Professional Documents
Culture Documents
Ed MCQs
Ed MCQs
Ed MCQs
Contents
Chapter 1: The Foundations of Entrepreneurship Self-Study Quiz ............................................ 2
Chapter 2: Inside the Entrepreneurial Mind: From Ideas to Reality Self-Study Quiz................ 4
Chapter 3: Designing a Competitive Business Model and Building a Solid Strategic Plan Self-
Study Quiz ...................................................................................................................................... 6
Chapter 4: Conducting a Feasibility Analysis and Crafting a Winning Business Plan Self-Study
Quiz ................................................................................................................................................. 8
Chapter 5: Form of ownership ...................................................................................................... 11
Chapter 6 : Franchising and entrepreneurship .............................................................................. 14
Chapter 7: Buying an existing business ........................................................................................ 16
Chapter 8: Guerilla marketing strategies ...................................................................................... 19
Chapter 9: E-Commerce and entrepreneur ................................................................................... 21
Chapter 10: Pricing strategies ....................................................................................................... 24
Chapter 11: Creating a successful financial plan ......................................................................... 26
Chapter 12: Managing cash flow .................................................................................................. 28
Chapter 13: Source of financing ................................................................................................... 31
Chapter 14: Choosing the right location ....................................................................................... 33
Chapter 15: Global Aspects of entrepreneurship .......................................................................... 35
Chapter 16: Building a new venture team and planning for next generation ............................... 38
Each activity contains 10 questions.
2. Economies that were state controlled and centrally planned are now fertile for growing small
businesses. The countries being part of this group include the following EXCEPT:
a) Canada
b) China
c) Eastern European countries
d) Russia
e) Vietnam
6. What factors and forces are encouraging the current trend in entrepreneurial activity?
a) Availability of various franchises
b) Ability to acquire investors
c) Low entry investment to start a business
d) Cooperation of government with tax incentives
e) Growing number of colleges and students involved with entrepreneurial studies
7. Home-based businesses are increasing at a significant rate. Which one of the following is NOT
a factor in the home being the first choice location?
a) Flexible lifestyle
b) Less inventory of product required
c) Minimal start-up and operating costs
d) Technology increases flexibility in type of business
e) Use of Internet for e-businesses
8. Small business creates 60 percent to 80 percent of all new jobs in the United States. The majority
of these businesses are involved in what type of industry?
a) Construction
b) Manufacturing
c) Food
d) Service and Retail Industries
e) Financial
3. Entrepreneurs require what side of the brain to help them meet the requirements for
success?
a) Left side
b) Right side
c) Both right and left sides
d) Neither right nor left sides
e) The brain is not an important ingredient
4. Potential barriers to creativity are limitless. Which one of those listed below is NOT a
barrier?
a) Logical thinking
b) Fearing failure
c) Ambiguity
d) Following the rules
e) Being practical with a solution
7. What is one of the best ways to generate creative thinking while you are on the job?
a) Don't gain a formal education
b) Don't gain a total understanding of the problem
c) Don't think convergently and divergently
d) Don't schedule every minute of the day
e) Don't use simulations
8. Which of the following shows the proper order of select steps in the creative process?
a) Preparation, implementation, verification, illumination
b) Preparation, verification, implementation, illumination
c) Verification, preparation, implementation, illumination
d) Preparation, illumination, verification, implementation
e) Preparation, implementation, illumination, verification
9. What is a good recommendation for forming and conducting a brainstorming session?
a) Throw logic out the window
b) Distinguish good ideas from bad ideas during the session
c) Create an all-day retreat for the session
d) Restrict the guest list to only top management
e) Allow employees to prepare for the session ahead of time
10. Music writers would need to protect their songs by filing for which type of intellectual
property protection?
a) A patent
b) A trademark
c) A copyright
d) A trade secret
e) A service mark
5. Which of the following is the best process for a portion of the strategic management
process?
