? 

A. It has initial name recognition.

B. A start-up is also known as an earn-out.

C. It involves purchases of existing businesses.

D. It can provide new, unique products or services that are not available.

Answer: D

Purchases of existing businesses may occur through _____ in which the business is bought over a period of time with money obtained from the business.

Purchases of existing businesses may occur through _____ in which the business is bought over a period of time with money obtained from the business. 

A. green field investments

B. blue ocean strategies

C. earn-outs

D. leveraged buyouts

Answer: C

A new business that has begun from scratch is called a:

A new business that has begun from scratch is called a: 

A. buyout.

B. franchise.

C. start-up.

D. buy-in.

Answer: C

A legal agreement that allows a business to be operated using the name and business procedures of another firm is referred to as a:

A legal agreement that allows a business to be operated using the name and business procedures of another firm is referred to as a: 

A. franchise.

B. blue ocean strategy.

C. green field investment.

D. cartel.

Answer: A

Which of the following is one of the ways to get into small business management?

Which of the following is one of the ways to get into small business management? 

A. Narrowcasting

B. Franchising

C. Expropriating

D. Onboarding

Answer: B