Entrepreneurship Successfully Launching New Ventures, 7th Edition By Bruce R. Barringer TEST BANK

Entrepreneurship, 7e (Barringer/Ireland) Chapter 1 Introduction to Entrepreneurship 1) The Bee Corp in the Opening Profile of Chapter 1 received important early capital through a grant from the ________.

A) U.S. Small Business Administration B) Food and Drug Administration C) Internal Revenue Service D) U.S. Chamber of Commerce E) Carnegie Foundation Answer: A Difficulty: Easy LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 2) Which of the following is an accurate characterization of interest in entrepreneurship?

A) There is minimal interest in entrepreneurship across the world.

B) There is minimal interest in entrepreneurship in North America and Europe, but significant interest in Asia and Australia.

C) There is significant interest in entrepreneurship in North America and Europe, but minimal interest in Asia and Australia.

D) While interest in entrepreneurship was once high, it is waning in popularity across the world.

E) There is tremendous interest in entrepreneurship across the world.

Answer: E Difficulty: Easy LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Application of Knowledge Quest. Category: Application 3) According to the Global Entrepreneurship Monitor (GEM) 2021/2022 survey, about ________ percent of adults in the United States are either starting a business or are running a business that has been in existence for less than three-and-a-half years.

A) 3.8 B) 5.5 C) 7.6 D) 9.0 E) 16.5 Answer: E Difficulty: Challenging LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

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4) According to the Global Entrepreneurship Monitor (GEM) 2021/2022 study, the majority of people in low-income countries are drawn to entrepreneurship ________.

A) to make a difference in the world B) due to lack of career prospects C) as a result of government incentives D) because an important role model was an entrepreneur E) to gain prestige Answer: A Difficulty: Moderate LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 5) Which of the following statements regarding survival rates of entrepreneurial firms in the United States is correct?

A) Over 50 percent after five years B) Approximately 40 percent after five years C) As high as 70 percent after 10 years D) Approximately 50 percent after 10 years E) As high as 90 percent after 10 years Answer: A Difficulty: Moderate LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 6) Cody Rodgers is the founder of a company named Extreme Sports Apparel. The company makes apparel products for extreme sports enthusiasts such as rock climbers, triathletes, skateboarders, and BMX bikers. Cody wants his company to pursue a high level of corporate entrepreneurship. To achieve that goal, Cody's firm should be ________.

A) innovative, risk averse, and take a "wait and see" posture B) taking a "wait and see" posture, innovative, and risk taking C) proactive, not innovative, and risk taking D) taking a "wait and see" posture, not innovative, and risk averse E) proactive, innovative, and risk taking Answer: E Difficulty: Moderate LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Analytical Thinking Quest. Category: Analytical

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7) Google is a firm that is proactive, innovative and risk-taking. From this description, we can most accurately conclude that Google has a high level of ________.

A) enterprise focus B) innovative intensity C) entrepreneurial intensity D) creative intensity E) innovative concentration Answer: C Difficulty: Moderate LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 8) Apple is an established firm that encourages and emphasizes entrepreneurial behavior throughout its various divisions. According to the textbook, Apple practices ________ entrepreneurship.

A) tactical B) corporate C) strategic D) business E) enterprise Answer: B Difficulty: Moderate LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 9) Entrepreneurship cannot occur in government agencies and nonprofit organizations.

Answer: FALSE Difficulty: Easy LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 10) According to the results of the GEM 2021/2022 survey, about one out of every six American adults is actively engaged in starting a business or is the owner/manager of a business that is less than three-and-a-half- years old.

Answer: TRUE Difficulty: Moderate LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

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11) According to the Bureau of Labor Statistics, 9 out of 10 businesses fail in their first few years of existence.

Answer: FALSE Difficulty: Moderate LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 12) Entrepreneurship is the process by which individuals pursue opportunities within the constraints of the resources they control.

Answer: FALSE Difficulty: Easy LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 13) Established firms with an entrepreneurial emphasis are proactive, innovative, and risk taking.

Answer: TRUE Difficulty: Moderate LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Analytical Thinking Quest. Category: Analytical 14) What is entrepreneurship? What is the essence of entrepreneurial behavior?

Answer: Entrepreneurship is the process by which individuals pursue opportunities without regard to the resources they currently control for the purpose of exploiting future goods and services. The essence of entrepreneurial behavior is identifying opportunities and putting useful ideas into practice.

Difficulty: Easy LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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15) The three primary reasons that people become entrepreneurs and start their own firms are to ________.

A) gain prestige, realize financial rewards, and eliminate risk in their lives B) do what they were "born" to do, be their own boss, and gain prestige C) take big risks, be their own boss, and do what they were "born" to do D) be their own boss, pursue their own ideas, and pursue financial rewards E) take advantage of government subsidies, pursue their own ideas, and realize financial rewards Answer: D Difficulty: Moderate LO: 1.2: Discuss three main reasons people decide to become entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 16) According to the textbook, the reason people give most often for becoming entrepreneurs is to ________.

A) realize financial rewards B) gain prestige C) be their own boss D) continue a family tradition E) pursue their own ideas Answer: C Difficulty: Easy LO: 1.2: Discuss three main reasons people decide to become entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 17) According to the textbook, starting a business to make a lot of money ________.

A) often fails to live up to its hype B) is equally as satisfying as other reasons for starting a business C) is the number one reason people start their own business D) is the number two reason that people start their own business, right behind the lack of better career prospects E) does not rank among the top three reasons that people start their own business Answer: A Difficulty: Moderate LO: 1.2: Discuss three main reasons people decide to become entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 18) Established firms seldom resist innovation.

Answer: FALSE Difficulty: Moderate LO: 1.2: Discuss three main reasons people decide to become entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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19) Describe the three primary reasons that people become entrepreneurs and start their own firms.

Answer: The three primary reasons that people become entrepreneurs and start their own firms are to (1) be their own boss, (2) pursue their own ideas, and (3) pursue financial rewards. Being one's own boss-is the reason given most commonly. Many entrepreneurs want to be their own boss because either they have had a long-time ambition to own their own firm or they have become frustrated working in traditional jobs. The second reason people start their own firms is to pursue their own ideas. Some people are naturally alert, and when they recognize ideas for new products or services, they have a desire to see those ideas realized. The third reason people start their own firms is to pursue financial rewards. This motivation, however, is typically secondary to the first two.

Difficulty: Moderate LO: 1.2: Discuss three main reasons people decide to become entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 20) The four characteristics of successful entrepreneurs cited in the textbook are ________.

A) passion for the business, on the cutting edge of technological change, very charismatic, and tenacity despite failure B) young and energetic, passion for the business, product/customer focus, and seeks recognition C) passion for the business, tenacity despite failure, product/customer focus, and execution intelligence D) on the cutting edge of technological change, forward thinking, tenacity despite failure, and product/customer focus E) passion for the business, seeks recognition, young and energetic, and execution intelligence Answer: C Difficulty: Moderate LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 21) The number one characteristic shared by successful entrepreneurs is ________.

A) a desire to achieve financial rewards B) a passion for their business C) a passion for creating employment for other people D) a desire to fulfill a lifetime dream E) a desire to revolutionize the market Answer: B Difficulty: Moderate LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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22) According to the textbook, the primary motivator behind entrepreneurs of social enterprises is to ________.

A) make a difference in people's lives B) make a lot of money C) increase their prestige D) transition to a high-level job in the corporate sector E) be their own boss and manage others Answer: A Difficulty: Moderate LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 23) Which of the following was NOT identified in the textbook as one of the five primary reasons passion is important for the launch of a successful entrepreneurial organization?

A) The ability to stick to a plan even when faced with evidence that changes are needed B) A willingness to work hard for an extended period of time C) The ability to overcome setbacks and "no's" D) The ability to listen to feedback on the limitations of your organization and yourself E) Perseverance and persistence when the going gets tough Answer: A Difficulty: Challenging LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Analytical Thinking Quest. Category: Analytical 24) The What Went Wrong? feature in Chapter 1 focuses on Prim, a failed startup in the laundry industry. According to the feature, Prim failed largely as a result of ________.

A) lack of product/customer focus B) poor intellectual property protection C) the individuals who started the firm were too young and inexperienced D) poor execution intelligence E) a lack of passion and resolve Answer: E Difficulty: Moderate LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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25) Stacey Wills, who is at heart a craftsperson, recently started a firm to manufacture a new innovative food blender. Stacey's desire is to sell her food blender to as many people as possible because she firmly believes in the merits of her product. Stacey's story best illustrates which of the following characteristics, or attributes, of a successful entrepreneur?

A) Product/customer focus B) Execution intelligence C) Tenacity despite failure D) A desire to please consumers E) A desire to gain financial rewards Answer: A Difficulty: Easy LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Analytical Thinking Quest. Category: Analytical 26) Alex and Patty Webb launched a firm several years ago and have been particularly successful in introducing new products to the marketplace. One thing that Alex and Patty are particularly good at is translating their thoughts, creativity, and imaginations into products that reach the marketplace. The ability to make this happen is most closely related to which of the following characteristics of successful entrepreneurs?

A) A passion for the business B) Execution intelligence C) Tenacity despite failure D) Product/market focus E) A desire for recognition Answer: B Difficulty: Moderate LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 27) ________ are organizations that provide startups with shared operating space.

A) Incubators B) Intrapreneurs C) Accelerators D) Capital markets E) Banks Answer: A Difficulty: Challenging LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Analytical Thinking Quest. Category: Analytical

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28) The number one characteristic shared by successful entrepreneurs is passion for the business.

Answer: TRUE Difficulty: Easy LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 29) The four main characteristics of successful entrepreneurs are: passion for the business, execution intelligence, product/customer focus, and tenacity despite failure.

Answer: TRUE Difficulty: Moderate LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 30) List the five primary reasons passion is important for the launch of a successful entrepreneurial organization.

Answer: The five primary reasons passion is important for the launch of a successful entrepreneurial organization are 1) the ability to learn and iterate, 2) a willingness to work hard for an extended time, 3) the ability to overcome setbacks and "no's", 4) the ability to listen to feedback on the limitations of their organization and themselves, and 5) perseverance and persistence when the going gets tough.

Difficulty: Challenging LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 31) Describe the four main characteristics of successful entrepreneurs.

Answer: The four main characteristics of successful entrepreneurs are: passion for the business, product/customer focus, tenacity despite failure, and execution intelligence. The number one characteristic shared by successful entrepreneurs is passion for their business, whether it is in the context of a new firm or an existing business. This passion typically stems from the entrepreneur's belief that the business will positively influence people's lives. A second defining characteristic of successful entrepreneurs is a product/customer focus. This characteristic underscores two of the most important elements in any business-products and customers. The third characteristic of successful entrepreneurs is tenacity despite failure. Because entrepreneurs are typically trying something new, the failure rate associated with their efforts is naturally high.

The litmus test for entrepreneurs is their ability to persevere through setbacks and failures. The fourth characteristic of successful entrepreneurs is execution intelligence. The ability to effectively execute a business idea means developing a business model, putting together a new venture team, raising money, establishing partnerships, managing finances, leading and motivating employees, and so on.

Difficulty: Moderate LO: 1.3: Identify four main characteristics of successful entrepreneurs.

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32) Which of the following is NOT one of the five common myths about entrepreneurs?

A) Entrepreneurs are not motivated primarily by money.

B) Entrepreneurs are gamblers.

C) Entrepreneurs should be young and energetic.

D) Entrepreneurs love the spotlight.

E) Entrepreneurs are born not made.

Answer: A Difficulty: Moderate LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 33) According to the textbook, entrepreneurs are ________.

A) indecisive B) moderate risk takers C) intolerant of ambiguity D) motivated primarily by money E) attention seekers Answer: B Difficulty: Moderate LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 34) Which of the following was NOT identified as one of the common traits and characteristics of entrepreneurs?

A) Lengthy attention span B) Self-starter C) Tolerant of ambiguity D) Tenacious E) Introvert Answer: E Difficulty: Challenging LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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35) As a Small Business Development Center counselor reviewing the personality profiles of five potential entrepreneur, which of the following candidates has the most desirable mix of personal characteristics to become a successful entrepreneur?

A) Candidate A: visionary, energetic, moderate risk taker B) Candidate B: seeks recognition, self-starter, creative C) Candidate C: visionary, high-risk taker, energetic D) Candidate D: high-risk taker, achievement-motivated, networker E) Candidate E: tolerant for ambiguity, seeks recognition, motivated primarily by money Answer: A Difficulty: Challenging LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 36) Which of the following statements about entrepreneurs is NOT true?

A) People with self-employed parents or caregivers are more likely to become entrepreneurs.

B) Becoming an entrepreneur is a function of environment, life experiences, and personal choices.

C) There are personality traits that have a common association with entrepreneurs.

D) Some people have a genetic predisposition to become an entrepreneur.

E) People who know an entrepreneur personally are more than twice as likely to engage in entrepreneurship.

Answer: D Difficulty: Challenging LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 37) According to the Kauffman Foundation, which age bracket reflected the highest percentage of entrepreneurs in 2019?

A) The 20 to 34 age range B) The 45 to 54 age range C) The 35 to 44 age range D) The 55 to 64 age range E) The under 20 age range.

Answer: D Difficulty: Moderate LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Application of Knowledge Quest. Category: Application

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38) Which of the following statements is NOT correct regarding entrepreneurial activity and age range?

A) The highest percent of business owners are 35 and older.

B) Twenty-five percent of all new entrepreneurs are in the 20—34 age group.

C) The majority of business founders have no prior work experience.

D) The biggest shift in entrepreneurial activity from 1996 to 2018 was in the 55-64 age group.

E) Entrepreneurial activity is fairly evenly spread out over age ranges.

Answer: C Difficulty: Moderate LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Analytical Thinking Quest. Category: Analytical 39) Investors report their most important criterion in the decision to fund new ventures is the ________.

A) financial position of the new venture B) strength of the industry the new firm is entering C) strength of the new venture's marketing plan D) strength of the business idea E) strength of the entrepreneur Answer: E Difficulty: Moderate LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 40) Venture capitalists often express the sentiment that ________.

A) the strength of the entrepreneur and the strength of the business idea are of equal importance B) they would never fund a strong entrepreneur with a weak business idea C) they would rather fund a strong entrepreneur with a mediocre business idea than fund a strong business idea with a mediocre entrepreneur D) a new venture's marketing plan is more important than either the strength of the entrepreneur or the strength of the business idea E) they would rather fund a strong business idea with a mediocre entrepreneur than fund a strong entrepreneur with a mediocre business idea Answer: C Difficulty: Challenging LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Analytical Thinking Quest. Category: Analytical

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41) Pacific Fishing LLC is a startup that is working on a new technology for the fishing industry.

Because the technology it's working on is highly proprietary, the company is located in the warehouse district of a large western city. Pacific's founder, Ray Sims, rarely gives interviews and is careful not to divulge much about what the company is doing. Which of the following common myths about entrepreneurs does the behavior of its founder, Ray Sims, dispel?

A) Entrepreneurs are born, not made.

B) Entrepreneurs are gamblers.

C) Entrepreneurs are motivated primarily by money.

D) Entrepreneurs should be young and energetic.

E) Entrepreneurs love the spotlight.

Answer: E Difficulty: Moderate LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 42) According to the consensus of the research, some people are genetically predisposed to be entrepreneurs.

Answer: FALSE Difficulty: Moderate LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Analytical Thinking Quest. Category: Analytical 43) Most new entrepreneurs have work experience.

Answer: TRUE Difficulty: Moderate LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 44) List the five common myths regarding entrepreneurs.

Answer: TRUE Difficulty: Moderate LO: 1.4: Explain five common myths regarding entrepreneurship.

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45) What are the three types of startup firms?

A) Lifestyle firms, general firms, and entrepreneurial firms B) Standard-of-living firms, statutory firms, and general firms C) Entrepreneurial firms, standard-of-living firms, and statutory firms D) Lifestyle firms, salary-substitute firms, and entrepreneurial firms E) Innovative firms, entrepreneurial firms, and standard firms Answer: D Difficulty: Moderate LO: 1.5: Describe the three types of startup firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 46) Colorado Sandwich, Soup and Salad is a casual dining restaurant that has been owned by Stephanie Peterson for the past 14 years. The restaurant offers a menu that is typical for casual dining restaurants and affords Stephanie a level of income that is similar to what she would earn in a conventional job. According to the textbook, Colorado Sandwich, Soup and Salad is an example of a(n) ________ firm.

A) salary-substitute B) entrepreneurial C) quality-of-life D) lifestyle E) industry-standard Answer: A Difficulty: Moderate LO: 1.5: Describe the three types of startup firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 47) Montana Sky Trails leads multiday outdoor adventure trips for private groups and corporate clients to various locations across Montana. The company was started by Justin Smith, an individual that gave up a prestigious job in banking because Montana Sky Trails better accommodates his personal lifestyle. Montana Sky Trails is an example of a(n) ________ firm.

A) entrepreneurial B) salary-substitute C) standard-of-living D) statutory E) lifestyle Answer: E Difficulty: Easy LO: 1.5: Describe the three types of startup firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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48) Which type of firm brings new products and services to market by creating and seizing opportunities?

A) Entrepreneurial B) Salary-substitute C) Standard-of-living D) Statutory E) Lifestyle Answer: A Difficulty: Moderate LO: 1.5: Describe the three types of startup firms.

AACSB: Analytical Thinking Quest. Category: Analytical 49) According to the textbook, Airbnb, Facebook, and Uber are examples of ________ firms.

A) lifestyle B) salary-substitute C) industry-standard D) entrepreneurial E) standard-of-living Answer: D Difficulty: Easy LO: 1.5: Describe the three types of startup firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 50) The Partnering for Success feature in Chapter 1 focuses on campus ambassador or campus rep programs. Which of the following is NOT a characteristic cited that such programs typically look for in student hires?

A) Have upbeat personalities B) Are effective communicators C) Have a wide network of friends D) Have effective presentation skills E) Have in-depth knowledge and love for the company's product Answer: C Difficulty: Moderate LO: 1.5: Describe the three types of startup firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 51) The essence of entrepreneurship is creating value and then disseminating that value to customers.

Answer: TRUE Difficulty: Easy LO: 1.5: Describe the three types of startup firms.

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52) Identify the three types of startup firms and discuss how they differ. Provide examples of each type of firm.

Answer: The three types of startup firms are: salary-substitute firms, lifestyle firms, and entrepreneurial firms. Salary-substitute firms are small firms that afford their owners a level of income similar to what they would earn in a conventional job. Examples of salary-substitute firms are dry cleaners, convenience stores, restaurants, accounting firms, retail stores, and hairstyling salons. Lifestyle firms provide their owner or owners the opportunity to pursue a particular lifestyle and earn a living while doing so. Examples of lifestyle firms include ski instructors, golf pros, and tour guides. Entrepreneurial firms bring new products and services to market by creating and seizing opportunities. There are many examples of entrepreneurial firms in computer software, biotechnology, and medical devices.

Difficulty: Moderate LO: 1.5: Describe the three types of startup firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 53) According to the Kauffman Foundation, in 2020, women accounted for what percent of new business owners?

A) 40.5 percent B) 49.5 percent C) 30.5 percent D) 25.5 percent E) 15.5 percent Answer: A Difficulty: Easy LO: 1.6: Discuss the changing diversity of new entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 54) There was ________ in the number of minority entrepreneurs in the United States from 1996 to 2020.

A) a slight increase B) a substantial decrease C) no meaningful change D) a substantial increase E) a slight decrease Answer: D Difficulty: Moderate LO: 1.6: Discuss the changing diversity of new entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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55) Which generation was born between 1997 and 2012?

A) Gen Z B) Millennials C) Gen X D) Baby Boomers E) Gen Y Answer: A Difficulty: Moderate LO: 1.6: Discuss the changing diversity of new entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 56) According to a 2021 Ernst & Young survey, which generation reported 49 percent of their cohort being very or extremely likely to start their own business?

A) Gen Y B) Millennials C) Baby Boomers D) Gen Z E) Gen X Answer: D Difficulty: Challenging LO: 1.6: Discuss the changing diversity of new entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 57) In every U.S. census since 1880, immigrants are more likely to be self-employed than the native-born population.

Answer: TRUE Difficulty: Moderate LO: 1.6: Discuss the changing diversity of new entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 58) Although interest in entrepreneurship remains high nationwide, the number of women-owned businesses is decreasing.

Answer: FALSE Difficulty: Moderate LO: 1.6: Discuss the changing diversity of new entrepreneurs.

AACSB: Application of Knowledge Quest. Category: Application

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59) Unfortunately, statistics show that there is very little interest in entrepreneurship among young people in the United States.

Answer: FALSE Difficulty: Moderate LO: 1.6: Discuss the changing diversity of new entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 60) As new products that are better than the existing generation of products are introduced, sales normally increase because the new products provide consumers increased value or worth. This process is called ________.

A) creative destruction B) repetitive destruction C) iterative replacement D) inventive replacement E) iterative destruction Answer: A Difficulty: Moderate LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

AACSB: Analytical Thinking Quest. Category: Analytical 61) The process of creative destruction was argued in the book The Theory of Economic Development written by ________.

A) B. Barringer B) Alexander Osterwalder C) Joseph Schumpeter D) Michael Porter E) Jim Collins Answer: C Difficulty: Moderate LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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62) According to the textbook, entrepreneurship has historically had ________.

A) a major impact on the economy and minor impact on society B) a minor impact on both the economy and society C) a major impact on society and minor impact on the economy D) a major impact on both the economy and society E) no impact on either the economy or society Answer: D Difficulty: Easy LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 63) ________ is the process of creating something new, which is central to the entrepreneurial process.

A) Creative destruction B) Modernism C) Execution D) Creativity E) Innovation Answer: E Difficulty: Easy LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 64) Joseph Schumpeter argued that entrepreneurs develop new products and technologies that over time make current products and technologies obsolete, and this process, which he called creative destruction, is good because it stimulates economic activity.

Answer: TRUE Difficulty: Moderate LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 65) Entrepreneurial firms have an impact on economies, societies, and larger firms.

Answer: TRUE Difficulty: Easy LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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66) According to the SBA, from 2015 to the first quarter of 2022, small businesses created 66 percent of private-sector new jobs in the U.S. Answer: TRUE Difficulty: Challenging LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 67) Discuss the two primary reasons that entrepreneurial behavior has a strong impact on the United States economy.

Answer: The two reasons that entrepreneurial behavior has a strong impact on the United States economy are innovation and job creation. Innovation is the process of creating something new, which is central to the entrepreneurial process. According to the National Science Foundation, small innovative firms that engage in R&D generate more patents per employee than larger businesses that engage in R&D.. In regard to job creation, according to the SBA, small businesses create a substantial number of new jobs in the United States. Firms with fewer than 500 employees created 66 percent of private-sector jobs from 2015 to the first quarter of 2022.

Difficulty: Challenging LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 68) Which of the following is the correct sequence for the four steps in the entrepreneurial process?

A) Deciding to become an entrepreneur, developing successful business ideas, moving from an idea to an entrepreneurial firm, managing and growing the entrepreneurial firm B) Developing successful business ideas, deciding to become an entrepreneur, moving from an idea to an entrepreneurial firm, managing and growing the entrepreneurial firm C) Developing successful business ideas, moving from an idea to an entrepreneurial firm, deciding to become an entrepreneur, managing and growing the entrepreneurial firm D) Deciding to become an entrepreneur, moving from an idea to an entrepreneurial firm, developing successful business ideas, managing and growing the entrepreneurial firm E) Managing and growing the entrepreneurial firm, developing successful business ideas, deciding to become an entrepreneur, moving from an idea to an entrepreneurial firm Answer: A Difficulty: Challenging LO: 1.8: Explain the entrepreneurial process.

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69) Which of the following is NOT one of the four steps of the entrepreneurial process?

A) Deciding to become an entrepreneur B) Determining how to seize the spotlight C) Developing successful business ideas D) Moving from an idea to an entrepreneurial firm E) Managing and growing the entrepreneurial firm Answer: B Difficulty: Easy LO: 1.8: Explain the entrepreneurial process.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 70) An event that prompts an individual to become an entrepreneur, such as losing a job, inheriting money, or accommodating a certain lifestyle, is referred to as a(n) ________.

A) prompting event B) entrepreneurial prompt C) initiating event D) triggering event E) kick-off event Answer: D Difficulty: Easy LO: 1.8: Explain the entrepreneurial process.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 71) Jan Berry recently received a $500,000 inheritance from her maternal grandmother. Jan decided to use the money to start a business. The inheritance that Jan received was the ________ that prompted her to start a business.

A) prompting event B) entrepreneurial prompt C) initiating event D) triggering event E) kick-off event Answer: D Difficulty: Easy LO: 1.8: Explain the entrepreneurial process.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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72) A(n) ________ is a written document that describes all the aspects of a business venture in a concise manner.

A) business plan B) business model C) operations plan D) corporate plan E) contingency plan Answer: A Difficulty: Easy LO: 1.8: Explain the entrepreneurial process.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 73) A firm's ________ is a plan for how it competes, uses its resources, structures its relationships, interfaces with customers, and creates value to sustain itself on the basis of the value it creates.

A) business plan B) business model C) tactical model D) strategic plan E) operations model Answer: B Difficulty: Moderate LO: 1.8: Explain the entrepreneurial process.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 74) What are the four steps in the entrepreneurial process?

Answer: The four steps in the entrepreneurial process are 1) deciding to become an entrepreneur, 2) developing successful business ideas, 3) moving from an idea to an entrepreneurial firm, and 4) managing and growing an entrepreneurial firm.