a) Analyze competition, scan the environment, establish controls
b) Develop a clear vision, assess strengths and weaknesses, scan environment for
opportunities
c) Establish controls, create goals and objectives, identify key factors
d) Formulate strategic options, analyze the competition, create goals and objectives
e) Analyze competition, create goals and objectives, establish controls
9. When beginning the implementation phase of strategic management, the plan should be
divided into projects. Each project should be defined by ________.
a) The purpose of the project
b) The areas of the company to be involved
c) The project's contribution to the strategic plan
d) The resources needed to complete the project successfully
e) All of the above
10. Which is NOT a perspective to consider in using a balanced scorecard for performance?
a) Meeting responsibility to society
b) Financial standards do not contribute to the overall review of a strategy
c) Continue to innovate
d) Goals for productivity and cycle time
e) Goals for durability, service, and reliability
3. Which of the following conditions would make an industry more threatening to new
entrants?
a) Less presence of economies of scale
b) High capital requirements
c) Buyers with low brand loyalty
d) Laissez-faire governmental policies in the market
e) Few competitors within the industry
8. When describing your firm's marketing strategy, which of the following is NOT a factor in
defining your target market?
a) Describing where potential customers live and work
b) Estimating the ages, income level, and other pertinent demographics
c) Estimating the number of goods that each customer would buy
d) Understanding needs and wants
e) Determining the basis of differentiation in the minds of the target market
9. What financial statements are necessary to include in a business plan for either an existing
business or startup?
a) Monthly sales forecast, income statement, balance sheet
b) Balance sheet, operating ratio statement, break even statement
c) Balance sheet, cash flow statement, sales statement
d) Ratio analysis, balance sheet, income statement
e) Balance sheet, income statement, cash flow statement
10. When delivering a business plan presentation to investors and creditors, it is a good idea to
________.
a) Be as detailed as possible, covering all of the points of the business plan
b) Keep it simple and use visual aids
c) Use technical terminology to emphasize your knowledge of the industry
d) Improvise as you present your speech to emphasize your personality
e) Allow all of the founders of the business an opportunity to present their contributions to
the venture
5. The _____ legal structure allows investors to limit their liability to their personal
investment in the business.
a) Partnership
b) LLC
c) Corporation
d) Proprietorship
e) Partnership and LLC
7. In which of the following legal organization forms is ownership the most easily
transferable?
a) The corporation
b) The general partnership
c) The limited liability partnership (LLP)
d) The structured partnership (SP)
e) The proprietorship
8. What is a major advantage of the S corporation over the corporation or C corporation?
a) The S corporation may be publicly traded, and a C corporation may not.
b) The profits of an S corporation are passed through to the owners' personal income taxes
and are thus taxed only once.
c) The S corporation offers limited liability of its owners, limited to their personal investment
in the business, whereas a C corporation does not.
d) The S corporation allows for unlimited numbers of owners; a C corporation only allows
for up to 75 owners.
e) Ownership in an S corporation may be handed down through inheritance, whereas
ownership in a C corporation may not.
9. If an S corporation's owners choose to reinvest the company's net income back into the
business, ________.
a) the owners will not have to pay income taxes on that portion
b) the S corporation will have to pay income tax on that portion
c) the owners will have to pay income tax on that portion, regardless of the fact that they did
not receive the income
d) the S corporation will not have to pay sales tax on that portion
e) the organization will compensate the owners later in the next year for the money owed
them
2. ________ is where the franchisee purchases the right to use all of the elements of a fully
integrated business operation.
a. Pure franchising
b. Segment franchising
c. Trademark franchising
d. Multiple franchising
e. Product distribution franchising
3. Why is the purchase of a franchise sometimes considered to be a better option than starting
a business independently, from scratch?
a. The upfront costs are lower for the rights to a franchise than they are for a new independent
business.
b. The franchiser will absorb the first few years' losses as a part of the services provided.
c. The franchisee receives a business system, training, support, advice, and brand recognition
that an independent entrepreneur would not receive.
d. The franchisee receives a portion of the profits of the parent company, whereas the
independent entrepreneur would not.
e. The franchiser will come into the franchisee's company and operate it until it becomes
profitable, which would never be an option for the independent entrepreneur.