Difficulty: Moderate LO: 1.8: Explain the entrepreneurial process.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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75) Which skill was identified as a link to studying potential opportunities to determine if any of the identified opportunities are the foundation for a viable business venture?

A) Critical thinking B) Data literacy C) Collaboration D) Ethical reasoning E) Social responsibility Answer: A Difficulty: Moderate LO: 1.9: Learn how understanding entrepreneurship and the entrepreneurial process can facilitate your career success.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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Entrepreneurship, 7e (Barringer/Ireland) Chapter 2 Recognizing Opportunities and Generating Ideas 1) Entrepreneurs essentially recognize a(n) ________ and then take action to turn it into a successful business.

A) opportunity B) design C) scheme D) objective E) mind map Answer: A Difficulty: Moderate LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 2) A(n) ________ is a favorable set of circumstances that creates a need for a new product, service, or business.

A) strategy B) threat C) design D) proposal E) opportunity Answer: E Difficulty: Easy LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective Thinking Quest. Category: Analytical 3) Which of the following statements about opportunities is NOT true?

A) Entrepreneurs recognize an opportunity and then take action to turn it into a thriving business.

B) Fresh opportunities are tough to spot.

C) To capitalize on an opportunity, its window of opportunity must be open.

D) Every idea is the source of an opportunity for an entrepreneur to pursue.

E) Entrepreneurship-related skills can be developed by engaging in opportunity recognition efforts over time.

Answer: D Difficulty: Moderate LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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4) The four essential qualities of an opportunity as cited in the text are: anchored in a product, service, or business that creates or adds value for its buyer or end user, attractive, durable, and ________.

A) timely B) practical C) striking D) attention-getting E) resilient Answer: A Difficulty: Moderate LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 5) Brad Johnson is starting a trendy, upscale men's clothing store in a mall near Seattle. He wants to open his store during the time period in which a business like his can realistically enter the new market. Brad is trying to open his business while the ________ is open.

A) safe harbor B) window of opportunity C) portal of entry D) exit barrier E) safety zone Answer: B Difficulty: Moderate LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 6) The term window of opportunity as discussed in Chapter 2, is a metaphor that describes the time period in which a firm can ________.

A) obtain funding or financing B) hire new employees C) complete a financial analysis D) realistically enter a new market E) write a business plan Answer: D Difficulty: Moderate LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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7) Monarc in the Opening Profile of chapter 2 is an example of an entrepreneur recognizing a(n) ________ and creating a business to address it.

A) opportunity gap B) idea C) mind map D) strong-tie relationship E) scheme Answer: A Difficulty: Moderate LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Analytical Thinking Quest. Category: Analytical 8) A(n) ________ is a favorable set of circumstances that creates the need for a new product, service, or business while a(n) ________ is a thought, an impression or a notion.

A) scheme, spark B) opportunity, idea C) idea, design D) idea, opportunity E) notion, scheme Answer: B Difficulty: Easy LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 9) Before getting excited about a business idea, it is critical to understand if the idea ________.

A) has the appropriate funding B) fills a need and satisfies the criteria for an opportunity C) already is held by a patent D) has sufficient managerial expertise available E) can be profitable Answer: B Difficulty: Moderate LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 10) An opportunity is synonymous with an idea.

Answer: FALSE Difficulty: Easy LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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11) A fresh opportunity is tough to spot.

Answer: TRUE Difficulty: Easy LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Analytical Thinking Quest. Category: Analytical 12) The term "window of opportunity" is a metaphor describing the time period in which a firm can realistically raise money.

Answer: FALSE Difficulty: Moderate LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 13) As a market matures, the window of opportunity closes.

Answer: TRUE Difficulty: Easy LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 14) Describe the difference between an idea and an opportunity. Why is the distinction important?

Answer: An opportunity is a favorable set of circumstances that creates a need for a new product, service, or business. An opportunity has four essential qualities. It is (1) attractive, (2) durable, (3) timely, and (4) is anchored in a product, service, or business that creates or adds value for its buyer or end user. In contrast, an idea is a thought, impression, or notion. It may or may not meet the criteria of an opportunity. This distinction between an idea and an opportunity is important because many entrepreneurial ventures fail not because the entrepreneurs that launched them didn't work hard, but rather because there was no real opportunity to begin with.

Difficulty: Easy LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 15) The three approaches entrepreneurs use to identify an opportunity include ________.

A) observing trends, solving a problem, and finding gaps in the marketplace B) studying industry trade journals, talking to consumers, and conducting surveys C) observing trends, conducting brainstorming sessions, and studying industry trade journals D) reading books, talking to consumers, and finding gaps in the marketplace E) reading books, solving a problem, and findings gaps in the marketplace Answer: A Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

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16) GasBuddy is a company started to help consumers save money on gas. Which environmental trend is most likely to have provided the impetus for the creation of this company?

A) Regulatory changes B) Political changes C) Economic forces D) Technological advances E) Social forces Answer: C Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Analytical Thinking Quest. Category: Analytical 17) Which of the following alternatives reflects a set of economic forces that may be of interest to entrepreneurs?

A) Level of disposable income, new uses of old technologies, and new laws and regulations B) New technologies, consumer spending patterns, and new laws C) Housing starts, consumer spending patterns, and stability of interest rates D) Social and cultural trends, level of interest rates, and what people think is "in" E) New changes in political areas, new laws, and level of disposable income Answer: C Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 18) Demographic changes are an example of a(n) ________.

A) economic force B) regulatory force C) political force D) technological advance E) social force Answer: E Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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19) An increased focus on health and wellness has resulted in a number of new business ideas including healthier foods and beverages, yoga instruction and training centers, and nutrition consulting. This is an example of an opportunity gap in which type of environmental trend?

A) Economic force B) Regulatory force C) Political force D) Technological advances E) Social force Answer: E Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 20) The emergence of the group of people who earn money by creating things is an important ________ trend.

A) political B) economic C) legal D) social E) demographic Answer: B Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 21) Hulu.com allows people to watch television shows and movies on the Internet. Hulu.com's business opportunity was made possible by ________ that enhanced the ability of television shows and movies to be uploaded to the Internet and played by anyone with a suitable computer and an Internet connection.

A) social forces B) technological advances C) legal changes D) regulatory changes E) economic forces Answer: B Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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22) A new firm was launched to help businesses comply with the Affordable Care Act. That opportunity was created by ________.

A) changes in economic forces B) demographic changes C) changes in social forces D) changes in technological forces E) political and regulatory changes Answer: E Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 23) After attending several parent group meetings to hear the concern of parents to protect their children's online reputation, privacy, and safety, SafetyWeb was launched. Which of the following approaches to identifying an opportunity was most likely the impetus for SafetyWeb? A) Observing trends B) Studying government reports C) Finding gaps in the marketplace D) Responding to economic trends E) Solving a problem Answer: E Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 24) The Savvy Entrepreneurial Firm feature in Chapter 2 features Swipe Out Hunger, an organization launched to help eliminate hunger on the UCLA campus and the surrounding community. This firm is an example of a ________.

A) corporate venture B) non-altruistic venture C) targeted venture D) social venture E) for-profit venture Answer: D Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Analytical Thinking Quest. Category: Analytical

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25) Jay Sorensen dropped a cup of coffee in his lap because the cup was too hot. He later launched a company to sell the insulating cup sleeve he invented. Which approach to identifying an opportunity was used by Sorensen?

A) Solving a problem B) Observing trends C) Finding gaps in the marketplace D) Leveraging social trends E) Mapping opportunities Answer: A Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 26) Clothing boutiques and specialty shops often start because there is a need for a particular product, but large retailers like Walmart and Costco can't sell enough of the item to stock it on their shelves. If a clothing boutique started to sell designer clothes or clothing for hard-to-fit people because the clothing wasn't being offered by a larger retailer, the best way to describe how that idea was recognized is ________.

A) finding a gap in the marketplace B) brainstorming C) observing trends D) solving a problem E) talking to consumers Answer: A Difficulty: Challenging LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 27) The aging population, the increasing diversity of the populations and employees desiring more flexible work schedules are examples of ________.

A) political action B) regulatory changes C) economic factors D) technological advances E) social trends Answer: E Difficulty: Challenging LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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28) Anytime Fitness was launched as a 24-hour fitness center to accommodate people who work odd hours and were unable to locate an open gym during their off hours. Anytime Fitness was created to ________.

A) fill a gap in the marketplace B) be a social venture C) respond to regulatory changes D) add to the creator economy E) respond to freelancers Answer: A Difficulty: Easy LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 29) The What Went Wrong? feature in Chapter 2 focuses on Sharingear, a service for independent musicians to use to share musical gear. Unfortunately, Sharingear failed in part because ________.

A) the market was too small B) the company had no musical gear to share C) the founder was networking at the expense of building a business D) too much time was spent perfecting their service E) there were too many competitors in the marketplace Answer: A Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 30) The three ways to identify an opportunity include observing trends, solving a problem, and finding an economic need.

Answer: FALSE Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 31) Conditions representing opportunities can lose their attractiveness as conditions change for firms' target customers.

Answer: TRUE Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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32) Sustainability is a social trend that has provided openings for new business and product opportunities.

Answer: TRUE Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 33) List the four environmental trends suggesting business, product, or service opportunity gaps.

Provide one example of each.

Answer: The four environmental trends suggesting business, product, or service opportunity gaps are economic forces, social forces, technological advances, and political action and regulatory changes. Consumer spending patterns are an example of economic forces.

Demographic changes are an example of social forces. New uses of old technologies are an example of technological advances. New laws are an example of political and regulatory changes.

Difficulty: Easy LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 34) Describe the three approaches entrepreneurs use to identify new business, product, and service opportunities.

Answer: The three ways that entrepreneurs identify new business, product, and service opportunities are through observing trends, solving a problem, and finding gaps in the marketplace. The first approach is to observe trends and study how they create opportunities to pursue. Economic forces, social factors, technological advances, and political action and regulatory changes are the most important trends to follow. The second approach is solving a problem. Sometimes identifying opportunities simply involves noticing a problem and finding a way to solve it. The third approach is finding gaps in the marketplace. This approach is accomplished by finding a need that customers have that is not being satisfied-by either large, established firms or entrepreneurial ventures. Entrepreneurs step in to start businesses to fill these gaps. There are also gaps in the marketplace that represent consumer needs that aren't being met by anyone.

Difficulty: Moderate LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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35) Which of the following statements is NOT true regarding the personal characteristics of entrepreneurs?

A) Some people think that entrepreneurs have a "sixth sense" that allows them to see opportunities that others miss.

B) The extent and depth of an individual's social network affects opportunity recognition.

C) Prior experience in an industry is a requirement for entrepreneurial success.

D) Most entrepreneurs believe they are more alert to opportunities than others.

E) It is more likely that an entrepreneur will get a new business idea through a weak-tie than a strong-tie relationship.

Answer: C Difficulty: Challenging LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Analytical Thinking Quest. Category: Analytical 36) The ability to notice things without engaging in deliberate search is referred to as ________.

A) cognitive alertness B) cognitive awareness C) managerial alertness D) entrepreneurial alertness E) individual awareness Answer: D Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 37) Kelly Pryor, who has launched several successful entrepreneurial firms, seems to have a "sixth sense" that allows him to see opportunities that others miss. Kelly's ability is referred to as ________.

A) individual awareness B) cognitive alertness C) entrepreneurial alertness D) individual readiness E) cognitive readiness Answer: C Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

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38) Which of the following statements is NOT true concerning prior industry experience?

A) There are no high-profile examples of people who started successful firms without prior industry experience.

B) Prior industry experience may be preferable for entrepreneurs.

C) Prior industry experience is not always necessary for startup success.

D) In some cases, prior industry experience may work against entrepreneurs.

E) Prior industry experience may fix the entrepreneur's mind on the traditional ways of doing things in an industry.

Answer: A Difficulty: Challenging LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 39) According to the textbook, research suggests that somewhere between ________ percent of those who start businesses got their ideas through social contacts.

A) 10 and 20 B) 20 and 30 C) 30 and 40 D) 40 and 50 E) 50 and 60 Answer: D Difficulty: Challenging LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 40) An individual who identifies a business idea on his or her own is referred to as a(n) ________ entrepreneur.

A) strong-tie B) functional C) network D) weak-tie E) solo Answer: E Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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41) A network entrepreneur is an individual who identifies his or her business idea ________.

A) on their own B) through the assistance of a paid consultant C) through social contacts D) with artificial intelligence E) through a business incubator program Answer: C Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 42) Which of the following is NOT true concerning creativity?

A) If at any stage of the creative process an individual gets stuck, it is best to return to the preparation stage.

B) Incubation is the "mulling things over" phase.

C) Preparation follows evaluation.

D) Elaboration is the final phase.

E) Creativity is the process of generating a novel or useful idea.

Answer: C Difficulty: Challenging LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 43) ________ relationships are characterized by frequent interactions that are more likely to form between like-minded individuals.

A) Balanced B) Weak-tie C) Lateral-tie D) Moderate-tie E) Strong-tie Answer: E Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

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44) Most of Sarah's ideas come from interacting with coworkers, friends, her spouse, her parents, and other people that share the same beliefs that she does. Sarah is getting most of her ideas through ________ -tie relationships.

A) weak B) horizontal C) strong D) multiple E) vertical Answer: C Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 45) Alex has a number of casual acquaintances that he interacts with infrequently. These are referred to as ________ -tie relationships.

A) strong B) moderate C) lateral D) weak E) multiple Answer: D Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 46) Research suggests that it is more likely that an entrepreneur will get a new business idea through a ________ -tie relationship than the alternatives.

A) weak B) moderate C) vertical D) lateral E) strong Answer: A Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

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47) ________ is the process of generating a novel or useful idea.

A) Innovation B) Imagining C) Creativity D) Visualization E) Envisioning Answer: C Difficulty: Easy LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 48) Which of the following represents the correct order of the five stages of the creative process?

A) Preparation, incubation, elaboration, insight, evaluation B) Insight, preparation, incubation, elaboration, insight C) Preparation, incubation, insight, evaluation, elaboration D) Incubation, evaluation, insight, preparation, elaboration E) Incubation, preparation, evaluation, elaboration, insight Answer: C Difficulty: Challenging LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 49) Macy is a very creative person. Often, when trying to generate a novel or useful idea, she spends several days "mulling over" the idea. Macy is in which stage of the creative process?

A) Preparation B) Insight C) Evaluation D) Elaboration E) Incubation Answer: E Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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50) In the five-stage creative process, the flash of recognition, or the "eureka" experience, occurs in the ________ stage.

A) insight B) preparation C) incubation D) elaboration E) evaluation Answer: A Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 51) The creative idea is put into final form in which stage of the creative process?

A) Insight B) Preparation C) Incubation D) Elaboration E) Evaluation Answer: D Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 52) In some cases, prior experience may work against entrepreneurs by fixing their minds on the traditional ways of doing things in an industry.

Answer: TRUE Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 53) Alertness is largely a learned skill.

Answer: TRUE Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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54) According to one study, network entrepreneurs identify significantly more opportunities than solo entrepreneurs.

Answer: TRUE Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 55) It is more likely that an entrepreneur will get a new business idea through a strong-tie than a weak-tie relationship.

Answer: FALSE Difficulty: Challenging LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 56) Incubation, or "mulling things over," is the first stage of the creative process.

Answer: TRUE Difficulty: Challenging LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 57) Insight is the step in the creative process that many entrepreneurs mistakenly skip.

Answer: FALSE Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 58) List the five stages of the creative process.

Answer: The five stages of the creative process are preparation, incubation, insight, evaluation, and elaboration.

Difficulty: Moderate LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

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59) Describe the difference between strong-tie and weak-tie relationships. Is it more likely that an entrepreneur will get new ideas through strong-tie or weak-tie relationships?

Answer: Strong-tie relationships are characterized by frequent interaction and form between coworkers, friends, and spouses. Weak-tie relationships are characterized by infrequent interaction and form between casual acquaintances. According to research in this area, it is more likely that an entrepreneur will get a new business idea through a weak-tie than a strong-tie relationship because strong-tie relationships, which typically form between like-minded individuals, tend to reinforce insights and ideas the individuals already have. Weak-tie relationships are not as apt to be between like-minded individuals, so one person may say something to another that sparks a completely new idea.

Difficulty: Challenging LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 60) ________ is a technique designed to generate a number of ideas quickly without criticism.

A) An insight group B) A competitive intelligence session C) A focus group D) A survey group E) A brainstorming session Answer: E Difficulty: Easy LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 61) Which of the following is NOT one of the rules for a formal brainstorming session?

A) No criticism is allowed.

B) The session moves quickly.

C) Freewheeling is supported.

D) Leapfrogging is encouraged.

E) The session is used for decision making.

Answer: E Difficulty: Moderate LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

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62) The number one rule for a brainstorming session is ________.

A) no criticism is allowed B) no freewheeling is allowed C) no leapfrogging is allowed D) no more than 10 people are allowed to participate E) no wild or unrealistic ideas are allowed Answer: A Difficulty: Moderate LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 63) A focus group is a gathering of 5 to 10 people who are selected because ________.

A) they are most likely to purchase large amounts of the product or service being discussed B) they responded to a self-selected opinion poll about the topic being discussed C) of their relationship to the issue being discussed D) they responded to a mail survey about the topic being discussed E) they are spokespersons for the topic being discussed Answer: C Difficulty: Moderate LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 64) According to the textbook, the best approach to utilizing a library for entrepreneurshiprelated research is to ________.

A) discuss your general area of interest with a reference librarian B) focus your efforts on studying newspapers and periodicals C) focus your efforts on browsing through industry-related materials D) discuss your general area of interest with other library patrons E) focus your efforts on academic journals Answer: A Difficulty: Moderate LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

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65) Which of the following is NOT a rule-of-thumb for making the initial contact when reaching out to potential mentors?

A) Put something in the subject line that will resonate with the recipient.

B) Be specific about why you are reaching out.

C) Provide a precise summary of who you are and what you want to achieve.

D) Keep the email short and to the point.

E) Say in general terms that you are looking for an experienced mentor to guide you through the startup process.

Answer: E Difficulty: Moderate LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 66) Much of the effectiveness of a focus group session depends on ________.

A) the moderator's ability to ask questions and keep the discussion on track B) internet research being shared C) identifying an appropriate mentor D) completing a mind map E) inhibiting the free flow of ideas Answer: A Difficulty: Moderate LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 67) Which idea-generating technique is being used when a company sends teams of testers to users' homes to see how its products are working?

A) Customer advisory board B) Library research C) Focus group D) Day-in-the-life research E) Brainstorming Answer: D Difficulty: Easy LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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68) Some companies set up ________ that meet regularly to discuss needs, wants, and problems that may lead to new ideas.

A) staff committees B) customer advisory boards C) managerial committees D) supervisory committees E) supplier advisory boards Answer: B Difficulty: Moderate LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 69) A focus group is used to generate a number of ideas quickly and encourage leapfrogging.

Answer: TRUE Difficulty: Moderate LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 70) Brainstorming sessions are designed to move slowly, so ideas can be presented and evaluated.

Answer: FALSE Difficulty: Challenging LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 71) Focus groups typically work best before brainstorming to help the entrepreneur generate a general idea for a business.

Answer: FALSE Difficulty: Moderate LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 72) Day-in-the-life research is a form of anthropological research.

Answer: TRUE Difficulty: Easy LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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73) List five techniques entrepreneurs can use to generate ideas.

Answer: Four techniques entrepreneurs can use to generate ideas are brainstorming, focus groups, library and internet research, customer advisory boards, and day-in-the-life research.

Difficulty: Moderate LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 74) Describe how brainstorming can help facilitate the generation of ideas, and outline the four rules for conducting a brainstorming session.

Answer: Brainstorming is a technique that is used to generate a number of ideas quickly. In a brainstorming session, the leader of the group of people is instructed to come up with ideas-one person shares an idea, another person reacts to it, another person reacts to the reaction, and so on.

A flip chart or whiteboard is typically used to record all the ideas. A productive session is freewheeling and lively. The main objective is to create an atmosphere of enthusiasm and originality where lots of ideas are generated. The four strict rules of brainstorming are as follows: 1. No criticism is allowed.

2. Freewheeling is encouraged—the more ideas, the better.

3. The session moves quickly, and nothing is permitted to slow down the pace.

4. Leapfrogging is encouraged. This means using one idea as a means of jumping forward quickly to other ideas.

Difficulty: Moderate LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 75) Describe how library and Internet research can be used to generate new business ideas.

Answer: Library and Internet research are important tools for generating business ideas. A natural tendency is to think that an idea should be chosen, the process of researching the idea should then begin. This approach is too linear. Often, the best ideas emerge when the general notion of an idea is merged with extensive library and Internet research. The best approach to utilizing a library is to discuss your general area of interest with a reference librarian, who can point you to useful resources, such as industry-specific magazines, trade journals, and industry reports. Simply browsing through several issues of a trade journal can spark new ideas. Internet research is also important. If you are starting from scratch, simply typing "new business ideas" into Google or Yahoo! will produce links to newspaper and magazine articles about the "hottest" and "latest" new business ideas. If you have a specific idea in mind, a useful technique is to set up a Google e-mail alert using keywords that pertain to your topic of interest The Internet can also be used for specific searches and to access blogs that provide insightful information on almost any topic.

Difficulty: Moderate LO: 2.4: Identify and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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Entrepreneurship, 7e (Barringer/Ireland) Chapter 3 Feasibility Analysis 1) Impact Food, discussed in the Opening Profile feature of Chapter 3, was launched ________.

A) at a tradeshow B) on the Shapeways platform C) on the CNBC show Shark Tank D) in a classroom at UC-Berkeley E) by a group of physicians Answer: D Difficulty: Easy LO: 3.1: Explain what a feasibility analysis is and why it is important.

AACSB: Analytical Thinking Quest. Category: Analytical 2) The process of determining the viability of a business idea is called ________.

A) feasibility analysis B) opportunity recognition C) viability analysis D) achievability analysis E) scenario analysis Answer: A Difficulty: Easy LO: 3.1: Explain what a feasibility analysis is and why it is important.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 3) ________ research probes data that is already collected.

A) Derivative B) Primary C) Secondary D) Indirect E) Direct Answer: C Difficulty: Easy LO: 3.1: Explain what a feasibility analysis is and why it is important.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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4) Cynthia Jones recently surveyed 200 of her classmates to get a sense of the demand for a new software product she is working on. This data is referred to as ________ research.

A) direct B) derivative C) primary D) secondary E) initial Answer: C Difficulty: Moderate LO: 3.1: Explain what a feasibility analysis is and why it is important.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 5) Talking to industry experts, obtaining feedback from prospective customers, and administering surveys are examples of ________ research.

A) primary B) secondary C) derivative D) principal E) fundamental Answer: A Difficulty: Easy LO: 3.1: Explain what a feasibility analysis is and why it is important.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 6) Which of the following is considered primary research?

A) Prospective customer feedback B) Trade journals C) Industry-related publications D) Government statistics E) Competitors' web sites Answer: A Difficulty: Moderate LO: 3.1: Explain what a feasibility analysis is and why it is important.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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7) Jennifer Burroughs is thinking about starting a firm in the upscale women's fashion industry.

To understand the competitive nature of the industry, and how she might position her products, Jennifer has spent considerable time researching industry-related publications, Hoover's Online, and ABI-Inform. Jennifer is conducting ________ research.

A) primary B) secondary C) action D) temporary E) direct Answer: B Difficulty: Moderate LO: 3.1: Explain what a feasibility analysis is and why it is important.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 8) Which of the following is NOT one of the four areas of feasibility analysis?

A) Product/service feasibility B) Financial feasibility C) Societal feasibility D) Organizational feasibility E) Industry/target market feasibility Answer: C Difficulty: Moderate LO: 3.1: Explain what a feasibility analysis is and why it is important.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 9) Feasibility analysis is the process of determining if a business idea is viable.

Answer: TRUE Difficulty: Easy LO: 3.1: Explain what a feasibility analysis is and why it is important.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 10) According to Mullins, failure to investigate a business idea fully before writing a business plan increases the likelihood of an entrepreneur being blind to inherent risks and results in too positive of a plan.

Answer: TRUE Difficulty: Moderate LO: 3.1: Explain what a feasibility analysis is and why it is important.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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11) The four parts of feasibility analysis include: product/service feasibility, industry/target market feasibility, organizational feasibility, and financial feasibility.

Answer: TRUE Difficulty: Moderate LO: 3.1: Explain what a feasibility analysis is and why it is important.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 12) Secondary research probes data that is already collected.

Answer: TRUE Difficulty: Moderate LO: 3.1: Explain what a feasibility analysis is and why it is important.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 13) Explain the difference between primary and secondary research. Provide an example of each.

Answer: Primary research is research that is collected by the person or persons completing the analysis. Examples include talking to prospective customers and getting feedback from industry experts. Secondary research probes data that is already collected. Census Bureau data, analyst forecasts, and other pertinent information gleaned through library and Internet research are examples of primary research.

Difficulty: Moderate LO: 3.1: Explain what a feasibility analysis is and why it is important.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 14) Describe the purpose of feasibility analysis. When should a feasibility analysis be conducted relative to opportunity recognition and the development of a business plan?

Answer: Feasibility analysis is the process of determining if a business idea is viable. As a preliminary evaluation of a business idea, a feasibility analysis is completed to determine if an idea is worth pursuing and to screen ideas before spending resources on them. Feasibility analysis follows the opportunity recognition stage but comes before the development of a business plan.

Difficulty: Easy LO: 3.1: Explain what a feasibility analysis is and why it is important.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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15) ________ feasibility analysis is an assessment of the overall appeal of the product or service being proposed.

A) Consumer B) Industry/market segment C) Industry/market D) Product/service E) Purchaser/end-user Answer: D Difficulty: Easy LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 16) The two components of product/service feasibility analysis are product/service ________ and product/service ________.

A) value; affordability B) demand; timeliness C) timeliness; value D) durability; value E) desirability; demand Answer: E Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 17) Which of the following is NOT a question that is likely to be asked in the product/service feasibility component of a complete feasibility analysis?

A) Does it make sense?

B) Is it reasonable?

C) Does it take advantage of an environmental trend, solve a problem, or fill a gap in the marketplace?

D) Is it something consumers will get excited about?

E) Are there sufficient resources to fund this idea?

Answer: E Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Analytical Thinking Quest. Category: Analytical

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18) The goal of the concept statement is to find a(n) ________.

A) product/market fit B) funding source C) management team D) patent attorney E) mentor Answer: A Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 19) A(n) ________ involves showing a preliminary description of a product or service idea to prospective customers and industry experts to solicit their feedback.

A) concept test B) product/service statement C) impression test D) idea prospectus E) idea test Answer: A Difficulty: Easy LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 20) Which of the following items is typically NOT included in a concept statement?

A) A brief description of the company's management team B) A description of the product or service's positioning relative to competitors' offerings C) A description of how much money the new venture needs D) The benefits of the product or service E) The intended target market Answer: C Difficulty: Challenging LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Analytical Thinking Quest. Category: Analytical

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21) Tracy Brady is in the process of developing an exciting new product in the smartphone industry. She'd like to show a preliminary description of the product to industry experts and prospective customers to solicit their feedback. Tracy should complete and distribute a(n) ________ statement.

A) perception B) usability C) early adopter D) concept E) adoption risk-reward Answer: D Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 22) The tendency to search for information that validates your preconceptions is called ________.

A) confirmation bias B) product/market fit C) gumshoe research D) secondary research E) a concept test Answer: A Difficulty: Easy LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 23) Which of the following is an online forum suitable for getting feedback on business ideas regarding how to go about acquiring your first customers?

A) LaunchRock B) Growth Hackers C) Google Trends D) 3 Minute Optimizer E) Shapeways Answer: B Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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24) 3 Minute Optimizer and Optimizely are websites that provide access to ________.

A) 3D printing services B) Web site usability testing C) online whiteboarding services D) A/B split testing services E) feedback on business ideas Answer: D Difficulty: Challenging LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 25) Photo Labs is an online tool that provides ________.

A) feedback on business ideas B) landing pages C) surveys D) prototyping services E) market research Answer: D Difficulty: Challenging LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 26) Three commonly utilized methods for determining product/service demand are ________.

A) assessing the overall financial attractiveness of the proposed venture, talking face-to-face with potential customers, and assessing industry attractiveness B) analyzing the financial performance of other businesses, talking face-to-face with potential customers, and assessing target market attractiveness C) assessing target market attractiveness; utilizing online tools, such as Google AdWords and landing pages; and calculating total startup cash needed D) assessing industry attractiveness; library, Internet and gumshoe research; and talking face-toface with friends and family E) talking face-to-face with potential customers; utilizing online tools, such as Google AdWords and landing pages; and library, Internet and gumshoe research Answer: E Difficulty: Challenging LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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27) Katlin Smith is investigating the feasibility of developing an iPhone app to help high school students with math. To get a good handle on the potential demand for her service, Katlin is scrounging around for information wherever she can find it. She even spent two weeks volunteering as a math tutor at a local high school to see how students responded to her methods.

Katlin is conducting ________ research.

A) parallel B) derivative C) gumshoe D) secondary E) on-the-ground Answer: C Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 28) Conner Brandshaw is investigating the feasibility of a new type of electronic game targeting middle school and high school-age boys. Which of the following is an example of "gumshoe research" that Conner could conduct to get a sense of the likely demand for his game?

A) Download electronic games industry reports from the Internet.

B) Administer a buying intentions survey.

C) Administer a concept test.

D) Look at the Web sites of a number of companies that sell electronic games.

E) Spend several days in electronic games arcades and stores to observe the types of games that attract the interest of middle school age and high school age boys.

Answer: E Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 29) According to the textbook, the only way to know if your product or service is what people want and need is by ________.

A) interviewing industry experts B) library, Internet and gumshoe research C) conducting brainstorming sessions D) talking to them E) surveying them Answer: D Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 9 Copyright © 2025

30) A ________ is a single Web page that typically provides direct sales copy, like "click here to buy a Hawaiian vacation."

A) sales page B) marketing page C) destination page D) call for action page E) landing page Answer: E Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 31) An early sample, model, or release of a product that is built to test a concept or a process is a(n) ________.

A) concept statement B) concept test C) feasibility analysis D) prototype E) startup Answer: D Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 32) Quora is an excellent Q&A site.

Answer: TRUE Difficulty: Easy LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 33) The two components to product/service feasibility analysis are product/service desirability and product-service demand.

Answer: TRUE Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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34) A concept statement is a preliminary description of a product or service idea presented in a one-page document.

Answer: TRUE Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 35) The temptation to show a concept statement to friends and family members should be avoided because they are predisposed to give positive feedback.

Answer: TRUE Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 36) What is the first component of product/service feasibility? What questions should be asked in this component?

Answer: The first component of product/service feasibility is to affirm that the proposed product or service is desirable and serves a need in the marketplace. The following questions should be asked to determine the basic appeal of the product or service: Does it make sense? Is it reasonable? Is it something real customers will buy? Does it take advantage of an environmental trend, solve a problem, or fill a gap in the marketplace? Is this a good time to introduce the product or service to the market? and Are there any fatal flaws in the product or service's basic design or concept?

Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 37) Describe what a concept test is, and what it should include.

Answer: A concept test involves showing a preliminary description of a product or service idea to prospective customers and industry experts to solicit their feedback. The one-page document should include: • A description of the product or service being offered.

• The intended target market.

• The benefits of the product or service.

• A description of how the product will be positioned relative to similar ones in the market.

• A brief description of the company's management team.

Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 11 Copyright © 2025

38) What is gumshoe research and why is it important?

Answer: Simple gumshoe research is important for gaining a sense of the magnitude of likely product demand. A gumshoe is a detective or an investigator that scrounges around for information or clues wherever they can be found. This type of research can take creative forms.

Gumshoe research is simply being inventive in regard to the activities that can be undertaken to better understand your industry and target market's attractiveness.

Difficulty: Moderate LO: 3.2: Describe a product/service feasibility analysis, explain its purpose, and discuss the two primary issues that a proposed business should consider in this area.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 39) A(n) ________ is a group of firms producing a similar product or service.

A) target market B) trade group C) trade association D) competitive group E) industry Answer: E Difficulty: Easy LO: 3.3: Describe an industry/market feasibility analysis, explain its purpose, and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 40) The portion of the industry to which a firm wants to appeal is a ________.

A) prototype B) target market C) concept statement D) startup E) fragmented industry Answer: B Difficulty: Moderate LO: 3.3: Describe an industry/market feasibility analysis, explain its purpose, and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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41) ________ feasibility analysis has two components: industry attractiveness and target market attractiveness.

A) Institutional B) Financial C) Organizational D) Product/service E) Industry/target market Answer: E Difficulty: Easy LO: 3.3: Describe an industry/market feasibility analysis, explain its purpose, and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 42) Which of the following issues should be considered in industry/target market feasibility analysis?

A) Gaps in the marketplace B) Financial performance of similar businesses C) Resource sufficiency D) Industry attractiveness E) Management prowess Answer: D Difficulty: Moderate LO: 3.3: Describe an industry/market feasibility analysis, explain its purpose, and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 43) Which of the following is NOT an attribute of an attractive industry?

A) Is young rather than old B) Is not crowded C) Is late rather than early in its life cycle D) Is important to the customer E) Is fragmented rather than concentrated Answer: C Difficulty: Moderate LO: 3.3: Describe an industry/market feasibility analysis, explain its purpose, and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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44) Mintel, IBISWorld, and BizMiner are databases most likely to be used during the ________ feasibility stage of the feasibility analysis process.

A) organizational B) economic C) political/legal D) industry/target market E) product/service Answer: D Difficulty: Challenging LO: 3.3: Describe an industry/market feasibility analysis, explain its purpose, and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 45) Which of the following statements about target markets is NOT correct?

A) There is a distinct difference between a firm's industry and its target market.

B) The challenge in identifying an attractive target market is to find a market that's large enough for the proposed business but is yet small enough to avoid attracting larger competitors.

C) By focusing on a target market, a firm can usually avoid head-to-head competition with industry leaders.

D) Target market attractiveness is a component of industry/target market feasibility analysis.

E) It's generally easier to find good information about the attractiveness of a target market than an industry as a whole.

Answer: E Difficulty: Moderate LO: 3.3: Describe an industry/market feasibility analysis, explain its purpose, and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 46) Describe the purpose of industry/target market feasibility analysis, and identify the two primary issues that should be considered.

Answer: Industry/market feasibility analysis is an assessment of the overall appeal of the industry and the target market for the product or service being promoted. For industry/target market feasibility analysis, there are two primary issues that a proposed business should consider: industry attractiveness and target market attractiveness.

Difficulty: Easy LO: 3.3: Describe an industry/market feasibility analysis, explain its purpose, and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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47) What is the difference between a firm's industry and its target market?

Answer: There is a distinct difference between a firm's industry and its target market. An industry is a group of firms producing a similar product or service, such as computers, cars, or electronic games. A firm's target market is the limited portion of the industry that it goes after or to which it wants to appeal. Most firms do not try to service their entire industry. Instead, they select or carve out a specific target market and try to service that market very well.

Difficulty: Moderate LO: 3.3: Describe an industry/market feasibility analysis, explain its purpose, and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 48) ________ feasibility analysis is conducted to determine whether a proposed business has sufficient management expertise, organizational competence, and resources to successfully launch its business.

A) Industry/market B) Institutional C) Financial D) Organizational E) Product/service Answer: D Difficulty: Easy LO: 3.4: Explain what an organizational feasibility analysis is and its purpose and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 49) The two primary issues to consider in organizational feasibility analysis are ________.

A) target market attractiveness and financial rate of return B) management prowess and resource sufficiency C) capital requirements and industry attractiveness D) concept testing and financial rate of return E) industry attractiveness and overall attractiveness of the investment Answer: B Difficulty: Moderate LO: 3.4: Explain what an organizational feasibility analysis is and its purpose and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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50) What are the two primary issues to consider in organizational feasibility analysis?

A) Market timeliness and management prowess B) Concept testing and management prowess C) Resource sufficiency and market timeliness D) Target market attractiveness and resource sufficiency E) Management prowess and resource sufficiency Answer: E Difficulty: Moderate LO: 3.4: Explain what an organizational feasibility analysis is and its purpose and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 51) A(n) ________ team is the group of founders, key employees, and advisers that either manage or help manage a new business in its startup years.

A) opening B) entrepreneurial C) scout D) launch E) new-venture Answer: E Difficulty: Easy LO: 3.4: Explain what an organizational feasibility analysis is and its purpose and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 52) According to the textbook, two of the most important factors to consider regarding "management prowess" are ________.

A) the passion the sole entrepreneur or the management team has for the business idea and the extent to which the management team or sole entrepreneur understands the markets in which the firm will compete B) whether the members of the management team have worked successfully together before and the passion the management team has for the business idea C) whether the members of the management team are good "networkers" and the extent to which the management team understands the markets in which the firm will compete D) the educational and functional backgrounds of the management team or sole entrepreneur E) whether the members of the management team are good "networkers" and the passion they have for the business idea Answer: A Difficulty: Challenging LO: 3.4: Explain what an organizational feasibility analysis is and its purpose and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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53) The focus in organizational feasibility analysis is on ________.

A) business acumen B) industry attractiveness C) product/market fit D) nonfinancial resources E) financial resources Answer: D Difficulty: Moderate LO: 3.4: Explain what an organizational feasibility analysis is and its purpose and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 54) An excellent resource for doing a quick trademark search is ________.

A) Trademarkia B) SurveyMonkey C) Miro D) Optimizely E) Google Patents Answer: A Difficulty: Easy LO: 3.4: Explain what an organizational feasibility analysis is and its purpose and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 55) Which of the following is NOT cited as one of the key criteria when seeking a business partner?

A) Know the skills and experiences you need in a partner.

B) Make sure you and your partner's work habits are compatible.

C) Make sure you and your partner have common goals and aspirations.

D) Pick a partner that is similar rather than different from you in terms of skills, abilities, and functional background.

E) Hire a lawyer to draft a founders' agreement.

Answer: D Difficulty: Moderate LO: 3.4: Explain what an organizational feasibility analysis is and its purpose and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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56) Which of the following is an example of a resource that normally would NOT be evaluated as part of the "resource sufficiency" stage of organizational feasibility analysis?

A) Ability to form favorable business partnerships B) Financial resources C) Lab space, manufacturing space, or space to launch a service business D) Key equipment needed to operate the business E) Ability to obtain intellectual property protection on key aspects of the business Answer: B Difficulty: Moderate LO: 3.4: Explain what an organizational feasibility analysis is and its purpose and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 57) To test resource sufficiency, a firm should list the ________ most critical non-financial resources that it will need to move its business idea forward and determine if those resources are available.

A) 1 to 2 B) 3 to 5 C) 6 to 12 D) 10 to 16 E) 15 to 25 Answer: C Difficulty: Moderate LO: 3.4: Explain what an organizational feasibility analysis is and its purpose and discuss the two primary issues to consider when completing this analysis.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 58) Organizational feasibility analysis is the final component of a comprehensive feasibility analysis.

Answer: FALSE Difficulty: Moderate LO: 3.4: Explain what an organizational feasibility analysis is and its purpose and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 59) The focus in organizational feasibility analysis is on financial resources.

Answer: FALSE Difficulty: Moderate LO: 3.4: Explain what an organizational feasibility analysis is and its purpose and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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60) The two primary areas to consider in organizational feasibility analysis are management prowess and resource sufficiency.

Answer: TRUE Difficulty: Moderate LO: 3.4: Explain what an organizational feasibility analysis is and its purpose and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 61) Google Patents is a good substitute for using a patent attorney.

Answer: FALSE Difficulty: Moderate LO: 3.4: Explain what an organizational feasibility analysis is and its purpose and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 62) Describe the two primary issues to consider in an organizational feasibility analysis.

Answer: The purpose of an organizational feasibility analysis is to determine whether a proposed business has sufficient management expertise, organizational competence, and resources to launch successfully. There are two primary issues to consider: management prowess and resource sufficiency. Two of the most important factors in the area of management prowess are the passion the solo entrepreneur or the management team has for the business idea and the extent to which they understand the markets in which the firm will compete. The resource sufficiency component focuses on determining whether the proposed venture has or can obtain sufficient resources to move forward. Here the focus is on nonfinancial resources.

Difficulty: Moderate LO: 3.4: Explain what an organizational feasibility analysis is and its purpose and discuss the two primary issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 63) The final component of a comprehensive feasibility analysis is a(n) ________ feasibility analysis.

A) organizational B) institutional C) product/service D) financial E) industry/market Answer: D Difficulty: Easy LO: 3.5: Describe what a financial feasibility analysis is, explain its importance, and discuss the most critical issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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64) The most important issues to consider in financial feasibility analysis are ________.

A) resource sufficiency, industry attractiveness, and total startup cash needed B) total startup cash needed, financial performance of similar businesses, and the overall financial attractiveness of the proposed venture C) target market attractiveness, resource sufficiency, and product/service demand D) total startup cash needed, management prowess, and product/service demand E) concept testing, total startup cash needed, and financial performance of similar businesses Answer: B Difficulty: Moderate LO: 3.5: Describe what a financial feasibility analysis is, explain its importance, and discuss the most critical issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 65) Which of the following was NOT cited as a cause for the failure of the Keurig Kold profiled in the What Went Wrong? feature of Chapter 3?

A) The pods came in too many sizes.

B) It was too expensive.

C) Soda consumption is on the decline.

D) It was too big, loud, and inconvenient.

E) Few people "brew" soda at home.

Answer: A Difficulty: Moderate LO: 3.5: Describe what a financial feasibility analysis is, explain its importance, and discuss the most critical issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 66) Which of the following is NOT correct regarding the "total startup cash needed" component of financial feasibility analysis?

A) It's not necessary to complete an actual budget of startup expenses.

B) When explaining where the startup funds will come from, avoid cursory explanations such as "I plan to bring investors on board" or "I'll borrow the money."

C) There are worksheets posted online that help entrepreneurs determine the startup costs to launch their venture.

D) An explanation of where the startup funds will come from should be included.

E) If the money will come from friends and family or is raised through other means, a reasonable plan should be stipulated to repay the money.

Answer: A Difficulty: Moderate LO: 3.5: Describe what a financial feasibility analysis is, explain its importance, and discuss the most critical issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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67) Which of the following factors is NOT a factor used to weigh the overall financial attractiveness of a new business?

A) Steady and rapid growth in sales during the first five to seven years in a clearly defined market niche B) High percentage of recurring revenue C) Ability to forecast income and expenses with a reasonable degree of accuracy D) Ability to form favorable business partnerships E) Availability of an exit opportunity for investors to convert equity into cash Answer: D Difficulty: Challenging LO: 3.5: Describe what a financial feasibility analysis is, explain its importance, and discuss the most critical issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 68) There is typically no requirement for rigor beyond a preliminary financial assessment in a financial feasibility analysis because ________.

A) the specifics of the business will inevitably evolve B) no target market has been identified C) there are no budget plans D) funding sources have not yet been identified E) no product/service has been identified Answer: A Difficulty: Challenging LO: 3.5: Describe what a financial feasibility analysis is, explain its importance, and discuss the most critical issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 69) Simple observation and legwork with the observations may be used to obtain sales data for similar businesses.

Answer: TRUE Difficulty: Easy LO: 3.5: Describe what a financial feasibility analysis is, explain its importance, and discuss the most critical issues to consider when completing this analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 70) What are the most important issues to consider in financial feasibility analysis?

Answer: The most important issues to consider in financial feasibility analysis are total startup cash needed, financial performance of similar businesses, and overall financial attractiveness of the proposed venture.

Difficulty: Moderate LO: 3.5: Describe what a financial feasibility analysis is, explain its importance, and discuss the most critical issues to consider when completing this analysis.

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71) ________ is the template for completing a feasibility analysis included in Appendix 3.2 of the textbook.

A) First Screen B) Initial Screen C) Shapeways D) First Evaluation E) Flash Screen Answer: A Difficulty: Challenging LO: 3.6: Describe a feasibility analysis template and explain why it is important for entrepreneurs to use this template.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 72) Which of the following is false concerning First Screen?

A) Completing First Screen is a lengthy process.

B) First Screen is not meant to be shot in the dark.

C) After completing the worksheet, there is no definitive way of discerning if an idea is feasible.

D) Completing First Screen requires some research and analysis.

E) The First Screen worksheet can draw attention to issues and force founders to consider alternatives.

Answer: A Difficulty: Moderate LO: 3.6: Describe a feasibility analysis template and explain why it is important for entrepreneurs to use this template.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 73) The mechanics for filling out a First Screen worksheet are straightforward.

Answer: TRUE Difficulty: Moderate LO: 3.6: Describe a feasibility analysis template and explain why it is important for entrepreneurs to use this template.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 74) First Screen is a template for completing industry analysis.

Answer: FALSE Difficulty: Moderate LO: 3.6: Describe a feasibility analysis template and explain why it is important for entrepreneurs to use this template.

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75) Briefly describe the purpose of the First Screen and how it is used.

Answer: The First Screen is a template for completing a feasibility analysis. It is called First Screen because a feasibility analysis is an entrepreneur's initial pass at determining the feasibility of a business idea. The mechanics for filling out the First Screen worksheet are straightforward.

It maps the four areas of feasibility analysis accentuating the most important points in each area.

The final section of the worksheet, "Overall Potential," includes a section that allows for suggested revisions of a business idea to improve its potential for feasibility. The value of the First Screen is that it (1) provides an entrepreneur an overall sense of the feasibility of a business idea and (2) draws attention to issues that suggest the idea has low potential.

Difficulty: Challenging LO: 3.6: Describe a feasibility analysis template and explain why it is important for entrepreneurs to use this template.

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Entrepreneurship, 7e (Barringer/Ireland) Chapter 4 Developing an Effective Business Model 1) BlocPower is the focus of the Opening Profile feature in Chapter 4. The city of Ithaca partnered with BlocPower to help become ________.

A) more tech-friendly.

B) a model for other cities housing the homeless C) a drug-free city by 2030 D) a more profitable city.

E) carbon-neutral by 2030.

Answer: E Difficulty: Moderate LO: 4.1: Describe business models and discuss their importance.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 2) A ________ is a firm's plan or recipe for how it creates, delivers, and captures value for its stakeholders.

A) commercialization plan B) business model C) business plan D) launch plan E) tactical model Answer: B Difficulty: Easy LO: 4.1: Describe business models and discuss their importance.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 3) The Savvy Entrepreneurial Firm feature in Chapter 4 focuses on Headspace, a mobile app that ________.

A) provides meditative and mindfulness lessons to people around the world B) makes buildings in poorer areas that are more energy efficient and healthier C) helps companies create business models D) moves mail-order businesses online E) provides a subscription service for dog owners Answer: A Difficulty: Moderate LO: 4.1: Describe business models and discuss their importance.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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4) Which of the following is the proper sequence for when a firm should develop a business model?

A) Preparation of the business model, initial validation of the business idea, opportunity recognition B) Initial validation of the business idea, establishing a growth plan, preparation of the business model C) Initial validation of the business idea, preparation of the business model, fleshing out the operational details of the firm D) Opportunity recognition, fleshing out the operational details of the firm, preparation of the business model E) Opportunity recognition, preparation of the business model, establishing a growth plan for the firm Answer: C Difficulty: Moderate LO: 4.1: Describe business models and discuss their importance.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 5) In regard to business models, which of the following statements is NOT correct?

A) A business model should be created in isolation.

B) The Barringer/Ireland Business Model Template describes how the core aspects fit together and support one another.

C) It is dangerous for a company to assume that it can be successful by simply copying the business model of another firm.

D) A firm's business model represents the core aspects of its business.

E) It is often difficult to determine what another firm's business model is.

Answer: A Difficulty: Moderate LO: 4.1: Describe business models and discuss their importance.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 6) Which of the following is NOT one of the quadrants of the Barringer/Ireland Business Model Template?

A) Core strategy B) Management team C) Resources D) Operation E) Financials Answer: B Difficulty: Easy LO: 4.1: Describe business models and discuss their importance.

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7) A business model is a firm's plan or recipe for how it creates, delivers, and captures value for its stakeholders.

Answer: TRUE Difficulty: Easy LO: 4.1: Describe business models and discuss their importance.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 8) What is a business model? Why is it important? Provide an example to illustrate your answer.

Answer: A business model is a firm's plan or recipe for how it creates, delivers, and captures value for its stakeholders. Business models are fundamental to a firm's ability to succeed both in the short and long term. Dropbox, for example, has what's referred to as a freemium business model. It offers customers a free account with a set amount of storage space, and makes money by selling premium accounts with more capacity. Dropbox could charge all of its users a monthly fee based on the amount of storage that they use, but that's not its business model. Its business model is based on the belief that by introducing users to its service through a free account, it will ultimately sign up more paid users. A firm's business model also describes how the core aspects of what it does fit together and complement one another.

Difficulty: Easy LO: 4.1: Describe business models and discuss their importance.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 9) The two general categories of business models are ________ and ________.

A) normal; unique B) standard; disruptive C) ordinary; revolutionary D) customary; unique E) ordinary; disruptive Answer: B Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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10) Which business model is commonly used by existing firms and those preparing to launch an entrepreneurial venture?

A) Revolutionary B) Normal C) Customary D) Disruptive E) Standard Answer: E Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 11) Brandon Jones has crafted a business model for his firm that is based on an existing plan or template for how firms in his industry create, deliver and capture value for their shareholders.

Brandon has crafted a ________ business model.

A) standard B) disruptive C) customary D) normal E) temporary Answer: A Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 12) ________ describes the low-end market disruption model in his book The Innovator's Dilemma.

A) Jeff Bezos B) Alexander Osterwalder C) Donnel Baird D) Clayton Christensen E) Yves Pigneur Answer: D Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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13) ________ refers to the number of subscribers that a subscription-based business loses each month.

A) Agitate B) Churn C) Erosion D) Attrition E) Stir Answer: B Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 14) Tyler Smith founded a firm that has a subscription-based business model. Although Tyler has averaged 600 new subscribers per month, she also loses 450 subscribers per month. The number of subscribers that Tyler loses each month is referred to as ________.

A) erosion B) churn C) destruction D) attrition E) agitation Answer: B Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 15) Which of the following firms has a low-cost business model?

A) Dell B) Dropbox C) Costco D) Salesforce.com E) Google Answer: C Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

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16) ________ business models are ones that do not fit the profile of standard business models, and are impactful enough that they disrupt or change the way business is conducted in an industry or an important niche within an industry.

A) Disruptive B) Normal C) Unique D) Incomparable E) Exceptional Answer: A Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 17) SaaS, a provider of CRM software, is an example of a ________ business model.

A) low-end B) disruptive C) high-quality D) low-price E) standard Answer: B Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 18) ________ disruption occurs when firms in an industry continue to improve products to the point where they are better than a sizable portion of their clientele's needs or desires.

A) Low-end B) New-market C) High-quality D) New-product E) New-channel Answer: A Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

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19) Which of the following is a type of disruptive business model?