4. Since franchises are so widespread, often nationally and internationally interspersed, how
is advertising handled between the franchiser and franchisee?
a. The franchiser does all of the marketing for the franchisee, in return for royalties.
b. The franchisee pays the franchiser to arrange for all of the advertising that is to be
performed.
c. The franchiser puts national ads in the papers and on the television, and anything else is up
to the franchisee.
d. The franchisee pays a marketing fee to support company-wide advertising, and is also often
required to spend a predetermined amount on advertising in the local market to support her
location.
e. There is no prevalent pattern for how advertising is conducted within a franchise system.
It varies from franchise to franchise.
5. Which of the following is NOT considered to increase the success rate of franchisees when
included by the franchise, as noted in a recent survey.
a. Requires prior industry experience
b. A strong brand name
c. No absentee ownership
d. Offers training programs to improve knowledge and skills
e. Provides financial assistance
6. Where can an entrepreneur find the most accurate information about the total cost of
opening a certain franchise?
a. In the local newspaper
b. Franchise Disclosure Document
c. On the parent company's web site
d. From other entrepreneurs that have opened the franchise
e. From the government offices of the state wherein the parent company has incorporated
7. The following are all factors to consider whether you are franchise material.
a. Patience
b. General business skills
c. People skills
d. Leadership ability
e. All of the above
8. Which of the following is a factor that can signal that a franchiser does NOT have
underlying issues?
a. Reassurance that there is no need to read the contract - his word is as strong as oak
b. Reassurance that there is no need to go to the expense of hiring an attorney - her attorney
will help you through the confusing parts
c. Promises that you will earn your required rate of return, without documentation of this
outcome from other locations
d. A low franchisee turnover rate
e. Presentation of a one-time only, sign-today discount on franchise fees
9. Which of the following characteristics would suggest that a franchise might prove to be a
good business opportunity?
a. The franchise's business concept has already been proven by a number of established
competitors in the marketplace offering the same product.
b. The franchise offers a hot, trendy product that is unproven in the market.
c. The franchise is so new that it has not been covered by the media, and thus you will be one
of the first franchisees in the nation.
d. Favorable information from past franchisees
e. The franchise turnover rate is around 25%.
5. What are some of the easiest ways for easing the transition from the previous owner to the
new owner of an acquired business?
a) Be honest with employees about the changes to come.
b) Shake things up by laying-off the lowest-performing ten percent of your employee pool.
c) Keep your ideas for change to yourself for the first few months.
d) Keep to your initial schedule for any changes you were going to make. Employees will
protest, but remember, you are the boss.
e) Make the changes yourself - involving the previous owner in changes just complicates
things.
6. What does the term due diligence refer to?
a) The returns that the owner begins to see that are a part of his hard work after purchasing
an existing business
b) The hard work that the owner has to devote to turn around a newly purchased, struggling
business
c) The questioning that a previous owner will impose upon the new owner to ensure that his
values will be carried on through the sale of the business
d) The process an owner goes through to be qualified for a loan to purchase an existing
business
e) The investigation process that a new owner goes through to determine the strengths,
weaknesses, opportunities, and threats facing the existing business
9. Why is it a good idea to make adjustments to the typical balance sheet technique of valuing
a business, wherein liabilities are subtracted from assets?
a) The unadjusted method will not prove useful if a business's liabilities outscore its assets.
b) Balance sheets are usually only available for the last year, and are therefore inaccurate
representations of what has occurred in the business this year.
c) Most business owners are not honest on their balance sheets, so their figures are
meaningless.
d) It is important to consider balance sheet increases or decreases in market value determined
by undervalued real estate or overvalued inventory.
e) The balance sheet will not include valuable credit that the owner has established with
suppliers.