A) High-end B) New-product C) New-market D) New-channel E) Standard Answer: C Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 20) Which of the following is NOT a standard business model?

A) Low-end market disruption model B) Peer-to-peer business model C) Substitution business model D) Low-cost business model E) Franchise business model Answer: A Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

AACSB: Analytical Thinking Quest. Category: Analytical 21) Disruptive business models depict existing plans or recipes firms can use to determine how they will create, deliver, and capture value for their stakeholders.

Answer: FALSE Difficulty: Easy LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 22) There are several perfect business models for entrepreneurs to consider.

Answer: FALSE Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

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23) Disruptive business models are impactful enough that they change the way business is conducted in an industry or an important niche within an industry.

Answer: TRUE Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 24) A new market disruption addresses a market that businesses were not serving.

Answer: TRUE Difficulty: Easy LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 25) What is churn?

Answer: Churn refers to the number of subscribers that a subscription-based business loses each month.

Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 26) What is the difference between standard business models and disruptive business models?

Include examples of both in your answer.

Answer: Standard business models depict existing plans or recipes firms can use to determine how they will create, deliver, and capture value for their stakeholders. Examples include the advertising business model, the auction business model, the low-cost business model, and the manufacture/retailer business model. Disruptive business models, which are rare, are ones that do not fit the profile of a standard business model, and are impactful enough that they disrupt or change the way business is conducted in an industry or an important niche within an industry.

Examples include Dell (which introduced the direct-to-consumer computer sales model), Google (which introduced the online advertising model), and Salesforce.com (which introduced the notion of software as a service, or SaaS).

Difficulty: Moderate LO: 4.2: Identify and describe the two general types of business models—standard and disruptive.

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27) The Barringer/Ireland Business Model Canvas consists of ________ major categories and ________ parts.

A) 2; 12 B) 3; 9 C) 6; 18 D) 4; 12 E) 2; 6 Answer: D Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 28) The four major categories in the Barringer/Ireland Business Model Template are ________.

A) core strategy, resources, financials, and operations B) core strategy, value proposition, customers and channels C) value proposition, resources, customers and partners D) activities, partners, customers, and competitors E) value proposition, cost structure, financials, and operations Answer: A Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 29) Which of the following is one of the four major categories in the Barringer/Ireland Business Model Template?

A) Operations B) Management C) Channels D) Target market E) Partners Answer: A Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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30) In the Barringer/Ireland Business Model Template, a ________ describes how the firm plans to compete relative to its competitors.

A) strategic plan B) grand strategy C) tactical strategy D) value proposition E) core strategy Answer: E Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 31) Jamie Finch is crafting the business model for her fashion design firm. She just completed the section that describes how her firm plans to compete relative to her rivals. Jamie just completed the ________ portion of her business model template.

A) operations B) core strategy C) resources D) strategic plan E) tactical strategy Answer: B Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 32) A business' mission is part of which component of the Barringer/Ireland Business Model Template?

A) Operations B) Core strategy C) Resources D) Strategic plan E) Tactical strategy Answer: B Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

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33) A business's ________ statement describes why it exists and what it hopes to achieve by using its business model.

A) values B) importance C) differentiation D) mission E) significance Answer: D Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 34) Nathan Green is starting a firm in the organic produce industry. Nathan has developed a statement—"Helping Make Your Life Better, Healthier, and Fuller"—that describes the reason his company exists and what his business model is supposed to accomplish. Nathan's statement is referred to as his ________ statement.

A) values B) uniqueness C) differentiation D) mission E) task Answer: D Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Analytical Thinking Quest. Category: Analytical 35) Which of the following is NOT cited as a rule of thumb for writing mission statements?

A) Define the business' "reason for being".

B) Describe what makes the company different.

C) Avoid being risky and challenging.

D) Use a tone reflecting the company's culture.

E) Convey passion.

Answer: C Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

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36) What causes consumers to pick one company's products over another's is articulated in a company's ________.

A) basis of differentiation B) business mission C) target market D) product/market scope E) core competencies Answer: A Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Written and Oral Communication Quest. Category: Analytical 37) A firm's ________ market is a place within a larger market segment that represents a narrower group of customers with similar interests.

A) aspirational B) ambitious C) constrained D) target E) objective Answer: D Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Analytical Thinking Quest. Category: Analytical 38) Dog owners who are willing to spend $23 to $35 a month pampering their dog reflects the ________ market of BarkBox. A) controlled B) ambitious C) identifiable D) target E) aspirational Answer: D Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

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39) The fourth element of a core strategy is ________.

A) product/market scope B) business mission C) basis of differentiation D) core competencies E) target Answer: A Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 40) Erin Hill is working on the box in the Barringer/Ireland Business Model Template that defines the products and markets on which her firm will concentrate. Erin is working on the ________ scope portion of the business model template.

A) offering/market B) offering/industry C) business/market D) business/industry E) product/market Answer: E Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 41) ________ are the inputs a firm uses to produce, sell, distribute, and serve its product.

A) Financials B) Target marketing C) Channels D) Resources E) Revenue streams Answer: D Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

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42) A(n) ________ is a specific factor or capability that supports a firm's business model and sets it apart from its rivals.

A) primary capability B) core competency C) essential asset D) resource E) key aptitude Answer: B Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 43) Mark White is the founder of a firm that builds iPhone apps. Mark is very technically savvy, which allows him to build apps quickly and with minimal bugs or problems. Mark's technical savvy is a(n) ________ of his firm.

A) primary capability B) core competency C) essential asset D) staple proficiency E) key aptitude Answer: B Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 44) Which of the following represents a physical asset?

A) Patents B) Trade secrets C) Company brand D) Reputation E) Distribution networks Answer: E Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

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45) In the Barringer/Ireland Business Model Template, key assets can be ________.

A) fixed, situational, variable, and permanent B) tactical, strategic, fixed, and variable C) tangible, intangible, variable, and fixed D) temporary, permanent, fixed, and variable E) physical, financial, intellectual, or human Answer: E Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 46) Which component of the Barringer/Ireland Business Model Template includes revenue streams, cost structure, and funding?

A) Value proposition B) Financials C) Operations D) Core strategy E) Resources Answer: B Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 47) Which section of the Barringer/Ireland Business Model Template is the only section that describes how it makes its money?

A) Core strategy B) Resources C) Financials D) Operations E) Value proposition Answer: C Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

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48) ________ costs are costs that remain the same despite the volume of goods or services produced.

A) Expense B) Standard C) Fixed D) Non-standard E) Variable Answer: C Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 49) Advertising, commissions, download fees, licensing, and product sale are examples of ________.

A) revenue streams B) basis of differentiation C) key assets D) channels E) cost structure Answer: A Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 50) In the terminology of the Barringer/Ireland Business Model Template, a firm's ________ structure describes the most important costs incurred to support its business model.

A) expense B) cost C) budget D) overhead E) outflow Answer: B Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

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51) Which of the following would NOT be considered a capital cost?

A) Equipment B) Vehicles C) Furniture D) Buildings E) Website design Answer: E Difficulty: Easy LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 52) ________ costs change proportionally with the volume of goods or services provided.

A) Non-standard B) Capital C) Variable D) Standard E) Fixed Answer: C Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 53) According to the textbook, there are three categories of costs to consider when completing the "financing/funding" section of the Barringer/Ireland Business Model Template. These are ________.

A) setup costs, one-time expenses, and costs associated with incorporating the firm B) capital costs, marketing costs, and provisions for ramp-up expenses C) setup costs, marketing costs, and operating costs D) capital costs, one-time expenses, and provisions for ramp-up expenses E) operating costs, capital costs, and costs associated with setting up the firm Answer: D Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

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54) Which quadrant in the Barringer/Ireland Business Model Template represents the day-to-day heartbeat of a firm?

A) Operations B) Resources C) Channels D) Financials E) Core strategy Answer: A Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 55) Sarah Green, who plans to open a garden and lawn business, is working on the portion of the Barringer/Ireland Business Model template that focuses on how her products and services will be produced. Sarah is working on the ________ section of the template.

A) basis of differentiation B) product or service production C) product/market scope D) core competency E) channels Answer: B Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 56) The portion of the business plan template that describes how the firm delivers its product to customers is the ________.

A) channels B) network C) linkages D) grids E) conduits Answer: A Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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57) Cynthia Hamilton is launching a chain of smoothie restaurants. Among Cynthia's key partners will be firms that provide her the ingredients needed to make her smoothies. These partners are called ________.

A) dealers B) suppliers C) merchants D) traders E) brokers Answer: B Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 58) An arrangement between two or more firms that establish an exchange relationship but without any joint ownership is called a ________.

A) trade association B) network C) joint venture D) consortia E) strategic alliance Answer: E Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 59) The four major categories in the Barringer/Ireland Business Model Template are: core strategy, management, financials, and operations.

Answer: FALSE Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 60) Core strategy describes what causes consumers to pick one company's products over another.

Answer: FALSE Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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61) A business's core competencies reflect why it exists and what its business model is supposed to accomplish.

Answer: FALSE Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 62) Few startups have core competencies in more than two or three areas.

Answer: TRUE Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 63) A company's target market is a segment within a larger market segment that represents a narrower group of customers with similar interests.

Answer: TRUE Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 64) A company's product/market scope defines its products and the markets on which it will concentrate to sell them.

Answer: TRUE Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 65) The resources section of the Barringer/Ireland Business Model Template includes three parts: core competencies, key assets, and revenue streams.

Answer: FALSE Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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66) In the terminology of the Barringer/Ireland Business Model Template, a key asset is a specific factor or capability that supports a firm's business model and sets it apart from its rivals.

Answer: FALSE Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 67) A firm's core competencies largely determine what it can do.

Answer: TRUE Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 68) For firms that sell a physical product, how the product is made must sync with other parts of the business model.

Answer: TRUE Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 69) The first partnerships that many businesses forge are with suppliers.

Answer: TRUE Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 70) The primary elements of the operations section of the Barringer/Ireland Business Model are: product (or service) production, channels, and key partners.

Answer: TRUE Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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71) A company's channels describe how it delivers its product or service to its customers.

Answer: TRUE Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 72) A partnering trend today among all types of firms is to hire freelancers to complete jobs that are outside their core competencies.

Answer: TRUE Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 73) Describe the Barringer/Ireland Business Model Template and discuss its purpose.

Answer: The Barringer/Ireland Business Model Template is a visual template that lays out the four major categories and 12 individual parts of a firm's business model. The job of the entrepreneur, or team of entrepreneurs, is to configure their firm's business model in a manner that produces a viable and exciting business. The Barringer/Ireland Business Model template is a tool that allows an entrepreneur to describe, project, revise, and pivot a business model until all 12 parts are decided upon. The 12 parts are spread out, which provides space for ideas to be recorded, scratched out, and recorded again as ideas morph and change. The four major categories and 12 individual parts are: Core Strategy (business mission, basis of differentiation, target market, and product/market scope), Resources (core competency and key assets), Financials (revenue streams, cost structure, and financing/funding), and Operations (product or service production, channels, and key partners).

Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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74) Briefly describe the four main components of the Barringer/Ireland Business Model Template. Identify the subcomponents of each of the four main components of a business model.

Answer: The four main components of a business model are core strategy, resources, financials, and operations. A core strategy describes how the firm plans to compete relative to its competitors. The primary elements of core strategy are: business mission, basis of differentiation, target market, and product/market scope. Resources are the inputs a firm uses to produce, sell, distribute, and service a product or service. At a basic level, a firm must have a sufficient amount of resources to enable its business model to work. The primary elements of resources are core competencies and key assets. For most businesses, the manner in which it makes money is one of the most fundamental aspects around which its business model is built.

The primary aspects of financials are revenue streams, cost structure, and financing/funding.

Operations are both integral to a firm's overall business model and represent the day-to-day heartbeat of a firm. The primary elements of operations are: product or service production, channels, and key partners.

Difficulty: Challenging LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 75) What are core competencies?

Answer: A core competency is a specific factor or capability that supports a firm's business model and sets it apart from rivals. A core competency can take on various forms, such as technical know-how, an efficient process, a trusting relationship with customers, or expertise in product design.

Difficulty: Moderate LO: 4.3: Explain the components of the Barringer/Ireland Business Model Template that entrepreneurs can use to develop a business model for their firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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Entrepreneurship, 7e (Barringer/Ireland) Chapter 5 Industry and Competitor Analysis 1) Three Ships Beauty, the company profiled in the opening feature of Chapter 5, was initially launched as NIU BODY ________.

A) by Kimberly Clark B) as a high-end acne brand C) to join the other firms engaged in greenwashing D) with the founders contributing no seed money E) as a vegan, natural skincare brand Answer: E Difficulty: Moderate LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Analytical Thinking Quest. Category: Analytical 2) The American Watchmakers-Clockmakers Institute is an example of a(n) ________.

A) trade association B) trade show C) trade journal D) competitor analysis E) geographic roll-up Answer: A Difficulty: Easy LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 3) Sun Tzu's book ________ recognized the importance of studying and understanding the competitive landscape.

A) Competitive Advantage B) Dragons' Den C) From Good to Great D) The Art of War E) In Search of Excellence Answer: D Difficulty: Easy LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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4) In various studies, researchers have found that from ________ percent of the variation in firm profitability is directly attributable to the industry in which a firm competes.

A) 4 to 12 B) 8 to 30 C) 18 to 42 D) 22 to 56 E) 34 to 70 Answer: B Difficulty: Challenging LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Analytical Thinking Quest. Category: Analytical 5) Companies in industries that sell products to seniors, such as the eyeglass industry and the hearing aid industry, are benefiting from the aging of the population, which is an important ________ trend.

A) social B) business C) commerce D) statutory E) competitive Answer: A Difficulty: Moderate LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 6) Many firms benefit from an increasing ability to outsource manufacturing or service functions to lower-cost foreign labor markets. This trend is referred to as a(n) ________ trend.

A) business B) environmental C) commerce D) statutory E) social Answer: A Difficulty: Moderate LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Analytical Thinking Quest. Category: Analytical

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7) The Partnering for Success feature in Chapter 5 focuses on three things that are important for startups to become active in their industry. The three things are ________.

A) local Chambers of Commerce, trade journals, and networking events B) Facebook, industry-related e-mail listservs, and trade shows C) trade associations, trade shows, and trade journals D) networking events, blogs, and Facebook E) local Chambers of Commerce, university-sponsored incubators, and trade associations Answer: C Difficulty: Moderate LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 8) The strength of an industry often surges or wanes because environmental trends shift in favor of or against the products firms in the industry are selling.

Answer: TRUE Difficulty: Easy LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 9) The first technique an entrepreneur has available to discern the attractiveness of an industry is to study the industry trends.

Answer: TRUE Difficulty: Moderate LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 10) The two trends that are most important to focus on in an industry analysis are business and major economic trends.

Answer: FALSE Difficulty: Moderate LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 11) What are the two most important industry trends for entrepreneurs to evaluate?

Answer: The two most important industry trends for entrepreneurs to evaluate are environmental and business trends.

Difficulty: Moderate LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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12) What is industry analysis? Why is it important for a new venture to complete a thorough analysis of the industry it is entering?

Answer: Industry analysis is business research that focuses on the potential of an industry. To compete successfully, a firm needs to understand the industry in which it intends to compete.

The knowledge gleaned from the industry analysis helps a firm decide if it should enter an industry and if it can carve out a position in that industry that will provide it a competitive advantage.

Difficulty: Easy LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 13) According to Michael Porter, the five competitive forces included in the five forces model determine the average ________.

A) rate of new business starts in an industry B) growth rate for the firms in an industry C) rate of return for the firms in an industry D) sales for the firms in an industry E) failure rate for the firms in an industry Answer: C Difficulty: Challenging LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 14) According to the five forces model, to beat the average rate of return for an industry, wellmanaged firms must ________ A) switch industries regularly B) focus on one force intently and ignore the others C) change their profit expectations D) ignore all the forces E) try to position their firms in a way that avoids or diminishes the forces Answer: E Difficulty: Challenging LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Analytical Thinking Quest. Category: Analytical

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15) In general, industries are more attractive when the ________.

A) majority of the threats are high B) majority of the threats are low C) threat of each of the forces is neutral-neither low nor high D) threat of each of the five forces is high E) threat of each of the five forces is low Answer: E Difficulty: Moderate LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 16) The "Starbucks experience", good service, and high quality fresh coffee are deliberate offerings by Starbucks in order to avoid the threat of ________.

A) substitutes B) suppliers' power C) economies of scale D) buyers' power E) exit barriers Answer: A Difficulty: Moderate LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Analytical Thinking Quest. Category: Analytical 17) The price of prescription medicine is high, partly because there are few alternatives for many prescription medications. Which of Porter's five forces explains how this aspect of the prescription medicine industry helps keep profitability high?

A) Rivalry among existing firms B) Threat of new entrants C) Threat of substitutes D) Bargaining power of buyers E) Bargaining power of suppliers Answer: C Difficulty: Easy LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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18) Barriers to entry are designed to reduce the ________.

A) bargaining power of suppliers B) rivalry among existing firms C) threat of new entrants D) bargaining power of buyers E) threat of Substitutes Answer: C Difficulty: Moderate LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 19) Which of the following is NOT one of the major sources of barriers to entry?

A) Product differentiation B) Capital requirements C) Buyer group concentration D) Access to distribution channels E) Government and legal barriers Answer: C Difficulty: Moderate LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 20) Shelly Brunner owns a sports-themed restaurant which is located in an upscale business district in Chicago. One advantage that Shelly has is that she bought the lot she built her restaurant on 25 years ago when lots in the area were selling for $50,000. Shelly knows that several potential competitors have looked at bare lots near her business but haven't been willing to pay the asking prices, which are as high as $500,000. Which of the six major sources of barriers to entry is causing a disincentive for new firms to enter Shelly's industry?

A) Capital Requirements B) Economies of Scale C) Product Differentiation D) Government and Legal Barriers E) Cost Advantage Independent of Size Answer: E Difficulty: Moderate LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Analytical Thinking Quest. Category: Analytical

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21) The soft drink industry that has companies with strong brands is difficult to break into without spending heavily on promotions. This is an example of which barrier to entry?

A) Government and legal barriers B) Capital requirements C) Product differentiation D) Cost advantages independent of size E) Access to distribution channels Answer: C Difficulty: Moderate LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 22) Which of Porter's five forces is most directly influenced by the number and balance of competitors, degree of difference between products, growth rate of an industry, and level of fixed costs?

A) Threat of new entrants B) Rivalry among existing firms C) Threat of Substitutes D) Bargaining power of buyers E) Bargaining power of suppliers Answer: B Difficulty: Challenging LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 23) If a startup pioneers an industry or a new concept within an industry, the name recognition the startup establishes may create a formidable nontraditional barrier to entry referred to as a(n) ________.

A) unique business model B) economy of scale C) management team strength D) first-mover advantage E) level of fixed costs Answer: D Difficulty: Moderate LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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24) Which of the following factors affects the ability of suppliers to exert pressure on buyers and suppress the profitability of the industries they serve?

A) Threat of forward integration B) Buyers' costs C) Access to distribution channels D) Economies of scale E) Number and balance of suppliers Answer: A Difficulty: Moderate LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 25) Www.1800flowers.com is an example of which nontraditional barrier to entry?

A) Strength of management team B) First-mover advantage C) Unique business model D) Product differentiation E) Internet domain name Answer: E Difficulty: Easy LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 26) Microsoft's power as a supplier of computer operating systems increases because of the threat that it might enter the PC industry if PC makers balk too much at the cost of its software or threaten to use a different provider's operating system. This is an example of a ________.

A) threat of forward integration B) switching costs C) cost advantages independent of size D) attractiveness of substitutes E) economies of scale Answer: A Difficulty: Challenging LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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27) Tim Rutherford is thinking about starting a firm in the medical equipment industry. In the industry analysis Tim has been conducting, one thing he has noticed is that the medical equipment industry is characterized by buyer group concentration. This factor concerns Tim because it tells him that the profitability of the medical equipment industry is potentially suppressed by the ________.

A) threat of substitutes B) bargaining power of buyers C) rivalry among existing firms D) bargaining power of suppliers E) threat of new entrants Answer: B Difficulty: Moderate LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Analytical Thinking Quest. Category: Analytical 28) A barrier to entry is a condition that creates a disincentive for a new firm to enter an industry.

Answer: TRUE Difficulty: Moderate LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 29) The best industry to enter is an industry where the threat of each of Porter's five forces is high.

Answer: FALSE Difficulty: Moderate LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 30) There are four factors that determine the threat of new entrants: number and balance of competitors, degree of difference between products, growth rate of an industry, and level of fixed costs.

Answer: FALSE Difficulty: Moderate LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 31) When the PC industry threatens to make its own monitors if supplier prices get too high, they are using the threat of backward integration.

Answer: TRUE Difficulty: Challenging LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 9 Copyright © 2025

32) List the four primary factors that determine the nature and intensity of the rivalry among existing firms in an industry.

Answer: The four primary factors that determine the nature and intensity of the rivalry among existing firms in an industry are 1) number and balance of competitors, 2) degree of difference between products, 3) growth rate of an industry, and 4) level of fixed costs.

Difficulty: Moderate LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 33) Identify the five competitive forces that determine industry profitably. Explain the purpose of analyzing these forces.

Answer: The five competitive forces that determine industry profitability are the threat of substitutes, the threat of new entrants, rivalry among existing firms, bargaining power of suppliers, and bargaining power of buyers. Each of Porter's five forces impacts the average rate of return for the firms in an industry by applying pressure on industry profitability. Companies analyze the five forces to try to position their firms in a way that avoids or diminishes the negative impacts of these forces.

Difficulty: Moderate LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 34) Discuss the nontraditional barriers to entry. Why is it important that entrepreneurial firms utilize one or more of these forms of barriers to entry?

Answer: The nontraditional barriers to entry, which are particularly suitable for entrepreneurial firms, are strength of management team, first-mover advantage, passion of management team and employees, unique business model, a unique Internet domain name, and inventing a new approach to an industry and executing the idea in an exemplary fashion. It is important that startups utilize one or more of these forms of barriers to entry because many of the traditional barriers to entry, like economies of scale, are expensive and money is usually tight for startups.

Difficulty: Challenging LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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35) According to the textbook, the five forces model can be used to help a firm determine whether it should enter a particular industry and ________.

A) to help a firm determine whether to compete in international markets in that industry.

B) how to recruit top managerial expertise C) how to erect barriers to entry D) how much capital will be needed to compete successfully E) whether it can carve out an attractive position in that industry Answer: E Difficulty: Challenging LO: 5.3: Explain the value that entrepreneurial firms create by using the five forces model successfully.

AACSB: Analytical Thinking Quest. Category: Analytical 36) Brain Sentry is starting a firm in the small industry that helps football teams discern whether a player has suffered a concussion. This industry is still so new that no standard operating procedures have been developed. The industry Brain Sentry is entering is an example of a(n) ________ industry.

A) mature B) declining C) emerging D) global E) fragmented Answer: C Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 37) The primary opportunity existing for startups in emerging industries is to ________.

A) consolidate its resources B) pursue a geographic roll-up strategy C) pursue a niche strategy D) capture a first-mover advantage E) pursue a cost reduction strategy Answer: B Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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38) A(n) ________ industry is one that is characterized by a large number of firms of approximately equal size.

A) fragmented B) mature C) declining D) emerging E) global Answer: A Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 39) A geographic roll-up strategy is the most common way for startups in fragmented industries to ________.

A) pursue a niche strategy B) win customers by placing an emphasis on service and process innovation C) capture a first-mover advantage D) pursue a cost reduction strategy E) consolidate the industry and establish industry leadership by doing so Answer: E Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 40) A(n) ________ industry is an industry that is experiencing slow or no increase in demand, has numerous repeat customers, and is experiencing limited product innovations.

A) declining B) global C) mature D) emerging E) fragmented Answer: C Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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41) Bombas in the sock industry is an example of an entrepreneurial firm exploiting opportunities in what type of industry?

A) Emerging B) Fragmented C) Declining D) Mature E) Consolidated Answer: D Difficulty: Challenging LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 42) When OpenStore acquired Shopify businesses, it was exploiting which opportunity in a mature industry?

A) Consolidation B) First-mover advantage C) Process and after-sale service innovation D) Cost reduction E) Leadership strategy Answer: A Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 43) Nucor Corporation's mini-mills in the steel industry is an example of an entrepreneurial firm pursuing a ________ strategy.

A) leadership B) niche C) cost reduction D) global E) multidomestic Answer: C Difficulty: Challenging LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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44) A leadership strategy, a niche strategy, and a cost reduction strategy are the three strategies entrepreneurial firms employ in ________ industries.

A) mature B) emerging C) declining D) fragmented E) global Answer: C Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 45) A(n) ________ industry is an industry that is experiencing significant international sales.

A) global B) mature C) fragmented D) declining E) emerging Answer: A Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 46) Firms pursuing a ________ strategy use the same basic approach in all foreign markets.

A) multidomestic B) global C) worldwide D) inclusive E) home Answer: B Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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47) Firms that pursue a(n) ________ strategy compete for market share on a country-by-country basis and vary their product or service offerings to meet the demands of the local market.

A) inclusive B) universal C) multidomestic D) contemporary E) worldwide Answer: C Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 48) Kellen West recently launched a firm in the fruit drink industry, and has already exported his fruit drinks to 11 different countries. The firm is varying the tastes of the fruit drinks it sells on a country-by-country basis to meet the demands of the local markets. Kellen's firm is pursuing a ________ strategy.

A) global B) home C) universal D) contemporary E) multidomestic Answer: E Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 49) Katherine Chapman recently launched a firm in the clothing industry, targeting the 13- to 17year-old market. Believing her clothing has universal appeal, Katherine will not vary her product from country to country. Katherine is pursuing a ________ strategy.