10. Why do earnings-based approaches to valuing a business more accurately capture the value
of the business to the purchaser than balance sheet-based approaches?
a) Balance sheet-based approaches are past-oriented, and earnings-based approaches look to
the future potential of the business.
b) Balance sheet approaches are too mathematical; earnings-based approaches are qualitative
and descriptive.
c) Balance sheet approaches allow for too much adjustment on behalf of the evaluator;
earnings-based approaches are more exact.
d) Balance sheet approaches are not precise, being as figures on the balance sheet are only
estimates. Future earnings are more precise figures.
e) Earnings-based approaches to calculating the value of an existing business mathematically
incorporate important considerations such as opportunity cost and future earnings
potential.
2. Which of the following is agreed upon by most marketing experts as the biggest marketing
mistake that small businesses make?
a) Carving out too narrow of a target niche
b) Spending too much on media advertising
c) Failing to come up with a memorable jingle for their advertising
d) Spending too much on marketing during the first year
e) Failing to clearly define the target market to be served
3. Why is market research so important for an entrepreneur?
a) It allows the entrepreneur's family to understand that he or she has put preparation into the
business before starting it.
b) It tests the entrepreneur's ability to stick to his idea, regardless of information that tells the
entrepreneur not to move forward.
c) It helps the entrepreneur to determine how to improve the current level of satisfaction and
find ways to attract new customers.
d) It gives the entrepreneur a head start on developing relationships later in the business's
development.
e) It gives the entrepreneur information on how much it will cost to start the business.
5. Which of the following would be a rigorous method of collecting primary data for market
research?
a) Looking at census data
b) Direct mail list purging
c) Reviewing industry consultant reports
d) Distributing customer surveys and questionnaires
e) Reading articles on customers in your industry
8. What is one competitive edge that small businesses can excel at, because of their size?
a) Lower pricing strategies
b) Higher advertising spending
c) Innovation
d) Supplier relationships
e) Market research gathering
4. Which of the following is a good method to use to attract potential customers to your web
site?
a) Hijacking customers away from the sites they are really attempting to visit
b) Sending out mass emails to customers
c) Giving away something "free," such as information, in addition to the goods that you sell
on your site
d) Choosing a URL address that is similar to a competitor's address, in hopes that customers
will be confused or mistaken
e) Advertising through a pop-up window that will not close without deliberate consumer
effort
8. What does the term "bounce rate" mean when it refers to e-commerce?
a) The number of times a customer clicks on an advertisement
b) The number of stores a customer visits each time she gets onto the Internet
c) The amount of time that has passed since the customer last purchased an item on the
Internet
d) The amount of time that has passed since the customer last logged onto the Internet
e) The percentage of visitors to a company's web site who view a single page and leave
without viewing other pages
10. How can an e-commerce small business protect itself from credit card fraud?
a) By verifying the purchase by asking for the 3-digit card verification value on the back of
the card
b) By setting up an inexpensive firewall
c) By offering high-end goods that no thief would attempt to purchase
d) By requiring the customer to send in a copy of the card and their driver's license before
being added to a customer list
e) By asking for the customer's checking account information as well as credit card
information
Chapter 10: Pricing strategies
1. The correct price of a company's product or service is ________.
a) a measure of the entrepreneur's costs and sales taxes on a good or service
b) less important to the customer than reductions in fixed or variable cost levels
c) a measure of what the customer must give up to obtain a good or service
d) similar across all target customers
e) the result of a simple mathematical equation
3. Which of the following is NOT a point of reference that consumers often use when
evaluating the fairness of a price?
a) The price they would charge if they were the entrepreneur
b) The price they have paid in the past for a product or service
c) The prices competitors charge for the same or similar products or services
d) The costs a company incurs to provide the product or service
e) The value they receive from the product
9. Which of the following best represents the pricing equation for a break-even pricing
strategy?
a) Selling Price = Contribution Margin * Quantity Produced
b) Selling Price = Customer's Preferred Price - Desired Profit per Item
c) Selling Price = Variable Cost per Item + Fixed Costs
d) Selling Price = ((Variable costs × Quantity Produced) + Total Fixed Costs))/Quantity
Produced
e) Selling Price = Variable Costs + Quantity Produced
10. In the United States, credit card users typically spend ____ % more than if they used cash.
a) 10
b) 20
c) 12
d) 16
e) 0
2. What is the fallacy made by the entrepreneur who decides to generate more cash through
increasing sales levels?
a) The entrepreneur fails to consider that it takes cash to generate more sales, something he
does not have.
b) The entrepreneur fails to understand that more sales will not be profitable.
c) The entrepreneur fails to take into account the interest rate on the loan she will have to take
out to cover the sales increase.
d) The entrepreneur fails to take into consideration the backlash from customers upon
realizing that they have to cover his cash deficit.
e) The entrepreneur fails to take into account the price drop he will have to use to generate
the increase in sales.
3. Why is a cash budget useful to an entrepreneur?
a) A cash budget allows the entrepreneur to determine how many items need to be sold to
remain profitable.
b) A cash budget shows chronologically when inflows and outflows of cash can be expected.
c) A cash budget allows the entrepreneur to determine how the company will generate new
sales.
d) A cash budget does not take into account the employees' salaries, which can be removed
through layoffs.
e) The cash budget helps entrepreneurs determine when it would be a good idea to bring on
additional product lines.
9. Trading goods and services for other goods and services rather than cash is called _____.
a) Rummaging
b) Pilfering
c) Scraping
d) Masting
e) Bartering
8. What is the most important criterion, from a lender's perspective, of a firm that applies for
a loan?
a) The management team at the helm of the business
b) The profitability of the business
c) The ability of the business to produce cash through its business model
d) The industry that the business operates within
e) The market research that the organization has performed
9. How does the Small Business Administration (SBA) assist entrepreneurs in finding
financing?
a) The SBA writes business plans for small businesses to carry to creditors that they would
like to approach for a loan.
b) The SBA helps small businesses clear out their inventory so that they appear more
attractive to potential investors.
c) The SBA offers a free financial screening for entrepreneurs that are seeking loans.
d) The SBA loans out money directly to entrepreneurs.
e) The SBA backs a large percentage of each loan that qualified entrepreneurs receive from
affiliated lenders.
10. What is the purpose of state-backed capital access programs (CAPs)?
a) CAPs are programs in which the state lends money directly to the entrepreneur.
b) CAPs require upfront payments by the entrepreneur, matched by the state, that become
insurance against default on loans given to entrepreneurs.
c) CAPs are loan education programs that, once completed, qualify the entrepreneur for
special financing.
d) CAPs are programs that introduce entrepreneurs to the many options that are available
through lenders.
e) CAPs prequalify entrepreneurs for state-backed loans based on their personal background.
3. Why might it be beneficial for an entrepreneur to locate her business near a competitor?
a) It would help the entrepreneur learn from the competitor.
b) It would allow for increased profitability through reduced transportation costs for
distributors.
c) It would not be beneficial for an entrepreneur to locate her business near a competitor.
d) The offerings of both businesses may attract more customers to the vicinity.
e) It could help the entrepreneur improve her image by being associated with the competitor.
4. What is the concept of trade area size?
a) It is the size of the region from which a firm can reasonably expect to draw customers.
b) It is the size of the trading floor of the local area merchant exchange.
c) It is the distance between your firm and its nearest three competitors.
d) It is the size of the Metropolitan Statistical Area (MSA) that your firm operates within.
e) It is the distance between your firm and the nearest indoor or outdoor mall area.