A) universal B) multidomestic C) contemporary D) global E) home Answer: D Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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50) A geographic roll-up strategy is the primary opportunity for startups in mature industries.

Answer: FALSE Difficulty: Easy LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 51) A fragmented industry is one that is characterized by a large number of firms of approximately equal size.

Answer: TRUE Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 52) Firms pursuing a global strategy vary their product offerings to meet the local market's demand.

Answer: FALSE Difficulty: Easy LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 53) A fragmented industry is an industry that is experiencing slow increases in demand, numerous repeat customers, and limited product innovation.

Answer: FALSE Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 54) Describe the two most common strategies firms pursue to compete in global industries.

Answer: The two most common strategies firms pursue to compete in global industries are the multidomestic strategy and the global strategy. Firms that pursue a multidomestic strategy compete for market share on a country-by-country basis and vary their product offerings to meet the local market's demands. In contrast, firms pursuing a global strategy use the same basic approach in all foreign markets.

Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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55) What is an emerging industry? What is the primary opportunity available to entrepreneurial firms in emerging industries?

Answer: An emerging industry is a new industry in which standard operating procedures have yet to be developed. The firm that pioneers or takes the leadership of an emerging industry often captures a first-mover advantage, which is a sometimes-insurmountable advantage gained by the firm initiating the first significant move into a new market.

Difficulty: Moderate LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 56) Once a firm decides to enter an industry and chooses a market in which to compete, it must gain an understanding of its competitive environment. This challenge can be undertaken by completing a(n) ________ analysis.

A) business B) industry C) competitor D) strategic E) market Answer: C Difficulty: Easy LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 57) Each quarter, Craig Anderson, who owns a chain of auto repair shops, does a detailed analysis of his firm's competitors. This analysis is called ________ analysis.

A) competitor B) challenger C) strategic D) participant E) industry Answer: A Difficulty: Moderate LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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58) The first step in a competitor analysis is to ________.

A) develop a marketing plan B) develop the strategic plan C) study the strength of the industry D) study the external environment E) determine who the competition is Answer: E Difficulty: Easy LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 59) According to the textbook, the three different types of competitors a business will face are ________.

A) potential, direct, and upcoming B) indirect, fleeting, and future C) serious, cautious, and future D) direct, indirect, and future E) potential, fleeting, and indirect Answer: D Difficulty: Moderate LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 60) In the context of competitor analysis, businesses that offer substitute products are referred to as ________ competitors.

A) immediate B) direct C) indirect D) multidomestic E) future Answer: C Difficulty: Moderate LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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61) Aquafina operates in the bottled water industry. Which of the following companies would be considered a direct competitor of Aquafina?

A) Dasani B) Starbucks C) Blue Diamond D) Celestial Teas E) Ocean Spray Answer: A Difficulty: Moderate LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 62) In the context of competitor analysis, ________ competitors offer close substitutes to the product sold by the firm completing the analysis.

A) potential B) direct C) indirect D) impending E) future Answer: C Difficulty: Moderate LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 63) In the beverage industry, soda, fruit juice, and sports drinks are ________ competitors of bottled water.

A) occasional B) infrequent C) indirect D) direct E) future Answer: C Difficulty: Moderate LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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64) Amazon's founding was an example of a(n) ________ competition for Barnes & Noble.

A) stable B) roundabout C) impending D) approximate E) future Answer: E Difficulty: Moderate LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 65) The information that is gathered by a firm to learn about its competitors is referred to as ________.

A) a feasibility appraisal B) a workable appraisal C) a practical assessment D) a viable assessment E) competitive intelligence Answer: E Difficulty: Moderate LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 66) The Savvy Entrepreneurial Firm feature in Chapter 5 focuses on Kazam Bikes, Pair Eyewear, and Bevi that are all doing well in crowded industries as ________.

A) they have effectively differentiated themselves from their competitors and have captured a first-mover advantage B) they have passionate leaders and run savvy promotional campaigns C) they have captured a first-mover advantage and have unique business models D) they create meaningful value for customers at a fair price and have differentiated themselves from their competitors E) they are low-cost leaders and run savvy promotional campaigns Answer: D Difficulty: Challenging LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Analytical Thinking Quest. Category: Analytical

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67) Amy has just launched a firm in the sports drink industry. She has decided to complete tool to see how she stacks up against her competitors. Along the horizontal axis she lists her firm along with her major competitors. Along the vertical axis she lists the main competitive factors in her industry. Amy is completing a ________.

A) strategic analysis spreadsheet B) tactical analysis framework C) competitive analysis grid D) strategic analysis grid E) behavioral analysis spreadsheet Answer: C Difficulty: Moderate LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 68) Which of the following is NOT considered a source of ethical competitive intelligence?

A) Attend conferences and trade shows B) Purchase competitors' products C) Hire a former employee of a competitor just to gain proprietary information D) Set up Google alerts E) Study competitors' websites and social media pages Answer: C Difficulty: Moderate LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Analytical Thinking Quest. Category: Analytical 69) A comparison analysis is a detailed evaluation of a firm's competitors.

Answer: FALSE Difficulty: Easy LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 70) A competitor analysis helps a firm understand the positions of its major competitors and the opportunities that are available to develop a competitive advantage in one or more areas.

Answer: TRUE Difficulty: Easy LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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71) A firm's future competitors are its most important ones.

Answer: FALSE Difficulty: Moderate LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 72) The competitors that offer close substitutes to the product of your firm are direct competitors.

Answer: FALSE Difficulty: Moderate LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 73) If a competitor is a publicly traded firm, a description of the firm's business and its financial information is available through annual reports filed with the SEC. Answer: TRUE Difficulty: Moderate LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 74) A competitive analysis grid is a tool for organizing the information a firm collects about its competitors.

Answer: TRUE Difficulty: Easy LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 75) What is competitive intelligence? What are some of the ways that a firm can ethically obtain information about its competitors?

Answer: The information that is gathered by a firm to learn about its competitors is referred to as competitive intelligence. There are a number of ways that a firm can ethically obtain information about its competitors. These ways include: attend conferences and trade shows, read industry-related books, magazines, and Web sites, along with general business magazines, talk to potential customers about what motivated them to buy your product as opposed to your competitor, purchase competitors' products to understand their features, benefits, and shortcomings, study competitors' Web sites, and study Web sites that provide information about competitors.

Difficulty: Moderate LO: 5.5: Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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Entrepreneurship, 7e (Barringer/Ireland) Chapter 6 Writing a Business Plan 1) The company that created the Kadama app, profiled in the Opening Profile feature of Chapter 6, focuses on ________.

A) tutoring B) cleaning services C) shoe sales D) odd jobs E) home repairs Answer: A Difficulty: Easy LO: 6.1: Explain the purpose of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 2) Peter Watson is thinking about launching a small business consulting company. An advisor at his local Small Business Administration (SBA) office told Peter that one of the first things he needs to do is to sit down and write a 25- to 35- page narrative describing what his new business intends to accomplish and how it intends to accomplish it. The SBA advisor is telling Peter to write a(n) ________.

A) tactical plan B) marketing plan C) operations plan D) business plan E) feasibility analysis Answer: D Difficulty: Easy LO: 6.1: Explain the purpose of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 3) What is the main purpose inside the firm for writing a business plan?

A) The plan helps the company develop a "road map" to follow to execute its strategies.

B) The plan introduces potential investors and other stakeholders to the business opportunity.

C) The plan is vital in recruiting customers.

D) The plan establishes a strong social media presence.

E) The plan recruits a strong management team.

Answer: A Difficulty: Moderate LO: 6.1: Explain the purpose of a business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking

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4) A business plan is best described as a(n) ________.

A) narrative description of a new business B) contract C) budget D) agreement E) marketing initiative Answer: A Difficulty: Easy LO: 6.1: Explain the purpose of a business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 5) A 2015 Wells Fargo/Gallup Small Business Index Survey found that only ________ percent of business owners have a formal business plan.

A) 10 B) 15 C) 27 D) 33 E) 42 Answer: D Difficulty: Moderate LO: 6.1: Explain the purpose of a business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 6) The failure of Juicero profiled in the What Went Wrong? feature in chapter 6, was attributed to ________.

A) fatal flaws in the business plan B) the product not being priced high enough C) no marketing plan D) lack of necessary funding to launch E) a lack of a subscription plan Answer: A Difficulty: Moderate LO: 6.1: Explain the purpose of a business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking

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7) Entrepreneurs should build their business plan on ________.

A) hard evidence and sound research B) best guesses C) what they think may happen D) the most optimistic projections E) the most broadly defined market Answer: A Difficulty: Moderate LO: 6.1: Explain the purpose of a business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 8) Which of the following statements is NOT correct about business plans?

A) Writing a business plan forces a firm's founders to systematically think through each aspect of their new venture.

B) For most new ventures, the business plan is a dual-purpose document used both inside and outside the firm.

C) A business plan is typically 25 to 35 pages long.

D) A large percentage of entrepreneurs do not write business plans for their new ventures.

E) The business plan should be written while the feasibility analysis is being completed.

Answer: E Difficulty: Moderate LO: 6.1: Explain the purpose of a business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 9) A business plan is more compelling if it contains primary research conducted by the entrepreneur launching the business.

Answer: TRUE Difficulty: Easy LO: 6.1: Explain the purpose of a business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 10) According to studies cited in the book, the majority of entrepreneurs write business plans for their ventures.

Answer: FALSE Difficulty: Moderate LO: 6.1: Explain the purpose of a business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking

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11) For most new ventures, the business plan is a dual-purpose document used both inside and outside the firm.

Answer: TRUE Difficulty: Moderate LO: 6.1: Explain the purpose of a business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 12) What are the two primary reasons for writing a business plan?

Answer: The two primary reasons for writing a business plan are to force a firm's founders to think systematically through each aspect of their new venture and to create a selling document.

Difficulty: Moderate LO: 6.1: Explain the purpose of a business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 13) ________ refers to the process investors go through after they tentatively commit to an investment.

A) Due diligence B) Feasibility analysis C) Ratio analysis D) A tagline E) Operating leverage Answer: A Difficulty: Easy LO: 6.2: Describe who reads a business plan and what they are looking for.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 14) The two primary audiences for a business plan are ________ and ________.

A) a firm's employees; officials with the SEC B) a firm's customers; its competitors C) investors and other external stakeholders; public relations firms D) officials with the SEC; public relations firms E) a firm's employees; investors and other external stakeholders Answer: E Difficulty: Moderate LO: 6.2: Describe who reads a business plan and what they are looking for.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking

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15) A clearly written business plan ________.

A) should reflect overconfidence by the firm B) is important for both the management team and the rank-and-file employees C) should include overly optimistic projections to attract investors D) is required by all investors E) is substantially more valuable than the process of writing the plan Answer: B Difficulty: Moderate LO: 6.2: Describe who reads a business plan and what they are looking for.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 16) Which of the following is NOT an individual or group that normally is the intended audience to read a company's business plan?

A) Board of directors B) Potential alliance partners and major customers C) State senators D) Key recruits for jobs with the new firm E) Rank-and-file employees Answer: C Difficulty: Moderate LO: 6.2: Describe who reads a business plan and what they are looking for.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 17) The primary audience for a firm's business plan is potential investors.

Answer: FALSE Difficulty: Moderate LO: 6.2: Describe who reads a business plan and what they are looking for.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 18) Which of the following is NOT a recommended guideline for writing a business plan?

A) To make the best impression, a business plan should follow an unconventional structure and stand out in some dramatic way.

B) A business plan needs to be sharp and free of errors.

C) A business plan should be in both paper and digital form.

D) Investors want a plan where they can find critical information easily.

E) Avoid using a lot of boldfaced type, italics, clip art, and different font sizes and colors when preparing a business plan.

Answer: A Difficulty: Moderate LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking

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19) Which of the following is NOT one of the "red flags" listed in the textbook that raises questions about one or more aspects of a company's business plan?

A) Founders with none of their own money at risk B) Defining the market size too narrowly C) A poorly cited plan D) Sloppiness in any area E) Overly aggressive financials Answer: B Difficulty: Moderate LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 20) A ________ should accompany a business plan that an entrepreneur sends to investors or other stakeholders.

A) cover letter B) resume C) personal bank statement D) new business card E) personal character reference Answer: A Difficulty: Moderate LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 21) LivePlan, enloop, and BizPlan ________.

A) are online platforms to assist in the writing of a business plan B) generate financials for an entrepreneur C) create a slide deck for investor presentations D) are online grammar check platforms E) include a database of investor names for entrepreneurs Answer: A Difficulty: Moderate LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking

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22) A summary business plan is typically ________ pages.

A) 40 to 50 B) 30 to 40 C) 10 to 15 D) 25 to 35 E) 5 to 10 Answer: C Difficulty: Moderate LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 23) Which type of business plan primarily serves an internal audience?

A) Full business plan B) Contingency plan C) Functional business plan D) Opportunity plan E) Operational business plan Answer: E Difficulty: Moderate LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 24) Sarah Parks is in the very early stages of putting together a business startup, and is thinking about writing a business plan to request funds to conduct a feasibility analysis and write a more complete business plan. What type of business plan should Sarah write at this point?

A) Full business plan B) Tactical business plan C) Summary business plan D) Operational business plan E) Strategic business plan Answer: C Difficulty: Moderate LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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25) A(n) ________ business plan, which is typically 25 to 35 pages long, works best for new ventures who are at the point where they need funding or financing.

A) tactical B) strategic C) summary D) full E) operational Answer: D Difficulty: Moderate LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 26) A(n) ________ business plan, works best as a tool for creating a blueprint for a company's operations and providing guidance to managers.

A) operational B) full C) deliberate D) summary E) tactical Answer: A Difficulty: Moderate LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 27) Kevin Andrews has decided to write a business plan that will spell out his company's operations and plans in great detail. What type of business plan is Kevin writing?

A) Operational B) Full C) Strategic D) Summary E) Functional Answer: A Difficulty: Moderate LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking

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28) The well-known company discussed in the Savvy Entrepreneurial Firm feature of chapter 6 that changed significantly from its original business plan is ________.

A) Instagram B) Bloomscape C) Netflix D) Foursquare E) Amazon Answer: A Difficulty: Challenging LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 29) Which of the following statements is true concerning business plans?

A) A summary business plan works best for companies who are at the point where they need funding or financing; serves as a "blueprint" for the company's operations.

B) An operational business plan works best for companies in the early stages of development that want to "test the waters" to see if investors are interested in their idea.

C) A full business plan works best for companies in the early stages of development that want to "test the waters" to see if investors are interested in the idea.

D) A summary business plan is meant primarily for an internal audience and works best as a tool for creating a blueprint for a company's operations and providing guidance to operational managers.

E) A summary business plan works best for companies in the early stages of development that want to "test the waters" to see if investors are interested in their idea.

Answer: E Difficulty: Moderate LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Written and Oral Communication Quest. Category: Analytical 30) The Savvy Entrepreneurial Firm feature in Chapter 6 focuses on three companies: Bloomscape, Netflix, and Instagram. The overarching point of the feature is ________.

A) most business plans require major changes after the business is launched B) the degree to which business plans pan out as their founders envisioned varies C) most business plans require only minor changes after the business is launched D) the most effective business plans are followed without regard to environmental changes E) most business plans are quickly discarded after the business is launched Answer: B Difficulty: Moderate LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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31) To make the best impression, a business plan should follow a conventional structure.

Answer: TRUE Difficulty: Moderate LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 32) For most summary business plans, 25 to 35 pages are sufficient.

Answer: FALSE Difficulty: Moderate LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 33) Describe the three types of business plans.

Answer: The three types of business plans are the summary business plan, the full business plan, and the operational business plan. The summary business plan is generally 10-15 pages and works best for new ventures in the early stages of development that want to test the waters to see if investors are interested in their idea. The full business plan is 25-35 pages long and works best for new ventures that are at the point where they need funding or financing. This serves as a blueprint for the company's operations. And the operational business plan is 40-100 pages long. It is meant primarily for an internal audience and works best as a tool for creating a blueprint for a new venture's operations and providing guidance to operational managers.

Difficulty: Challenging LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 34) There is an emerging school of thought that opposes the idea of writing a business plan and advocates experimentation and trial-and-error learning gleaned through customer feedback and formal planning. How does the approach to writing a business plan described in the text differ from this philosophy? How does trial-and-error learning figure into the approach to writing a business plan advocated in the text?

Answer: The text argues that a business plan, proceeded by a feasibility analysis, represents an important starting point for a new venture and serves many useful purposes. In this sense, those developing a business plan should understand that it is not intended to be a static document written in isolation at a desk. Instead, it is anticipated that the research conducted to complete the plan, and the preceding feasibility analysis, will place the founders in touch with potential customers, suppliers, business partners, and others, and that the feedback obtained from these key players will cause the plan to change as it's being written.

Difficulty: Challenging LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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35) The ________ is the first section of the business plan.

A) summary statement B) executive summary C) management team and company structure D) company description E) financial projections Answer: B Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 36) Which of the following statements is incorrect regarding the executive summary of a business plan?

A) It is a short overview of the entire business plan.

B) In many instances an investor will first ask for a copy of a firm's executive summary and will request a copy of the full business plan only if the executive summary is sufficiently convincing.

C) It is arguably the most important section of the business plan.

D) It should not exceed two single-spaced pages.

E) The executive summary is the first thing that should be written in preparing a business plan.

Answer: E Difficulty: Challenging LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 37) Melanie Summer spoke to an investor who is interested in her business idea. Melanie offered to send the investor a copy of her full business plan, but the investor asked for a short overview of the business plan instead. What portion of her business plan should Melanie send the investor?

A) Marketing plan B) Executive summary C) Elevator pitch D) Company description E) Operations plan Answer: B Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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38) The page immediately after the cover in a business plan is the ________.

A) appendix B) table of contents C) operations plan D) financial plan E) executive summary Answer: B Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 39) Which of the following statements is NOT correct regarding the industry analysis portion of a firm's business plan?

A) The target market selected is the focus of the industry analysis.

B) Industry structure refers to how concentrated or fragmented an industry is.

C) The industry analysis is the first section in the main body of the business plan.

D) Industry trends, which include both environmental and business trends, should be discussed.

E) The industry analysis should conclude with a brief statement of your beliefs regarding the long-term prospects for the industry.

Answer: A Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 40) A company's key partnerships, if any, should be located in the ________ section of its business plan.

A) marketing plan B) management team and company structure C) company description D) market analysis E) industry analysis Answer: C Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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41) Which of the following is included in the industry analysis section of a business plan?

A) Key success factors B) Buyer behavior C) Competitor analysis D) Facilities and equipment E) Company structure Answer: A Difficulty: Easy LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 42) The mission statement is included in the ________ section of the business plan.

A) operations B) economics of the business C) company description D) market analysis E) industry analysis Answer: C Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 43) The noteworthy events of registering a company name or establishing a legal entity are examples of a(n) ________.

A) aspiration B) intention C) signpost D) milestone E) target Answer: D Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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44) The market segmentation process is included in the ________ section of a business plan.

A) competitive analysis B) current status C) market analysis D) marketing plan E) operations plan Answer: C Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 45) A competitor analysis should be included in the ________ section of a business plan.

A) market analysis B) industry analysis C) company description D) management team and company structure E) operations plan Answer: A Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 46) The Partnering for Success feature in Chapter 6 focuses on the need to involve others in what the entrepreneurs are doing. This community of supporters is called ________.

A) the entrepreneurial team B) the industry C) stakeholders D) shareholders E) early evangelists Answer: E Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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47) The ________ section of the business plan requires that an entrepreneur identify their firm's major revenue drivers.

A) economics of the business B) operations plan C) executive summary D) design and development plan E) market analysis Answer: A Difficulty: Easy LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 48) Operating leverage is highest in companies that have ________.

A) a service rather than a manufacturing emphasis B) virtually no fixed costs C) equal variable and fixed costs D) a high proportion of variable costs relative to their fixed costs E) a high proportion of fixed costs relative to their variable costs Answer: E Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 49) The gross margin is also referred to as ________.

A) contribution margin B) cost of goods sold C) revenue drivers D) operating leverage E) variable costs Answer: A Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking

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50) A computer-aided design to validate a product design before committing to making a physical prototype is called a(n) ________.

A) virtual prototype B) concept visualization C) abstract prototype D) virtual design E) usability test Answer: A Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 51) A product prototype is ________.

A) a form of opportunity recognition B) a tool for evaluating the industry a new firm plans to enter C) a financial model D) the first physical depiction of a new product E) a tool for evaluating the organizational prowess of a new firm Answer: D Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 52) What section of the business plan deals with the day-to-day activities of a company and how it will produce the product?

A) Financial plan B) Marketing plan C) Operations plan D) Industry analysis E) Executive summary Answer: C Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking

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53) Which section of the business plan describes the geographic location of the business?

A) Marketing plan B) Management team and company structure C) Company description D) Market analysis E) Operations plan Answer: E Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 54) Many investors and others who read business plans look first at the executive summary and then go directly to the ________ section of the business plan to make their preliminary assessment.

A) management team and company structure B) product (or service) design and development plan C) industry analysis D) marketing plan E) operations plan Answer: A Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 55) A(n) ________ is a graphic representation of how authority and responsibility are distributed within a company.

A) organizational chart B) personnel chart C) human resources chart D) administrative chart E) directional chart Answer: A Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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56) A(n) ________ is an explanation of the most critical beliefs on which the financial statements are based.

A) sources and uses of funds statement B) assumptions sheet C) pro forma financial statement D) credit and debit statement E) capital and operational budgeting statement Answer: B Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Analytical Thinking Quest. Category: Analytical 57) If you believe that the U.S. economy will gain strength over the next three to five years, and that underlying belief drives your sales projections, this should be included in your ________.

A) estimate sheet B) hypothesis sheet C) assumptions sheet D) forecast sheet E) forecast hypothesis Answer: C Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 58) The ________ are the heart of the financial section of a business plan.

A) financial ratios B) Revised financial statements C) budgets D) sources and uses of funds statements E) break-even analyses Answer: B Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Analytical Thinking Quest. Category: Critical Thinking

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59) The resumes of the top management team are included in the ________ section of the business plan.

A) appendix B) organizational chart C) operations D) company description E) management team and company structure Answer: A Difficulty: Easy LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Written and Oral Communication Quest. Category: Analytical 60) According to the textbook, the executive summary is arguably the most important section of the business plan.

Answer: TRUE Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 61) The executive summary is a lengthy overview of the entire business plan.

Answer: FALSE Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 62) A company's industry analysis and target market analysis are usually included in the same section of its business plan.

Answer: FALSE Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 63) Fragmented industries are more receptive to new entrants than industries that are dominated by a handful of large firms.

Answer: TRUE Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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64) A tagline is a phrase that a business uses to reinforce its position in the marketplace.

Answer: TRUE Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 65) A competitor analysis should be included in the industry analysis section of its business plan.

Answer: FALSE Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 66) The economics of the business section of the business plan addresses the basic logic of how the business expects to earn profits and how many units of its product a firm must sell to break even and then start earning a profit.

Answer: TRUE Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 67) A firm's operating leverage is an analysis of its debt versus its equity.

Answer: FALSE Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 68) The management team and company structure section of a business plan is one of the lesserread sections.

Answer: FALSE Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 69) An organizational chart is a graphic representation of how authority and responsibility are distributed within a company.

Answer: TRUE Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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70) List the four methods for estimating a new firm's initial sales.

Answer: The four methods for estimating a new firm's initial sales are 1) utilize the multiplication method, 2) find a comparable firm, 3) contact industry trade associations, and 4) conduct internet searches.

Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 71) What is an executive summary? Why is it important?

Answer: The executive summary is a short overview of the entire business plan; it provides a business plan reader with everything that needs to be known about a new venture's distinctive aspects. The executive summary is important because it is often the first (or only) part of a business plan that a busy investor or other stakeholders will read. As a result, unless the executive summary is compelling, the business plan may not get any additional attention.

Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 72) Why do many investors and others who read business plans often go the management team section right after reading the executive summary?

Answer: Investors read more business plans with interesting ideas and exciting markets than they are able to finance. As a result, it's often not the idea or market that wins funding among competing plans, but the perception that one management team is better prepared to execute their idea than the others.

Difficulty: Moderate LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 73) When asked to meet with an investor, the first rule for the entrepreneur in making an oral presentation is to ________.

A) follow instructions B) be creative C) include technical jargon D) appear overconfident E) ask for more time Answer: A Difficulty: Easy LO: 6.5: Explain how to effectively present a business plan to potential investors.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking

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74) An investor who can identify weaknesses in a business plan or presentation does a favor for the entrepreneur.

Answer: TRUE Difficulty: Moderate LO: 6.5: Explain how to effectively present a business plan to potential investors.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 75) How should the entrepreneur approach the oral presentation of the business plan?

Answer: Most oral presentations come with instructions from the investor. These instructions – such as the length of the presentation – should be followed. The entrepreneur's goal should be to make a smooth and well-rehearsed presentation that makes use of sharp slides that are not cluttered with material.

Difficulty: Easy LO: 6.5: Explain how to effectively present a business plan to potential investors.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking

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Entrepreneurship, 7e (Barringer/Ireland) Chapter 7 Preparing the Proper Ethical and Legal Foundation 1) Plasma Bionics, the company profiled in the opening feature in Chapter 7, is a ________.

A) limited liability company B) sole proprietorship C) partnership D) Schedule S corporation E) Schedule C corporation Answer: A Difficulty: Easy LO: 7.1: Discuss actions founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning Quest. Category: Critical Thinking 2) According to the textbook, one of the most important things the founders of an entrepreneurial venture can do is ________.