9. For retailers, merchandise purchased through impulse buying should be located ________.
a) near the back of the store
b) in areas that will be frequented by women shoppers
c) in the front of the store
d) near items that are not impulsively bought
e) near the restrooms
4. What is the downside to developing a master franchise design for foreign expansion of
your service business?
a) Because the firm turns over the management of franchises in a country to a master
franchiser, the company has the least control in this arrangement.
b) Because the contracts that bind international franchises to the parent company cannot be
upheld in an international court, the master franchiser could take the business model and
develop it as his own business.
c) Many countries do not allow the master franchise design to be used within their borders,
so the design is only applicable to a handful of markets.
d) Many governments see the high profitability of the master franchise model and nationalize
the business, taking all profits for the local government.
e) Many customers see the master franchise design as cultural imperialism by U.S.
companies, and therefore boycott the franchise businesses.
5. Small business in the U.S. represents nearly _____ percent of export sales from the country.
a) 1
b) 10
c) 20
d) 65
e) 90
6. What agency can assist entrepreneurs in securing financing to support their export
strategies?
a) the Securities and Exchange Commission
b) the Export Banking Association
c) the U. S. Chamber of Commerce
d) the Central Intelligence Agency
e) the Federal Trade Commission
8. What domestic barriers exist that hinder entrepreneurs from expanding internationally?
a) Domestic customers dislike having to share the attention of the business with foreign
customers.
b) Tariffs imposed by domestic governments make the price of goods too high.
c) The domestic government has policies that bar entrepreneurs from exporting.
d) Entrepreneurs often do not know where to get information about how to start an export
effort.
e) Domestic transportation systems make it difficult to ship outside of the country.
9. What are some of the political barriers entrepreneurs encounter when expanding into
foreign markets?
a) Military action against the United States
b) Violent acts against their businesses
c) Customer disdain for international products
d) Transportation difficulties overseas
e) Entrepreneurial ignorance of the local market
10. Why is the World Trade Organization (WTO) so important to international business?
a) The WTO negotiates and polices trade agreements between its 153 member countries.
b) The WTO allows for tariff-free trade between its member countries.
c) The WTO decides trade policy for its member nations.
d) The WTO acts as an export management company, assisting entrepreneurs from all of its
member nations.
e) The WTO monitors human working conditions in businesses around the world.
Chapter 16: Building a new venture team and planning for next
generation
1. Which of the following is a behavior exhibited by an effective leader?
a. Empower employees to act in the best interest of the company
b. Management of small details of others' positions
c. Insistence that all decisions within the business be made by that leader
d. Firm adherence to one original plan without amendment
e. Resistance to altering leadership style simply because employees dislike it
4. What can be equally as important as salary levels to a young worker in today's workforce?
a. A matched retirement fund
b. A flexible work schedule
c. Three weeks' vacation pay
d. Stock options
e. An award program
5. What are the three phases of an effective interview?
a. Greeting the candidate, touring the facility, and getting right down to the desired salary
b. Reviewing the candidate's resume, asking them about their successes and failures, and
introducing them to employees
c. Calling the candidate to schedule the interview, interviewing, and calling them to let them
know they earned the position
d. Interviewing the candidate, taking them to lunch, and touring the facility
e. Breaking the ice, asking the right questions, and selling the company
7. Luckily enough for small businesses, the best long-term motivation for employees is
________.
a. stock options
b. recognition, praise, encouragement, feedback, and promotions
c. continued employment
d. a raise in salary
e. a trip to an exotic locale
10. How do employee stock ownership plans (ESOPs) help entrepreneurs exit from their
businesses?
a. Employees earn stock options instead of salary, saving the entrepreneur cash in the short-
run, and transferring ownership over to employees from the owner in the long-run.
b. Employees who work at an organization long enough have the option of choosing either a
retirement plan or up to 5% ownership in the company, which the owner grants them for
their continued loyalty.
c. Employees buy stock in other companies and use the dividends and gains to leverage a
buyout from the owner.
d. Employees or managers gradually purchase the owner's share of stock through salary
contributions until they either own the company outright or can leverage a buyout of the
remaining equity.
e. Employees, upon reaching twenty years' tenure with the company, have the option of
purchasing the company at a value the owner sets.