A) create a board of advisors B) establish business partnerships C) establish a repayment plan for investors D) select a limited liability corporation structure E) establish a strong ethical culture for their firms Answer: E Difficulty: Easy LO: 7.1: Discuss actions founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning Quest. Category: Critical Thinking 3) According to the 2021 Global Business Ethics Survey, ________ percent of U.S. employees surveyed report observing misconduct.

A) 7 B) 15 C) 24 D) 49 E) 30 Answer: D Difficulty: Challenging LO: 7.1: Discuss actions founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning Quest. Category: Critical Thinking

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4) According to the 2021 Global Business Ethics Survey, ________ percent of U.S. respondents perceive that employees experience some type of retaliation for reporting misconduct.

A) 13 B) 32 C) 53 D) 79 E) 94 Answer: D Difficulty: Challenging LO: 7.1: Discuss actions founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning Quest. Category: Critical Thinking 5) The most important thing that an entrepreneur, manager, or supervisor can do to build a strong ethical culture in their organization is to ________.

A) implement an ethics training program B) discipline unethical employees C) lead by example D) hire an ethics compliance officer E) write a code of conduct Answer: C Difficulty: Moderate LO: 7.1: Discuss actions founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning Quest. Category: Critical Thinking 6) A code of ________ is a set of rules outlining the norms, rules, and responsibilities for proper practices of an organization.

A) conduct B) collaboration C) performance D) principles E) morals Answer: A Difficulty: Easy LO: 7.1: Discuss actions founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning Quest. Category: Critical Thinking

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7) The intention of a firm's code of conduct is to ________.

A) influence people to behave in ways that are consistent with a firm's ethical orientation B) establish punishments for those who violate the code C) provide ethical training for employees D) outline every activity considered unethical E) call out unethical behaviors by customers and suppliers Answer: A Difficulty: Moderate LO: 7.1: Discuss actions founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning Quest. Category: Critical Thinking 8) A situation that involves doing something that is beneficial to oneself or the organization, but may be unethical, is called a(n) ________.

A) ethical quandary B) ethical predicament C) ethical dilemma D) principled quandary E) immoral debate Answer: C Difficulty: Moderate LO: 7.1: Discuss actions founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning Quest. Category: Critical Thinking 9) Graza, the firm profiled in the Savvy Entrepreneurial Firm feature of chapter 7, was able to recover from the disaster of late, damaged, or poorly packaged holiday olive oil. The recovery was largely because of ________.

A) the sincerity of the founder's personal apology to each impacted customer B) free replacement products C) ignoring the mistake D) moving on from these customers and recruiting new ones E) a mass PR email to explain the disaster and provide discount coupons Answer: A Difficulty: Moderate LO: 7.1: Discuss actions founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning Quest. Category: Critical Thinking

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10) In strong ethical cultures, entrepreneurs communicate ethics as a priority and set a good example of ethical conduct.

Answer: TRUE Difficulty: Easy LO: 7.1: Discuss actions founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning Quest. Category: Critical Thinking 11) The most important thing that any entrepreneur, or team of entrepreneurs, can do to build a strong ethical culture in their organization is to hire an aggressive attorney.

Answer: FALSE Difficulty: Easy LO: 7.1: Discuss actions founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning Quest. Category: Critical Thinking 12) An ethical dilemma is a situation that involves doing something that is beneficial to oneself or the organization, but may be unethical.

Answer: TRUE Difficulty: Easy LO: 7.1: Discuss actions founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning Quest. Category: Critical Thinking 13) List and briefly describe three specific steps that an entrepreneurial organization can take to build a strong ethical culture.

Answer: (1) Lead by example. The most important thing that any entrepreneur, manager, or supervisor can do to build a strong ethical culture in their organization is to lead by example. (2) Establish a code of conduct. A code of conduct is a formal statement of an organization's values on certain ethical and social issues. The advantage of having a code of conduct is that it provides specific guidance to managers and employees regarding what is expected of them in terms of ethical behavior. (3) Implement an ethics training program. Ethics training programs teach business ethics to help employees deal with ethical dilemmas and improve their overall ethical conduct.

Difficulty: Moderate LO: 7.1: Discuss actions founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning Quest. Category: Critical Thinking

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14) A(n) ________ is a written document that deals with issues such as the relative split of the equity among the founders of the firm, and how long the founder will have to remain with the firm for their shares to fully vest.

A) entrepreneurs' agreement B) creators' agreement C) founders' agreement D) initiators' agreement E) originators' agreement Answer: C Difficulty: Moderate LO: 7.2: Describe actions new firms can take to deal effectively with legal issues.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 15) Most founders' agreements include a ________ clause.

A) redemption B) buyback C) statutory purchase D) voluntary recoup E) shareholder surrender Answer: B Difficulty: Moderate LO: 7.2: Describe actions new firms can take to deal effectively with legal issues.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 16) Which of the following is typically NOT included in the founders' agreement for a firm?

A) Recommended attorney(s) B) Nature of the prospective business C) Buyback clause D) Division of ownership E) Identity and proposed titles of the founders Answer: A Difficulty: Moderate LO: 7.2: Describe actions new firms can take to deal effectively with legal issues.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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17) The Partnering for Success feature in Chapter 7 focuses on the topic of vesting company stock. According to the feature, a typical startup's vesting schedule lasts ________ and includes a 12-month cliff.

A) 12 months B) 12 to 24 months C) 24 to 36 months D) 36 to 48 months E) 48 to 60 months Answer: D Difficulty: Challenging LO: 7.2: Describe actions new firms can take to deal effectively with legal issues.

AACSB: Analytical Thinking Quest. Category: Analytical 18) The written agreement that binds an employee or another party (such as a supplier) to not share a company's trade secret(s) is called a(n) ________ agreement.

A) nondisclosure B) reach-of-trust C) voluntary truth D) noncompete E) ethics Answer: A Difficulty: Moderate LO: 7.2: Describe actions new firms can take to deal effectively with legal issues.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 19) ________ is one of the simplest ways to avoid misunderstandings and ultimately legal disputes.

A) Getting everything in writing B) Hiring an experienced attorney C) Using LegalZoom regularly D) Creating a code of conduct E) Leading by example Answer: A Difficulty: Moderate LO: 7.2: Describe actions new firms can take to deal effectively with legal issues.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking

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20) Steven Diaz just took a job with Harley Davidson. As part of his employment agreement, Harley Davidson required Steven to sign an agreement, which states that if he leaves Harley Davidson, he will not work for a firm that is a competitor of Harley Davidson for at least two years. The agreement that Steven signed is called a ________ agreement.

A) nondisclosure B) nonparticipate C) nonchallenge D) noncompete E) noncontend Answer: D Difficulty: Easy LO: 7.2: Describe actions new firms can take to deal effectively with legal issues.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 21) ________ is the process in which an impartial third party helps those involved in a dispute reach an agreement.

A) Conciliation B) Reconciliation C) Negotiation D) Appeasement E) Mediation Answer: E Difficulty: Moderate LO: 7.2: Describe actions new firms can take to deal effectively with legal issues.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 22) A buyback clause if often included in a noncompete agreement.

Answer: FALSE Difficulty: Moderate LO: 7.2: Describe actions new firms can take to deal effectively with legal issues.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 23) A founders' agreement is a written document that deals with issues such as the relative split of the equity among the founders of the firm.

Answer: TRUE Difficulty: Moderate LO: 7.2: Describe actions new firms can take to deal effectively with legal issues.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking

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24) Vesting retains employee motivation and engagement and solves potential problems that can result when employees receive their stock all at once.

Answer: TRUE Difficulty: Moderate LO: 7.2: Describe actions new firms can take to deal effectively with legal issues.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 25) A nondisclosure agreement prevents an individual from competing against a former employer for a specific period of time.

Answer: FALSE Difficulty: Moderate LO: 7.2: Describe actions new firms can take to deal effectively with legal issues.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 26) A good way to select an attorney is to contact the local bar association and ask for a list of attorneys in your area specializing in business startups.

Answer: TRUE Difficulty: Easy LO: 7.2: Describe actions new firms can take to deal effectively with legal issues.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 27) What is a founders' agreement? Describe the purpose of a buyback clause and its importance.

Answer: A founders' (or shareholders') agreement is a written document that deals with issues such as the relative split of the equity among the founders of the firm, how individual founders will be compensated for the cash or the "sweat equity" they put into the firm, and how long the founders will have to remain with the firm for their shares to fully vest. An important issue addressed by most founders' agreements is what happens to the equity of a founder if the founder dies or decides to leave the firm. Most founders' agreements include a buyback clause, which legally obligates the departing founders to sell to the remaining founders their interest in the firm if the remaining founders are interested. In most cases, the agreement also specifies the formula for computing the dollar value to be paid. The presence of a buyback agreement is important for at least two reasons. First, if a founder leaves the firm, the remaining founders may need the shares to offer to a replacement person. Second, if founders leave because they are disgruntled, the buyback clause provides the remaining founders a mechanism to keep the shares of the firm in the hands of people who are fully committed to a positive future for the venture.

Difficulty: Moderate LO: 7.2: Describe actions new firms can take to deal effectively with legal issues.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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28) Describe the purpose of a noncompete agreement.

Answer: A noncompete agreement prevents an individual from competing against a former employer for a period of time.

Difficulty: Easy LO: 7.2: Describe actions new firms can take to deal effectively with legal issues.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 29) Which of the following statements regarding business licenses and permits is NOT correct?

A) Most business licenses and permits can wait until after a business is launched to be obtained.

B) New firms can incur severe penalties if they start running a business without the proper licenses in place.

C) Two of the most common state-level requirements for starting a business are obtaining a sales tax permit and obtaining professional and occupational licenses and permits.

D) Most states have startup guides for entrepreneurs.

E) The secretary of state's office in the state of the business can help identify licenses needed.

Answer: A Difficulty: Moderate LO: 7.3: Provide an overview of the business licenses and permits that startups must obtain before they begin operating.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 30) In some states, businesses that plan to use a name other than the business owner's name, need a(n) ________ permit.

A) unreal business name B) fabricated business name C) invented business name D) conjured business name E) fictitious business name Answer: E Difficulty: Moderate LO: 7.3: Provide an overview of the business licenses and permits that startups must obtain before they begin operating.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 31) All businesses, other than sole proprietorships without employees, must obtain a Federal Employee Identification Number.

Answer: TRUE Difficulty: Easy LO: 7.3: Provide an overview of the business licenses and permits that startups must obtain before they begin operating.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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32) Which of the following is the simplest form of business entity?

A) C corporation B) Sole proprietorship C) Subchapter S corporation D) Limited partnership E) Limited liability corporation Answer: B Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 33) Which of the following is NOT one of the four factors identified in the textbook as critical in selecting a form of business ownership?

A) The cost of setting up and maintaining the legal form B) The number and types of investors involved C) The location of the business D) Tax considerations E) The extent to which personal assets can be shielded from the liabilities of the business Answer: C Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 34) Which of the following generally has the lowest cost of setting up and maintaining?

A) Sole proprietorship B) General partnership C) C corporation D) Limited liability company E) Subchapter S corporation Answer: A Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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35) All of the following are advantages of a sole proprietorship EXCEPT ________.

A) creating one is easy and inexpensive B) unlimited liability on the owner's part C) it is not subject to double taxation D) the owner maintains complete control of the business and retains all profits E) business losses can be deducted against the sole proprietor's other sources of income Answer: B Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 36) Which of the following statements is NOT correct regarding sole proprietorships?

A) There is one owner.

B) The sole proprietor maintains full control.

C) The business ends at the owner's death or loss of interest in the business.

D) The liquidity of the investment is high.

E) The business is not subject to double taxation.

Answer: D Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 37) Partnerships are organized as either ________ or ________ partnerships.

A) specific; general B) narrow; broad C) inward; outward D) general; limited E) partial; full Answer: D Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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38) A(n) ________ details the responsibilities and the ownership shares of the partners involved with an organization.

A) partnership agreement B) founders agreement C) shareholder agreement D) article of incorporation E) partnership pledge Answer: A Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 39) Which of the following is NOT an advantage of a general partnership?

A) Business losses can be deducted against the partners' other sources of income.

B) The skills and abilities of more than one individual are available to the firm.

C) The liquidity of each partner's investment is low.

D) Creating one is relatively easy and inexpensive compared to a C corporation or limited liability company.

E) It is not subject to double taxation.

Answer: C Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 40) The major difference between a limited partnership and a general partnership is that a limited partnership ________.

A) includes two classes of owners B) has only one owner C) includes only general partners D) is subject to double taxation E) does not have access to the skills and abilities of more than one individual Answer: A Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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41) Which of the following statements about limited partnerships is NOT correct?

A) A limited partnership is a modified form of a general partnership.

B) Limited partnerships are common in real estate and oil and gas exploration.

C) A limited partnership is usually formed to raise money or to spread out the risk of a venture without forming a corporation.

D) Both the limited partners and the general partners are equally responsible for the debts and obligations of the partnership.

E) A limited partnership contains two classes of owners—general and limited partners.

Answer: D Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 42) A ________ sets forth the rights and duties of the general and limited partners, along with the details of how the partnership will be managed and eventually dissolved.

A) nondisclosure agreement B) restricted partnership agreement C) business partnership agreement D) founders agreement E) limited partnership agreement Answer: E Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Written and Oral Communication Quest. Category: Critical Thinking 43) ________ are common in real estate development, oil and gas exploration, and motion picture ventures.

A) Sole proprietorships B) Limited liability companies C) Subchapter S corporations D) Limited partnerships E) General partnerships Answer: D Difficulty: Challenging LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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44) A separate legal entity organized under the authority of a state is referred to as a ________.

A) limited partnership B) conglomerate C) general partnership D) sole proprietorship E) corporation Answer: E Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 45) Corporations are organized as either ________ corporations or ________ corporations.

A) permanent; temporary B) general; limited C) voluntary; statutory D) C; subchapter S E) closely-held; limited liability Answer: D Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 46) The vast majority of the corporations in the U.S. are ________.

A) limited partnerships B) public corporations C) subchapter S corporations D) limited liability corporations E) private corporations Answer: E Difficulty: Easy LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 47) The two classes of stock issued by most C corporations are ________.

A) premium and normal B) common and preferred C) standard and substandard D) regular and special E) ordinary and distinct Answer: B Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 14 Copyright © 2025

48) Which of the following is true regarding common and preferred stock?

A) Preferred stock is only held by board members.

B) Common stock is not issued in a C corporation.

C) Common stock is issued more broadly than preferred stock.

D) Preferred stockholders are usually the last to receive payment in the event of a corporation's liquidation.

E) Common stockholders do not have vesting rights.

Answer: C Difficulty: Challenging LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 49) ________ stock is typically issued to conservative investors who have preferential rights in regard to dividends and to the assets of the corporation in the event of liquidation.

A) Restricted B) Partial C) Preferred D) Common E) Limited liability Answer: C Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 50) Which of the following statements is incorrect regarding common stock?

A) Common stock is issued more narrowly than preferred stock.

B) Common stockholders have voting rights.

C) Common stockholders get paid after the creditors in the event of the liquidation of the corporation.

D) Common stock is the form of stock that most shareholders of a corporation own.

E) Common stockholders elect the board of directors.

Answer: A Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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51) A corporation is formed by filing ________ with the secretary of state's office in the state the corporation operates in.

A) a certificate of intent to incorporate B) articles of business C) corporate credentials D) a corporation permit E) articles of incorporation Answer: E Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 52) ________ means that a corporation is taxed on its net income and when the same income is distributed to shareholders in the form of dividends it is taxed again on shareholders' personal income tax returns.

A) Double taxation B) Dual toll C) Double duty D) Double assessment E) Dual harm Answer: A Difficulty: Easy LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 53) Corporations that trade their stock on organized exchanges like the New York Stock Exchange and the NASDAQ are called ________ corporations.

A) national B) civil C) public D) premier E) common Answer: C Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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54) In a ________ corporation, the voting stock is owned by a small number of individuals and is very thinly or infrequently traded.

A) public B) private C) narrow D) cautious public E) closely held Answer: E Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 55) If the owners of a corporation don't file their annual paperwork, neglect to pay their annual fees, or commit fraud, a court could ignore the fact that a corporation has been established and the owners could be held personally liable for the actions of the corporation. This chain of events is referred to as ________.

A) vacating the corporate status B) yielding the corporate privilege C) surrendering the corporate shield D) piercing the corporate veil E) capitulating the corporate doctrine Answer: D Difficulty: Challenging LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 56) A special form of incentive compensation that provides employees the option or right to buy a certain number of shares of their company's stock at a stated price over a certain period of time is referred to as ________.

A) corporate options B) collective plans C) share plans D) stock options E) dividends Answer: D Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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57) Which of the following is a disadvantage of a C Corporation?

A) Income is subject to double taxation.

B) There is limited liability.

C) Raising capital is easier than a partnership or sole proprietorship.

D) Stock is liquid if traded on a major stock exchange.

E) No restrictions exist on the number of shareholders.

Answer: A Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 58) Which of the following is an advantage of a C corporation?

A) Setting up and maintaining one is more difficult than for a sole proprietorship or a partnership.

B) Stock is liquid when traded on a major stock exchange.

C) Business losses cannot be deducted against the shareholders' other sources of income.

D) Income is subject to double taxation.

E) Small shareholders typically have little voice in the management of the firm.

Answer: B Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 59) A ________ combines the advantages of a partnership and a C corporation.

A) subchapter S corporation B) limited liability company C) private corporation D) sole proprietorship E) closely held corporation Answer: A Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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60) Which of the following is NOT one of the standards that a business must meet to qualify for status as a subchapter S corporation?

A) The business must be a subsidiary of another corporation.

B) All shareholders must agree to have the corporation formed as a subchapter S corporation.

C) It can have no more than 100 shareholders (both spouses count as one shareholder).

D) It can have only one class of stock issued and outstanding.

E) The shareholders must be U.S. citizens.

Answer: A Difficulty: Challenging LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 61) Originating in Germany, the ________ is a form of business organization that is rapidly gaining popularity in the United States.

A) limited partnership B) general partnership C) limited liability company D) subchapter S corporation E) C corporation Answer: C Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 62) Which form of business ownership has shareholders known as "members",) with "interests" instead of stock ownership?

A) General partnership B) Limited partnership C) Limited liability company D) Subchapter C corporation E) C corporation Answer: C Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 63) Choosing a legal entity for a firm is a one-time event since once a form of legal entity has been chosen, it cannot be changed.

Answer: FALSE Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 19 Copyright © 2025

64) Liquidity is the ability to sell a business or other asset quickly at a price that is close to its market value.

Answer: TRUE Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 65) An advantage of a general partnership is that it is not subject to double taxation.

Answer: TRUE Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 66) A common reason to form a limited partnership is to raise money or to spread out the risk of a venture without forming a corporation.

Answer: TRUE Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 67) Corporations are organized as either C corporations, T corporations, or subchapter S corporations.

Answer: FALSE Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 68) It is usually easier for a corporation to raise investment capital than a sole proprietorship or a general partnership because the shareholders are not liable beyond their investment in the firm.

Answer: TRUE Difficulty: Challenging LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 69) The vast majority of corporations in the United States are private corporations.

Answer: TRUE Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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70) Stock options are a special form of incentive compensation.

Answer: TRUE Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 71) The LLC as a form of business organization is rapidly losing popularity in the United States.

Answer: FALSE Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 72) Many entrepreneurial firms start as subchapter S corporations.

Answer: TRUE Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 73) Explain the difference between preferred stock and common stock.

Answer: Preferred stock is issued to conservative investors who with this stock have preferential rights over common stockholders regarding dividends and assets in the event of liquidation. Common stock is issued more broadly. Common stockholders have voting rights and elect the firm's board of directors. Common stockholders are usually the last to receive payment in the event of a corporation's liquidation, that is, after the creditors and the preferred stockholders.

Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 74) Describe what is meant by a "general partnership" and a "limited partnership." Describe the major difference between the two.

Answer: A general partnership is a form of business organization where two or more people pool their skills, abilities, and resources to run a business. A limited partnership is a modified form of a general partnership. The major difference between the two is that a limited partnership includes two classes of owners: general partners and limited partners. Similar to a general partnership, the general partners are liable for the debts and obligations of the partnership, but the limited partners are liable only up to the amount of their investment.

Difficulty: Challenging LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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75) What is meant by the term "piercing the corporate veil"?

Answer: In most states, corporations must file papers annually, to maintain their status as a corporation and to comply with state regulations. If the owners of a corporation don't file their annual paperwork, neglect to pay their annual fees, or commit fraud, a court could ignore the fact that a corporation has been established, and the owners could be held personally liable for actions of the corporation. This chain of events is referred to as "piercing the corporate veil."

Difficulty: Moderate LO: 7.4: Identify and describe the different forms of organizations available to new firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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Entrepreneurship, 7e (Barringer/Ireland) Chapter 8 Assessing a New Venture's Financial Strength and Viability 1) Cleancult, the company profiled in the Opening Profile feature in Chapter 8, ________ in the early years.

A) used a fractional CFO B) avoided outside accounting firms C) was not certain about its market D) easily delivered its product to the people promised E) never changed its value proposition Answer: A Difficulty: Easy LO: 8.1: Learn about the importance of understanding the financial management of an entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 2) Financial management deals with two things: managing a company's finances in a way that allows it to achieve the highest rate of return and ________.

A) operations management B) inventory control C) raising money D) production management E) supply chain management Answer: C Difficulty: Easy LO: 8.1: Learn about the importance of understanding the financial management of an entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 3) An entrepreneur's ability to pursue an opportunity and turn it into a viable entrepreneurial firm hinges largely on the availability of money.

Answer: TRUE Difficulty: Moderate LO: 8.1: Learn about the importance of understanding the financial management of an entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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4) Which of the following was NOT identified as one of the four main financial objectives of an entrepreneurial firm?

A) Stability B) Efficiency C) Timeliness D) Liquidity E) Profitability Answer: C Difficulty: Easy LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 5) The overall health of the financial structure of a firm, particularly as it relates to its debt-toequity ratio, is referred to as ________.

A) efficiency B) effectiveness C) control, effectiveness, liquidity, and power D) liquidity E) stability Answer: E Difficulty: Easy LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 6) A firm's efficiency is defined as ________.

A) the overall health of the financial structure of the firm, particularly as it relates to its debt-toequity ratio B) how productively a firm utilizes its assets C) a company's ability to make a profit D) a company's ability to meet its short-term obligations E) the overall strength of the management team Answer: D Difficulty: Moderate LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Analytical Thinking Quest. Category: Critical Thinking

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7) ________ is a company's ability to meet its short-term financial obligations.

A) Liquidity B) Profitability C) Effectiveness D) Stability E) Efficiency Answer: A Difficulty: Easy LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 8) A company's ability to productively utilize its assets relative to its revenue and its profits is referred to as ________.

A) efficiency B) effectiveness C) stability D) liquidity E) profitability Answer: A Difficulty: Moderate LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 9) Money owed to a company by its customers is referred to as ________.

A) accounts obtainable B) accounts payable C) accounts receivable D) inventory E) accounts collectable Answer: C Difficulty: Moderate LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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10) Susan Howard owns a seafood restaurant in Naples, Florida. She is currently owed $21,000 by a corporation that she catered a series of meetings for and $3,000 on an overdue account.

Amanda has $24,000 in ________.

A) accounts receivable B) inventory C) accounts collectable D) accounts obtainable E) accounts payable Answer: A Difficulty: Moderate LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 11) A company's merchandise, raw materials, and products waiting to be sold are called its ________.

A) current liabilities B) working capital C) owners' equity D) inventory E) net sales Answer: D Difficulty: Moderate LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 12) Renata owns a store that sells exercise equipment. Each January 1, she makes a very accurate account of all her merchandise and products waiting to be sold that are in her store. On January 1, Renata is taking account of her store's ________.

A) long-term assets B) owners' equity C) accounts payable D) accounts receivable E) inventory Answer: E Difficulty: Moderate LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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13) Southwest Airlines uses its assets very productively. Its turnaround time, or the time that its airplanes sit on the ground while they are being loaded and unloaded, is the lowest in the airline industry. In terms of the primary financial objectives of a firm, this is a measure of Southwest's ________.

A) efficiency B) effectiveness C) stability D) liquidity E) profitability Answer: A Difficulty: Moderate LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 14) Intercounty Appliance Corporation, ADO, and the Independent Pharmacy Cooperative, profiled in the Partnering for Success feature of chapter 8, are an example of a ________.

A) buying group B) failed corporation C) entrepreneurial startup D) federal agency E) state-run corporation Answer: A Difficulty: Moderate LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 15) Efficiency is how productively a firm utilizes its assets.

Answer: TRUE Difficulty: Moderate LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 16) Stability is a company's ability to meet its short-term financial obligations.

Answer: FALSE Difficulty: Moderate LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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17) If a firm's debt-to-equity ratio gets too high, it may have trouble meeting its obligations and securing the level of financing needed to fuel its growth.

Answer: TRUE Difficulty: Moderate LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 18) What are the four primary financial objectives of entrepreneurial firms?

Answer: The four primary financial objectives of entrepreneurial firms are profitability, liquidity, efficiency, and stability.

Difficulty: Moderate LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 19) The Partnering for Success feature in Chapter 8 focuses on buying groups and recommends that small businesses seek out buying groups to participate in. What is a "buying group" in the context of the feature?

Answer: A buying group is a partnership that bands small businesses together to attain volume discounts on common products and services that they buy.

Difficulty: Moderate LO: 8.2: Identify entrepreneurial ventures' four main financial objectives.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 20) A financial statement is a(n) ________.

A) set of ratios which depict relationships between a firm's financial items B) estimate of a firm's future income and expenses C) hybrid statement of cash flows D) itemized forecast of a company's income, expenses, and capital needs E) written report that quantitatively describes a firm's financial health Answer: E Difficulty: Moderate LO: 8.3: Describe the financial management process entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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21) ________ are estimates of a firm's future sales, income, expenses, and capital expenditures based on its past performance, its current circumstances, and its future plans.

A) Budgets B) Forecasts C) Statements of cash flow D) Financial statements E) Prediction statements Answer: B Difficulty: Moderate LO: 8.3: Describe the financial management process entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 22) ________ are itemized forecasts of a company's income, expenses, and capital needs.

A) Profitability statements B) Financial statements C) Owners' equity statements D) Budgets E) Statements of cash flows Answer: D Difficulty: Moderate LO: 8.3: Describe the financial management process entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 23) Financial ratios ________.

A) depict relationships between items on a firm's financial statements B) list a firm's assets C) itemize forecasts of a company's income, expenses, and capital needs D) describe a firm's marketing plan E) estimate a firm's future income and expenses Answer: A Difficulty: Moderate LO: 8.3: Describe the financial management process entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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24) What is the final step in the process of financial management?

A) Preparation of historical statements B) Ongoing analysis of financial results C) Preparation of forecasts D) Preparation of pro forma financial statements E) Estimating future product success Answer: B Difficulty: Easy LO: 8.3: Describe the financial management process entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 25) To determine if a firm is meeting its financial objectives and how it compares to industry peers, firms use ________, depicting relationships between items of its financial statements.

A) Financial proportions B) Fiscal relations C) Fiscal projections D) Monetary balances E) Financial ratios Answer: E Difficulty: Moderate LO: 8.3: Describe the financial management process entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 26) Budgets are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control.

Answer: TRUE Difficulty: Moderate LO: 8.3: Describe the financial management process entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 27) ________ financial statements reflect past performance and are usually prepared on a quarterly and annual basis.

A) Chronological B) Ad-hoc C) Historical D) Concurrent E) Pro forma Answer: C Difficulty: Moderate LO: 8.4: Explain the difference between historical and pro forma financial statements.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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28) ________ financial statements are projections for future periods based on forecasts.

A) Chronological B) Pro forma C) Ad-hoc D) Concurrent E) Historical Answer: B Difficulty: Moderate LO: 8.4: Explain the difference between historical and pro forma financial statements.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 29) Which of the following statements about pro forma financial statements is NOT correct?

A) Pro forma financial statements are projections for future periods based on forecasts.

B) Pro forma financial statements are typically completed for two to three years into the future.

C) Pro forma financial statements are required by the SEC. D) Most companies consider their pro forma financial statements to be confidential and reveal them to outsiders only on a "need to know basis."

E) Pro forma financial statements are strictly planning tools.

Answer: C Difficulty: Challenging LO: 8.4: Explain the difference between historical and pro forma financial statements.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 30) Pro forma financial statements look forward rather than backward.

Answer: TRUE Difficulty: Easy LO: 8.4: Explain the difference between historical and pro forma financial statements.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 31) The 10-K is also known as the annual report.

Answer: FALSE Difficulty: Moderate LO: 8.4: Explain the difference between historical and pro forma financial statements.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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32) Describe the difference between historical and pro forma financial statements.

Answer: Historical financial statements reflect past performance and are usually prepared on a quarterly and annual basis. Pro forma financial statements are projections for future periods based on forecasts and are typically completed for two to three years into the future. Pro forma financial statements are strictly planning tools, while historical financial statements reflect actual information.

Difficulty: Easy LO: 8.4: Explain the difference between historical and pro forma financial statements.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 33) The income statement ________.

A) reflects how much a firm is making or losing B) depicts the structure of a firm's assets and liabilities C) shows where a firm's cash is coming from.

D) compares a firm to competitors E) summarizes the changes in a firm's cash position Answer: A Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 34) A firm's ________ reflects the results of its operations over a specified period, recording all the revenues and expenses for the given period, and shows whether it is making a profit or is experiencing a loss.

A) statement of cash flows B) income statement C) forecast D) balance sheet E) operating budget Answer: B Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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35) Which financial statement is a snapshot of a company's assets, liabilities, and owners' equity at a specific point in time?

A) Balance sheet B) Owner's equity statement C) Statement of cash flows D) Forecast E) Income statement Answer: A Difficulty: Easy LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 36) On a firm's income statement, net sales consist of ________.

A) operating expenses minus cost of sales B) total sales minus allowances for returned goods and discounts C) cost of sales minus allowances for returned goods and discounts D) cost of sales minus operating expenses E) total sales minus operating expenses Answer: B Difficulty: Easy LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 37) The three numbers that receive the most attention when evaluating an income statement are ________.

A) depreciation, interest income, and income tax expense B) cost of sales, gross profit, and operating expenses C) net sales, cost of sales, and operating expenses D) gross profit, net sales, and income tax expense E) gross profit, other income, and net income Answer: C Difficulty: Challenging LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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38) A firm's profit margin, or return on sales, is computed by dividing ________.

A) net income by net sales B) gross profit by net sales C) net income by gross profit D) net income by cost of sales E) operating income by gross profit Answer: A Difficulty: Challenging LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 39) A(n) ________ summarizes the changes in a firm's cash position for a specified period of time and details the reason for the change.

A) income statement B) statement of cash flows C) effectiveness statement D) balance sheet E) efficiency statement Answer: B Difficulty: Easy LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 40) Which of the following statements is true regarding how balance sheets are prepared?

A) The left-hand side of a balance sheet shows a firm's liabilities.

B) The assets on a balance sheet are shown in order of liquidity.

C) Assets are recorded at fair market value rather than cost.

D) Owners' equity is a major category of assets.

E) Accumulated good will is an example of a long-term liability.

Answer: B Difficulty: Challenging LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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41) Real estate, buildings, equipment and furniture are classified as ________ on a company's balance sheet.

A) current assets B) fixed assets C) current liabilities D) long-term liabilities E) owners' equity Answer: B Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 42) The Savvy Entrepreneurial Firm feature in Chapter 8 focuses on a scenario involving the selection of a new CEO for New Venture Fitness Drinks. The lesson learned from the feature was ________.

A) compare a firm's financial ratios against its primary competitors and industry norms to fairly assess how well a firm is performing financially B) income statements are more effective in assessing how well a firm is performing financially than are balance sheets and statements of cash flow C) the most powerful instrument for understanding how well a firm is performing financially is the statement of cash flows D) ratio analysis is ineffective in determining the performance of a firm E) look at multiple years of an income statement and look beyond the numbers to understand the circumstances surrounding a firm's financial results Answer: E Difficulty: Challenging LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Analytical Thinking Quest. Category: Analytical 43) Cash plus items that are readily convertible to cash, such as accounts receivable, marketable securities, and inventories are classified as ________ on a firm's balance sheet.

A) fixed assets B) current liabilities C) long-term liabilities D) current assets E) owners' equity Answer: D Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Analytical Thinking Quest. Category: Critical Thinking

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44) Which of the following is an example of a long-term liability?

A) Accounts payable B) Real estate mortgage C) Accrued expenses D) Inventories E) Owners' equity Answer: B Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 45) When evaluating a balance sheet, the two primary questions are ________.

A) whether a firm has sufficient short-term assets to cover its short-term debts and whether it is profitable B) whether a firm is profitable and whether a firm is financially sound C) whether a firm's cost of sales is going up and whether it is generating excess cash that could be used to pay down debt or pay dividends D) whether a firm has sufficient short-term assets to cover its short-term debts and whether it is financially sound E) whether a firm is profitable and whether it is generating excess cash that could be used to pay down debt or pay dividends Answer: D Difficulty: Challenging LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Analytical Thinking Quest. Category: Analytical 46) A firm's working capital is its ________.

A) inventory and accounts receivable minus its current liabilities B) current assets minus its current liabilities C) total assets minus its total liabilities D) cash and cash equivalents minus its current liabilities E) accounts receivable minus its total accounts payable Answer: B Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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47) A firm's ________ represents the amount of liquid assets available to the firm.

A) accounts receivable B) market share C) working capital D) owners' equity E) current ratio Answer: E Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 48) Which of the financial statements used by businesses is like a month-end bank statement?

A) Income statement B) Balance sheet C) Statement of cash flows D) Statement of ratio analysis E) Statement of owners' equity Answer: C Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 49) The statement of cash flows is divided into three separate activities: ________.

A) profitability, stability, and investing B) stability, earning, and financing C) operating, capital, and liquidity D) spending, earning, and capital E) operating, investing, and financing Answer: E Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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50) In the context of a firm's statement of cash flows, ________ activities include the purchase or sale of fixed assets.

A) operating B) investing C) capital D) financing E) liquidity Answer: B Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 51) In the context of a firm's statement of cash flows, ________ activities include cash raised during the period by borrowing money or selling stock and/or cash used during the period by paying dividends, buying back outstanding stock, or buying back outstanding bonds.

A) investing B) financing C) operating D) liquidity E) capital Answer: B Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 52) ________ is the most practical way to interpret or make sense of a firm's historical financial statements.

A) Profit analysis B) Regression analysis C) Pro forma financial statements D) Ratio analysis E) Percentage analysis Answer: D Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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53) The income statement records all the revenues and expenses for a given period and shows whether the firm is making a profit or is experiencing a loss.

Answer: TRUE Difficulty: Easy LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 54) The balance sheet reflects the results of the operations of a firm over a specified period of time.

Answer: FALSE Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 55) A large increase in a firm's cash balance may not be a positive sign for a new venture.

Answer: TRUE Difficulty: Challenging LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 56) The major categories of assets listed on a balance sheet include current, fixed, and other assets.

Answer: TRUE Difficulty: Challenging LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 57) A statement of cash flows is a snapshot of a company's assets, liabilities, and owners' equity at a specific point in time.

Answer: FALSE Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 58) A firm's working capital is defined as its fixed assets minus its long-term liabilities.

Answer: FALSE Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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59) The statement of cash flows summarizes the changes in a firm's cash position for a specified period of time and details why the change occurred.

Answer: TRUE Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 60) Financing activities include the purchase, sale, or investment in fixed assets (e.g., real estate, equipment, and buildings).

Answer: FALSE Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 61) Describe the purpose of the income statement, the balance sheet, and the statement of cash flows.

Answer: The income statement reflects the results of the operations of a firm over a specified period of time. It records all the revenues and expenses for the given period and shows whether the firm is making a profit or is experiencing a loss. Unlike the income statement, a balance sheet is a snapshot of a company's assets, liabilities, and owners' equity at a specific point in time. The statement of cash flows summarizes the changes in a firm's cash position for a specified period of time and details why the change occurred. Similar to a month-end bank statement, it reveals how much cash is on hand at the end of the month as well as how the cash was acquired and spent during the month.

Difficulty: Challenging LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 62) What is ratio analysis? Why is it important?

Answer: The most practical way to interpret or make sense of a firm's historical and pro forma financial statements is through ratio analysis. The ratios are divided into profitability ratios, liquidity ratios, and overall financial stability ratios. These ratios provide a starting point for forecasting the firm's financial performance and capabilities for the future.

Difficulty: Moderate LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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63) Shawn Jones was reading the business plan of New Venture Fitness Drinks, and noticed that prior to its financial forecasts, New Venture Fitness Drinks placed an explanation of the sources of the numbers for the forecast and the assumptions used to generate them. This explanation is called a(n) ________.

A) forecast sheet B) forecast hypothesis C) estimate statement D) assumptions sheet E) hypothesis sheet Answer: D Difficulty: Moderate LO: 8.6: Discuss the role of forecasts in projecting a firm's future income and expenses.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 64) What is the most common way for a firm to forecast its cost of sales and the other items on its income statement?

A) Percent-of-sales method B) Regression analysis C) Ratio analysis D) Break-even analysis E) Constant ratio method of forecasting Answer: A Difficulty: Moderate LO: 8.6: Discuss the role of forecasts in projecting a firm's future income and expenses.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 65) If a firm determines it can use the percentage-of-sales method and it follows the procedure described in the textbook, then the net result is that each expense item on its income statement (with the exception of those items that can be individually forecast) will grow at the same rate as sales. This approach is called the ________.

A) continuous percentage method of forecasting B) stable fraction method of forecasting C) regular proportion method of forecasting D) constant ratio method of forecasting E) steady percentage method of forecasting Answer: D Difficulty: Challenging LO: 8.6: Discuss the role of forecasts in projecting a firm's future income and expenses.

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66) The break-even point for a new product is the point where the total revenue equals total costs associated with the output of the sale of the product.

Answer: TRUE Difficulty: Moderate LO: 8.6: Discuss the role of forecasts in projecting a firm's future income and expenses.

AACSB: Analytical Thinking Quest. Category: Analytical 67) What is regression analysis?

Answer: Regression analysis is a statistical technique firms use to find relationships between variables for the purpose of predicting future values.

Difficulty: Moderate LO: 8.6: Discuss the role of forecasts in projecting a firm's future income and expenses.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 68) A firm's pro forma financial statements are similar to its historical financial statements except that they ________.

A) do not include the income statement B) are required by the SEC in all cases C) look back rather than forward D) look forward rather than back E) do not include the statement of cash flows Answer: D Difficulty: Easy LO: 8.7: Explain the purpose of pro forma financial statements.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 69) The What Went Wrong? feature for Chapter 8 focuses on ToyGaroo, a subscription service for toys. According to the feature, ToyGaroo failed largely because it ________.

A) grew too quickly, which overwhelmed its cash flow B) was not careful enough in preparing its pro forma financial statements C) was not efficient in the way it utilized its assets D) could not effectively align the relationship between revenues and costs E) did not compare its financial ratios to industry peers Answer: D Difficulty: Easy LO: 8.7: Explain the purpose of pro forma financial statements.

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70) The pro forma ________ provides a firm a sense of how its activities will affect its ability to meet its short-term liabilities and how its finances will evolve over time.

A) balance sheet B) statement of cash flows C) income statement D) expense statement E) statement of owners' equity Answer: A Difficulty: Moderate LO: 8.7: Explain the purpose of pro forma financial statements.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 71) According to the textbook, the most important function of the pro forma statement of cash flows is to project whether the firm will have sufficient ________.

A) income to meet its payroll on a weekly or monthly basis B) income to exceed industry norms C) cash to meet its needs D) inventory to meet its sales and production forecasts E) short-term assets to cover its short-term liabilities Answer: C Difficulty: Moderate LO: 8.7: Explain the purpose of pro forma financial statements.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 72) Firms use their pro forma balance sheet to protect the company's overall financial soundness.

Answer: TRUE Difficulty: Moderate LO: 8.7: Explain the purpose of pro forma financial statements.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 73) In the pro forma income statement, firms use the constant ratio method of forecasting to forecast the cost of sales and general and administrative expenses, meaning that there is an expectation that they will remain at the same percentage of sales in the future.

Answer: TRUE Difficulty: Moderate LO: 8.7: Explain the purpose of pro forma financial statements.

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74) Regardless of how successful a firm is in other areas, it must succeed financially to remain strong and viable.

Answer: TRUE Difficulty: Moderate LO: 8.7: Explain the purpose of pro forma financial statements.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 75) Describe the pro forma statement of cash flows.

Answer: The pro forma statement of cash flows shows the projected flow of cash into and out of the company during a specified period. Projecting if the firm will have sufficient cash to meet its needs is the most important function of the pro forma statement of cash flows. There are three activities that are a part of the pro forma statement of ash flows: operating, investing, and financing activities.

Difficulty: Moderate LO: 8.7: Explain the purpose of pro forma financial statements.

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Entrepreneurship, 7e (Barringer/Ireland) Chapter 9 Building a New-Venture Team 1) The fact that companies often falter because the people who start the firms can't adjust quickly enough to their new roles and because the firm lacks a "track record" with outside buyers and sellers, is referred to as the ________.

A) liability of preparedness B) liability of newness C) burden of novelty D) burden of freshness E) millstone of innovation Answer: B Difficulty: Moderate LO: 9.1: Explain the concept called liability of newness.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 2) Savanna Combs opened a clothing boutique two years ago. Unfortunately, the boutique failed after 18 months. Savanna attributes the failure of her boutique to the fact that her employees couldn't adjust quickly enough to their new roles and that her boutique lacked a "track record" with outside buyers and sellers, which made it difficult to form partnerships and make sales.

Savanna suffered from what research calls the ________.

A) burden of novelty B) millstone of innovation C) liability of newness D) liability of preparedness E) burden of newness Answer: C Difficulty: Moderate LO: 9.1: Explain the concept called liability of newness.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 3) According to the text, the high failure rate among new ventures is due, in part, to the ________.

A) liability of newness B) lack of a marketing plan C) firm's poor financial management D) underfunding of the venture E) lack of business partnerships Answer: A Difficulty: Moderate LO: 9.1: Explain the concept called liability of newness.

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4) Sam Atkinson, an entrepreneur who had just launched his venture, attended an entrepreneurship boot camp sponsored by a local university. Sam's goal in attending the boot camp was to overcome the ________.

A) firm's entry barriers B) liability of foreignness C) signaling dilemma D) gaps in the skills profile E) liability of newness Answer: E Difficulty: Moderate LO: 9.1: Explain the concept called liability of newness.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 5) To overcome the liability of newness, entrepreneurs can become a part of a startup accelerator.

Answer: TRUE Difficulty: Moderate LO: 9.1: Explain the concept called liability of newness.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 6) Describe the term "liability of newness" and suggest several ways that a new venture can overcome it.

Answer: The term "liability of newness" refers to the fact that companies often falter because the people who start them aren't able to adjust quickly enough to their new roles and because the firms lack "track records" with outside buyers and suppliers. Assembling a talented and experienced new venture team is one path firms can take to overcome the liability of newness.

Another way is to attend entrepreneurship-focused workshops and events. Another route is to become a part of a startup accelerator.

Difficulty: Moderate LO: 9.1: Explain the concept called liability of newness.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 7) When several startups develop the same idea at the same time, the key to success is the founder's ability ________.

A) to assemble a team that can execute the idea better than others B) to raise the most funds C) to get the product or service to market the fastest D) to create the most impressive marketing plan E) to create the more economies of scale than the competition Answer: A Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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8) The way for a founder to impress potential investors, partners, and employees is to ________.

A) assemble as strong a team as possible B) write a strong business plan C) create an impressive marketing plan D) develop an innovative idea E) write a compelling mission statement Answer: A Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 9) When a team starts a new venture, ________.

A) trust is seldom an important component to effective functioning B) homogeneous team members are valuable in generating constructive conflict C) teams that have worked together before have an edge D) the team assembled can never be too large E) there are no pitfalls associated with starting a firm as a team rather than as a sole entrepreneur Answer: C Difficulty: Challenging LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 10) Which of the following is NOT an element of a new venture team?

A) Board of advisors B) Suppliers and vendors C) Key employees D) Lenders and investors E) Management team Answer: B Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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11) According to the textbook, studies show that more than one individual starts ________ percent of all new firms.

A) 20 to 25 B) 50 to 70 C) 5 to 15 D) 30 to 40 E) 75 to 90 Answer: B Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 12) Which of the following statements is NOT true regarding founding teams?

A) The members of heterogeneous teams are diverse in terms of their abilities and experiences.

B) The members of homogenous teams are very similar in terms of their abilities and experiences.

C) Teams that have worked together before have an edge.

D) Studies show that more than one individual starts 50 to 70 percent of all new firms.

E) Homogeneous teams are likely to generate debate and constructive conflict Answer: E Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 13) Which of the following is a common mistake made when assembling a new venture team?

A) Hiring top managers with ownership in the firm.

B) Assuming that previous success in other industries translates automatically to the new venture's industry C) Ensuring one person wears all the hats D) Disclosing management team competency gaps E) Establishing clear plans for filling a firm's skills gaps Answer: B Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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14) Team members that are diverse in terms of their abilities and experiences are considered ________.

A) heterogeneous B) homogeneous C) like-minded D) similar E) redundant Answer: A Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 15) The members of homogeneous teams are ________ in terms of their abilities and experiences.

A) complementary B) conflict-prone C) similar D) different E) tech-savvy Answer: C Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 16) According to the textbook, which of the following statements is NOT accurate regarding the size and composition of the founding team of a firm?

A) There is no relationship between a founding team's size and its effectiveness.

B) A founding team larger than four people is typically too large to be practical.

C) The members of a homogeneous founding team are similar in terms of their abilities and experiences.

D) The members of a heterogeneous founding team are diverse in terms of their abilities and experiences.

E) A founding team can be too big, causing communication problems and increasing the potential for conflict.

Answer: A Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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17) According to research studies, prior entrepreneurial experience ________.

A) is one of the poorest predictors of future entrepreneurial performance B) does not provide any advantages for entrepreneurs C) is one of the most consistent predictors of future entrepreneurial performance D) is of little help in dealing with the hype accompanying a venture's launch E) has no relationship to future entrepreneurial performance Answer: C Difficulty: Challenging LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 18) Which of the following statements is NOT true regarding the preferred attributes of the founders of an entrepreneurial firm?

A) Evidence suggests that important entrepreneurial skills are enhanced through higher education.

B) Founders with prior entrepreneurial experience are more likely to avoid costly mistakes.

C) Founders with prior entrepreneurial experience in the same industry are typically not as effective as founders new to the industry.

D) Founders with broad social and professional networks have potential access to additional know-how, capital, and customer referrals.

E) New ventures that are started by a team rather than an individual provide greater resources.

Answer: C Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 19) Which of the following qualities was NOT identified in the textbook as a preferred attribute of the founder(s) of a firm?

A) Prior entrepreneurial experience B) Firm started by a team C) Relevant industry experience D) Prior experience working in a government or university position E) Higher education Answer: D Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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20) The What Went Wrong? feature in Chapter 9 focuses on how the failure of Sharkius contributed to ________.

A) the successful startup of another firm, Chessable B) the launch of the Failory website to track failed companies C) a robust partnership network with other founders of failed startups D) the belief that "if you build it, they will come" E) the need for founders to be overconfident Answer: A Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 21) ________ is building and maintaining relationships with people whose interests are similar or whose relationship could bring advantages to the firm.

A) Linking B) Socializing C) Networking D) Associating E) Connecting Answer: C Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 22) Renaldo is a four-time entrepreneur. One thing that has served Renaldo well throughout his entrepreneurial career is his ability to build and maintain relationships with people whose interests are similar or whose relationships could bring advantages to his new ventures.

According to the textbook, Renaldo is a good ________.

A) networker B) socializer C) linker D) assembler E) connector Answer: A Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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23) A chart that depicts the most important skills that are needed in a new venture and where skills gaps exist is a(n) ________.

A) expertise report B) hiring grid C) abilities summary D) skills profile E) organization chart Answer: D Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 24) Jason Andersen's business plan for an innovative office supply store included a chart that depicts the most important skills that are needed for his business and where skills gaps exist.

Jason included a(n) ________ in his business plan.

A) skills profile B) recruitment summary C) abilities profile D) expertise report E) organization chart Answer: A Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 25) Maintaining a skills profile can help entrepreneurs prioritize their ________.

A) approach to operations B) need for members of the board of directors C) hiring needs D) marketing needs E) benefits packages Answer: C Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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26) The Savvy Entrepreneurial Firm feature in Chapter 9 focuses on any trick, shortcut, ability, or novelty method that increases a person's efficiency and effectiveness in both their personal life and career. These are referred to as ________.

A) lifehacks B) productivity hacks C) workarounds D) skills gaps E) skills profiles Answer: A Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Analytical Thinking Quest. Category: Analytical 27) A person who works for a business as an apprentice or trainee for the purpose of obtaining practical experience is a(n) ________.

A) freelancer B) consultant C) intern D) virtual assistant E) novice Answer: C Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 28) A(n) ________ is also known as a contractor.

A) employee B) virtual assistant C) intern D) trainee E) freelancer Answer: E Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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29) A freelancer who provides administrative, technical, or creative assistance to clients remotely is called a(n) ________.

A) intern B) contractor C) employee D) virtual assistant E) advisor Answer: D Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 30) The panel of individuals that a corporation's shareholders elect to oversee the management of the firm is called the ________.

A) social network B) board of directors C) board of advisors D) freelancers board E) top management team Answer: B Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 31) In the context of boards of directors, a(n) ________ director is a person who is also an officer of the firm.

A) outside B) junior C) inside D) expert E) senior Answer: C Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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32) In the context of boards of directors, a(n) ________ director is someone who is a nonemployee of the company and provides critical advice to startup entrepreneurs.

A) outside B) inside C) external D) impartial E) peripheral Answer: A Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 33) Juan Carlos is the chief operating officer of a startup in the health food industry and is also a member of his firm's board of directors. Juan is a(n) ________ director.

A) inside B) outside C) expert D) freelance E) senior Answer: A Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 34) Adam Miller is a general partner in a venture capital firm that just funded a startup, Gold Coast Software. Adam has taken a seat on Gold Coast Software's board of directors. Adam is a(n) ________ director.

A) subordinate B) senior C) distant D) inside E) outside Answer: E Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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35) Which of the following is NOT a formal responsibility of a board of directors?

A) Periodically update the firm's business plan B) Appoint the officers of the firm C) Declare dividends D) Oversee the affairs of the corporation E) Appoint the firm's key managers Answer: A Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 36) A board of directors' three formal responsibilities are to appoint the officers of the firm, oversee the affairs of the corporation, and ________.

A) conduct the annual meeting B) provide funding for the firm C) submit the firm's annual report to the stockholders D) declare dividends E) write the firm's strategic plan Answer: D Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 37) What is considered the most useful role of the board of directors?

A) Write the firm's strategic plan B) Conduct the annual meeting C) Provide funding for the firm D) Represent the firm in public relations activities E) Provide guidance and support for the firm's managers Answer: E Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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38) Which of the following statements is NOT correct regarding boards of directors?

A) Most CEOs interact very infrequently with their boards.

B) A board is typically made up of both inside and outside directors.

C) The board is responsible for declaring dividends.

D) Most boards meet formally three or four times a year.

E) Firms should conduct thorough searches for outside directors, with the objective of filling experience and background gaps of the firm's executives and other directors.

Answer: A Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 39) Well-known and respected board members bring instant credibility to a firm, which provides ________ for the entrepreneurial venture.

A) legitimacy B) ethical dilemmas C) interns D) freelances E) employees Answer: A Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 40) Sharma just launched a firm in the sporting goods industry. On the day the company was launched, Sharma issued a press release, indicating that the vice president of New Balance, a highly respected athletic shoe and sports apparel company, had agreed to serve on her board of directors. Sharma knows that such a high-quality appointment will send an important message to her potential clientele. This phenomenon is referred to as ________.

A) championing B) signaling C) profiling D) indicating E) validating Answer: B Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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41) The Partnering for Success feature in chapter 9 discusses computer programs designed to help people involved in a common task achieve their goals. These programs are called ________.

A) collaborative software B) signaling software C) profiling software D) skills profiles E) virtual assistants Answer: A Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 42) Which of the following was NOT identified in the textbook as an attribute of an effective board of directors?

A) Pattern recognition skills B) Complementary mix of talents C) Ability and willingness to stand up to the CEO and top managers of the firm D) Strong ethics E) Decisiveness Answer: A Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 43) Which of the following was NOT identified as an attribute of an effective board member?

A) Strong personal and professional networks B) Ability and willingness to stand up to the CEO and the firm's top managers C) Investment and/or operating experience D) Respected in their field E) Pattern recognition skills Answer: B Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 44) A new venture team usually does not come together all at once.

Answer: TRUE Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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45) Studies show that a sole entrepreneur starts 50 to 70 percent of all new firms.

Answer: FALSE Difficulty: Easy LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 46) It is generally believed that new ventures started by an individual have an advantage over those started by a team.

Answer: FALSE Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 47) Founding teams that have worked together before, as opposed to teams that are working together for the first time, have an edge.

Answer: TRUE Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 48) Previous team collaborators tend to engage in more effective communication with one another compared to people who are new to one another.

Answer: TRUE Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 49) Prior entrepreneurial experience, relevant industry experience, and networking are attributes that strengthen the chances of a founder's success.

Answer: TRUE Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 50) Educational experiences enhance an individual's entrepreneurial abilities.

Answer: TRUE Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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51) For some founders, networking is an easy part of their daily routine. For others, it is a learned skill.

Answer: TRUE Difficulty: Easy LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 52) The importance of an entrepreneur's relevant industry experience is especially evident starting firms in technical industries such as biotechnology.

Answer: TRUE Difficulty: Challenging LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 53) A contractor is an intern who provides administrative, technical, or creative assistance to clients remotely from a home office.

Answer: FALSE Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 54) List the attributes of effective board members.

Answer: The attributes of effective board members are strong personal and professional networks, respected in their field, willingness to make personal introductions on behalf of the firm, strong interpersonal communication skills, investment and/or operating experience, and ability and willingness to mentor the CEO and the firm's top managers.

Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 55) What are the advantages to founding a firm as a team rather than as an individual?

Answer: Studies show that more than one individual starts 50 to 70 percent of all new firms. It is generally believed that new ventures started by a team have an advantage over those started by an individual because a team brings more talent, resources, ideas, and professional contacts to a new venture than does a sole entrepreneur. In addition, the psychological support that cofounders of a new business can offer one another is an important element in the firm's success.

Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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56) List the preferred attributes of the founder(s) of an entrepreneurial venture.

Answer: The preferred attributes of the founder(s) of an entrepreneurial venture are firm started by a team, higher education, prior entrepreneurial experience, relevant industry experience, and broad social and professional network.

Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 57) What is a skills profile and what is it used for?

Answer: A skills profile is a chart that depicts the most important skills that are needed in a startup (e.g., executive leadership, finance, operations, human resources) on the horizontal axis and lists the members of the new venture team and the skills that each individual contributes on the vertical axis. The idea is to see whether the skills that are needed to launch a firm are adequately covered by the members of the new venture team, or whether skills gaps exist that need to be filled.

Difficulty: Moderate LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 58) A panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis is a(n) ________.

A) consultation board B) idea panel C) counseling panel D) advisory board E) suggestion panel Answer: D Difficulty: Moderate LO: 9.3: Identify professional advisers and explain their role in a new-venture team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 59) Recently launching a social network for chefs, Tasha is creating is a panel of experts who can provide her ongoing direction and advice. Tasha is creating a(n) ________.

A) board of directors B) discussion board C) advisory board D) founding team E) accountability panel Answer: C Difficulty: Moderate LO: 9.3: Identify professional advisers and explain their role in a new-venture team.

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60) Most board of advisors have between ________ members.

A) 5 and 15 B) 2 and 4 C) 10 and 20 D) 20 and 25 E) 25 and 35 Answer: A Difficulty: Easy LO: 9.3: Identify professional advisers and explain their role in a new-venture team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 61) Which of the following statements about advisory boards is NOT correct?

A) The fact that a corporation has a board of directors does not preclude it from establishing one or more advisory boards.

B) Most advisory boards have between 5 and 15 members.

C) Similar to a board of directors, an advisory board has legal responsibilities for the firm in certain areas.

D) Entrepreneurial firms typically pay their advisory board members a small honorarium for their service.

E) A growing number of startups are forming advisory boards.

Answer: C Difficulty: Moderate LO: 9.3: Identify professional advisers and explain their role in a new-venture team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 62) Which of the following statements is NOT a guideline for organizing an advisory board?

A) A firm should not ask an advisory member to sign a nondisclosure agreement.

B) A firm should look for board members who are compatible and complement one another in terms of experience and expertise.

C) A firm should not have a board just so it can boast of it.

D) When inviting a person to serve on its board of advisors, the rules about access to confidential information should be explained to them.

E) Advisors should be cautioned to disclose that they have a relationship with the firm before posting comments about it on blogs or social media sites.

Answer: A Difficulty: Challenging LO: 9.3: Identify professional advisers and explain their role in a new-venture team.

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63) Most entrepreneurial firms pay the members of their board of advisors ________.

A) a small honorarium for their service B) nothing since it is an advisory position C) with product discounts in exchange for their service D) the going rate for business consultants in their field of expertise E) in common stock on an annual basis Answer: A Difficulty: Moderate LO: 9.3: Identify professional advisers and explain their role in a new-venture team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 64) While it is a recommendation for new startups to form a board of advisors, most startups do not have one.

Answer: TRUE Difficulty: Moderate LO: 9.3: Identify professional advisers and explain their role in a new-venture team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 65) Similar to a board of directors, an advisory board possesses legal responsibility for the firm.

Answer: FALSE Difficulty: Moderate LO: 9.3: Identify professional advisers and explain their role in a new-venture team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 66) Investors often take a seat on the boards of directors of the firms they fund to provide oversight and advice.

Answer: TRUE Difficulty: Moderate LO: 9.3: Identify professional advisers and explain their role in a new-venture team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 67) The fact that a corporation has a board of directors precludes it from having a board of advisors.

Answer: FALSE Difficulty: Moderate LO: 9.3: Identify professional advisers and explain their role in a new-venture team.

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68) A firm should look for advisory board members who are compatible and complement one another in terms of experience and expertise.

Answer: TRUE Difficulty: Easy LO: 9.3: Identify professional advisers and explain their role in a new-venture team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 69) What is a board of advisors? Explain the most important thing the board can do for the entrepreneurial venture.

Answer: An advisory board is a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis. A firm can establish a board of advisors for general purposes or to address a specific issue or need. The most important thing that advisory board members can do is make high-level introductions to early customers, suppliers, and business partners.

Difficulty: Moderate LO: 9.3: Identify professional advisers and explain their role in a new-venture team.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 70) A business ________ is an individual who gives professional or expert advice.

A) consultant B) intern C) employee D) advocate E) incubator Answer: A Difficulty: Easy LO: 9.4: Explain why a new-venture team might use consultants to obtain advice.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 71) Which of the following is NOT correct regarding the typical role of consultants in business startups?

A) Consultants provide professional advice B) International consulting firms are generally financially beyond the reach of most small firms.

C) Consultants fall into two categories: paid consultants and consultants who are made available for free or at a reduced rate through a nonprofit or government agency.

D) Consultants can assist firms with conducting in-depth analysis such as industry analyses.

E) Consultants step in to help manage the day-to-day activities of the firm.

Answer: E Difficulty: Moderate LO: 9.4: Explain why a new-venture team might use consultants to obtain advice.

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72) Consultants fall into two categories–paid consultants and consultants who are made available for free or at a reduced rate through a nonprofit or government agency.

Answer: TRUE Difficulty: Moderate LO: 9.4: Explain why a new-venture team might use consultants to obtain advice.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 73) SCORE is a for-profit organization that provides consulting services to small businesses.

Answer: FALSE Difficulty: Moderate LO: 9.4: Explain why a new-venture team might use consultants to obtain advice.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 74) Entrepreneurs can negotiate with consultants about their fees.

Answer: TRUE Difficulty: Easy LO: 9.4: Explain why a new-venture team might use consultants to obtain advice.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 75) What is SCORE? What is its role in helping a firm fill out its new venture team?

Answer: SCORE is a nonprofit organization in the U.S. that provides free consulting services to small businesses. SCORE currently has over 10,000 volunteers and 300 local chapters. SCORE helps a business fill out its new venture team by providing important advice and direction in areas that the new venture cannot provide for itself.

Difficulty: Moderate LO: 9.4: Explain why a new-venture team might use consultants to obtain advice.

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Entrepreneurship, 7e (Barringer/Ireland) Chapter 10 Getting Financing or Funding 1) Cuboh, the company profiled in the opening feature of Chapter 10, described its current major limitation as ________.

A) not understanding the company's numbers B) having only one product to offer its customers C) wasting time with an organized and structured fundraising process D) failing to raise investment capital E) not automating the major processes Answer: B Difficulty: Moderate LO: 10.1: Describe the importance of financing for entrepreneurial success.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 2) According to the textbook, many entrepreneurs go about the task of raising capital haphazardly because they ________.

A) are uncomfortable talking about money and they haven't written a business plan B) lack experience in this area and because they don't have much information about their options C) are focused on the nuts and bolts of starting their business D) haven't completed a feasibility analysis or business plan E) are intimidated by the process and they are unsure of how much money they need Answer: B Difficulty: Moderate LO: 10.1: Describe the importance of financing for entrepreneurial success.

AACSB: Analytical Thinking Quest. Category: Analytical 3) Carlos is the founder of a company in the semiconductor industry. The firm is still in the feasibility analysis stage and doesn't have a product that is ready to sell. The company is spending about $25,000 per month and expects to maintain that level of spending until it reaches profitability. The $25,000 a month is the firm's ________ rate.

A) consumption B) utilization C) burn D) usage E) liquidity Answer: C Difficulty: Easy LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

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4) The three primary reasons startups need funding are ________.

A) cash flow challenges, capital investments, and lengthy product development cycles B) business research, cash flow challenges, and costs associated with building a brand C) bonuses for members of the new venture team, attorney fees, and lengthy product development cycles D) attorney fees, capital investments, and marketing research E) bonuses for members of the new venture team, marketing research, and personnel costs Answer: A Difficulty: Moderate LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 5) Firms often need to purchase additional equipment and hire and train new employees before serving the increased customer base that generates additional income. The lag between spending to generate revenue and earning income from the firm's operations creates ________.

A) cash-flow challenges B) marketing costs C) personnel costs D) capital investments E) lengthy product development cycles Answer: A Difficulty: Moderate LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 6) For startup firms, the cost of buying real estate, building facilities, and purchasing equipment often exceeds the firm's ability to provide funds for those needs on its own. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example?

A) Lengthy product development cycles B) Costs associated with building a brand C) Cash flow challenges D) Capital investments E) Personnel costs Answer: D Difficulty: Moderate LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

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7) The path to getting a new drug approved in the biotech industry takes up to 10½ years, creating the need to raise money to pay the up-front costs. This example illustrates the need for funding or financing referred to as ________.

A) personnel costs B) marketing costs C) costs associated with building a brand D) lengthy product development cycles E) cash flow challenges Answer: D Difficulty: Moderate LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 8) A(n) ________ represents a fertile place to find a business partner.

A) Techstars Startup Weekend B) local SBA office C) local SCORE chapter D) incubator E) state's secretary of commerce office Answer: A Difficulty: Moderate LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 9) The Partnering for Success feature in chapter 10 focuses on a community-oriented event that Techstars sponsors. Techstars is a(n) ________.

A) startup accelerator program B) business certificate program C) group of investors looking for startups to fund D) university-sponsored group of professors E) a collaboration of several state agencies Answer: A Difficulty: Moderate LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

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10) The three reasons that most firms need to raise money during their early life are cash flow challenges, capital investments, and lengthy product development cycles.

Answer: TRUE Difficulty: Easy LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 11) Explain the three reasons that most new firms need to raise money during their early life.

Answer: The three reasons that most new firms need to raise money during their early life are cash flow challenges, capital investments, and lengthy product development cycles. In regard to cash flow challenges, as a firm grows, it requires an increasing amount of cash to service its customers. Often, equipment must be purchased and new employees hired and trained before the increased customer base generates additional income. In regard to capital investments, firms often need to raise money early on to fund capital investments. While it may be possible for the fi11m's founders to fund its initial activities, it becomes increasingly difficult for them to do so when it comes to buying property, constructing buildings, and purchasing equipment. In regard to lengthy product development cycles, firms often need to raise money to finance the upfront costs of lengthy product development cycles.

Difficulty: Moderate LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 12) The seed money that gets a startup off the ground typically comes from ________.

A) angel investors B) venture capitalists C) commercial banks D) governmental agencies E) the founders' own pockets Answer: E Difficulty: Easy LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

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13) The time and effort that entrepreneurs put into their venture, that can't be easily measured from a financial point of view, is referred to as ________ equity.

A) effort B) intangible C) sweat D) worry E) fret Answer: C Difficulty: Moderate LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Analytical Thinking Quest. Category: Analytical 14) The second source of funds beyond their own funds for many new ventures is ________.

A) government grants B) business angels C) friends and family D) banks E) venture capital Answer: C Difficulty: Moderate LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 15) "Love money" refers to seed capital an entrepreneur receives from ________.

A) friends and family B) bootstrapping C) networking money D) compassion money E) legacy money Answer: A Difficulty: Moderate LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

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16) Rather than borrow money or raise funds from investors, entrepreneurs may use their creativity and ingenuity and figured out how to get their business up and running without the need for external funding. This technique is referred to as ________.

A) networking B) reaching C) scrounging D) prospecting E) bootstrapping Answer: E Difficulty: Challenging LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 17) Typically, the seed money that gets a company off the ground comes from a commercial bank.

Answer: FALSE Difficulty: Moderate LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 18) A promissory note details the terms of a loan agreement.

Answer: TRUE Difficulty: Moderate LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 19) Seventy-seven percent of startup founders rely on personal savings to fund their ventures.

Answer: TRUE Difficulty: Moderate LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

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20) Bootstrapping is the process of combining personal funds, equity investments, and bank financing to launch a business.

Answer: FALSE Difficulty: Moderate LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 21) What is meant by the term "bootstrapping"? Provide several examples of the ways that entrepreneurs bootstrap to raise money or cut costs.

Answer: Bootstrapping is the use of creativity, ingenuity, and any means possible to obtain resources other than borrowing money or raising capital from traditional sources. There are many ways entrepreneurs bootstrap to raise money or cut costs. Some examples include: • Buy used instead of new equipment • Coordinate purchases with other businesses • Lease equipment rather than buying • Obtain payments in advance from customers • Minimize personal expenses • Buy items cheaply, but prudently, through discount outlets or online auctions such as eBay • Share office space or employees with other businesses • Hire interns Difficulty: Challenging LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 22) Equity financing means ________.

A) exchanging partial ownership in a firm, usually in the form of stock, for funding B) receiving a grant or outright gift C) getting a signed promissory note D) getting a lease agreement E) buying a loan guarantee Answer: A Difficulty: Moderate LO: 10.4: Identify and explain the three steps involved in preparing to raise debt or equity financing.

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23) Which of the following is NOT one of the most common sources of equity funding?

A) Initial public offering B) Angel investors C) Private placement D) Venture capital E) Government grants Answer: E Difficulty: Moderate LO: 10.4: Identify and explain the three steps involved in preparing to raise debt or equity financing.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 24) Equity investors typically have a ________ year investment horizon.

A) 1 to 3 B) 2 to 4 C) 3 to 5 D) 9 to 12 E) 5 to 8 Answer: E Difficulty: Moderate LO: 10.4: Identify and explain the three steps involved in preparing to raise debt or equity financing.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 25) Which of the following is a liquidity event?

A) When the firm reaches its one-year mark B) When a new venture goes public C) After the board of directors approves a new CEO D) After the advisory board disbands E) When a new venture breaks even Answer: B Difficulty: Moderate LO: 10.4: Identify and explain the three steps involved in preparing to raise debt or equity financing.

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26) Which of the following statements is NOT correct regarding equity funding?

A) Equity investors expect to get their money back, along with a substantial capital gain, through the sale of their stock.

B) Angel investors are a common source of equity funding.

C) Equity funding is not a loan.

D) Equity investors are very demanding.

E) Equity investors fund the majority of the plans they consider.

Answer: E Difficulty: Challenging LO: 10.4: Identify and explain the three steps involved in preparing to raise debt or equity financing.

AACSB: Analytical Thinking Quest. Category: Analytical 27) The most common sources of debt financing are ________.

A) commercial bank and SBA guaranteed loans B) IPOs and angel investors C) private placement and IPOs D) angel investors and government grants E) government grants and private placement Answer: A Difficulty: Challenging LO: 10.4: Identify and explain the three steps involved in preparing to raise debt or equity financing.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 28) A brief, carefully constructed description of your opportunity, product idea, qualifications and market is called a(n) ________ speech.

A) subway B) sway C) bootstrap D) teaser E) elevator Answer: E Difficulty: Moderate LO: 10.4: Identify and explain the three steps involved in preparing to raise debt or equity financing.

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29) Debt financing means exchanging partial ownership in a firm in exchange for cash.

Answer: FALSE Difficulty: Moderate LO: 10.4: Identify and explain the three steps involved in preparing to raise debt or equity financing.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 30) The ideal candidate for a bank loan is a firm with strong cash flow, low leverage, audited financial statements, good management, and a healthy balance sheet.

Answer: TRUE Difficulty: Challenging LO: 10.4: Identify and explain the three steps involved in preparing to raise debt or equity financing.

AACSB: Analytical Thinking Quest. Category: Analytical 31) What is an elevator speech? How did it get its name?

Answer: An elevator speech is a brief, carefully constructed statement that outlines the merits of a business opportunity. Why is it called an elevator speech? If an entrepreneur stepped into an elevator on the 25th floor of a building and found that by a stroke of luck a potential investor was in the same elevator, the entrepreneur would have the time it takes to get from the 25th floor to the ground floor to try to get the investor interested in his or her business opportunity. Most elevator speeches are 45 seconds to 2 minutes long.

Difficulty: Moderate LO: 10.4: Identify and explain the three steps involved in preparing to raise debt or equity financing.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 32) What is the difference between equity funding and debt financing? What are the most common sources of equity funding and debt financing?

Answer: Equity funding means exchanging partial ownership in a firm, usually in the form of stock, for funding. Angel investors, private placement, venture capital, and initial public offering are the most common sources of equity funding. Debt financing is getting a loan. The most common sources of debt financing are commercial banks and Small Business Administration guaranteed loans.

Difficulty: Moderate LO: 10.4: Identify and explain the three steps involved in preparing to raise debt or equity financing.

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33) The primary disadvantage of equity funding is that ________.

A) the firm's owners relinquish part of their ownership in the business B) the funds must be paid back C) interest rates are usually higher than normal D) the investment is not made directly into the firm E) there can be only one investor Answer: A Difficulty: Easy LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 34) ________ are individuals who invest their personal capital directly in startups.

A) Venture capitalists B) Business angels C) Institutional investors D) Investment bankers E) Business capitalists Answer: B Difficulty: Easy LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 35) Which of the following statements is NOT correct regarding business angels?

A) Business angels invest their personal capital directly in startups.

B) Business angels invest at the later stages of a company's life, generally often funding through venture capital by the firm.

C) The best way to find an angel investor is to work your professional network.

D) Business angels are valuable because of their willingness to make relatively small investments.

E) The prototypical business angel is 50-years old, is well educated and has succeeded as an entrepreneur.

Answer: B Difficulty: Moderate LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

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36) According to the textbook, the unique value provided by business angels is they ________.

A) are willing to make relatively large investments B) are willing to make relatively small investments C) require a fairly low rate of return on their money D) invest money but typically don't take a seat on a company's board of directors E) are easy to find Answer: B Difficulty: Challenging LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 37) ________ are limited partnerships of money managers who raise money in "funds" to invest in startups and growing firms.

A) Venture capital firms B) Business angels C) Institutional investors D) Investment bankers E) Pension funds Answer: A Difficulty: Easy LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 38) Venture capital firms are ________ of money managers who raise money in "funds" to invest in startups and growing firms.

A) limited partnerships B) finance associations C) consortiums D) nonprofit organizational collaborations E) strategic partnerships Answer: A Difficulty: Moderate LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

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39) In 2022, the value of venture capital investments was ________.

A) $800 million B) $2 billion C) $221 billion D) $620 billion E) $800 billion Answer: C Difficulty: Challenging LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Application of Knowledge Quest. Category: Application 40) The term describing money the startup received after the initial investment of venture capital is ________.

A) buyout funding B) successive funding C) mezzanine financing D) follow-on funding E) ensuing backing Answer: D Difficulty: Moderate LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 41) ________ refers to the process where individuals investigate the merits of a potential venture and verify the key claims made in the business plan.

A) Private placement B) Sweat equity C) Due diligence D) Bootstrapping E) Debt financing Answer: C Difficulty: Moderate LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

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42) In regard to the stages (or rounds) of venture capital funding, the stage of funding that occurs when an investment is made very early in a venture's life to fund the development of a prototype and feasibility analysis is referred to as ________ funding.

A) seed B) second-stage C) first-stage D) mezzanine E) startup Answer: A Difficulty: Challenging LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 43) The first sale of stock by a firm to the public is referred to as a(n) ________.

A) preferred stock offering B) first unrestricted offering C) preemptive offering D) original open offering E) initial public offering Answer: E Difficulty: Moderate LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 44) The What Went Wrong? feature in Chapter 10 focuses on the failure of Quibi. The startup's failure demonstrates the importance of ________.

A) the new venture's team working together effectively B) effectively managing their investment capital C) making something people want D) staying in favor with investors E) being effective in raising follow-on rounds of funding Answer: C Difficulty: Moderate LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

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45) A(n) ________ bank is an institution that acts as an underwriter or agent for a firm engaged in issuing securities.

A) venture B) statutory C) fiduciary D) investment E) public Answer: D Difficulty: Easy LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 46) Business angels, venture capital, and initial public offerings are the most common sources of equity funding.

Answer: TRUE Difficulty: Moderate LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 47) The yield rate is the percentage of investment opportunities that people bring to the attention of investors that results in an investment.

Answer: TRUE Difficulty: Moderate LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 48) The best way to find an angel investor is to work your professional network.

Answer: TRUE Difficulty: Easy LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 49) The venture capitalists who manage the venture capital funds are general partners.

Answer: TRUE Difficulty: Moderate LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

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50) Venture capital is money that is invested by venture capital firms in startups and small businesses with exceptional growth potential.

Answer: TRUE Difficulty: Moderate LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 51) The percentage of the profits the venture capitalists receive is called the "carry."

Answer: TRUE Difficulty: Moderate LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 52) Venture capital generally is received in rounds rather than all at once.

Answer: TRUE Difficulty: Moderate LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 53) What is a business angel? Describe the prototypical business angel. How much money do business angels typically invest in a single company?

Answer: Business angels are individuals who invest their personal capital directly in startups.

The prototypical business angel is about 50 years old, has high income and wealth, is well educated, has succeeded as an entrepreneur, and invests in companies that are in the region in which they live. These investors generally invest between $5,000 and $150,000 in a single company. Business angels are hard to find.

Difficulty: Challenging LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

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54) Debt financing involves ________.

A) raising venture capital or securing a private placement B) selling corporate bonds or selling stock via an IPO C) getting a grant or selling corporate bonds D) getting a loan or raising venture capital E) getting a loan or selling corporate bonds Answer: E Difficulty: Easy LO: 10.6: Describe common sources of debt financing entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 55) Historically, entrepreneurs do not view ________ as practical sources of financing for their ventures.

A) crowdfunding B) SBA guaranteed loans C) venture capitalists D) business angels E) commercial banks Answer: E Difficulty: Moderate LO: 10.6: Describe common sources of debt financing entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 56) The two major advantages of obtaining a loan versus equity funding are ________.

A) lenders typically take an active interest in their borrowers B) banks are reliable sources of funding for startups and interest payments are tax deductible C) the money doesn't have to be paid back and no ownership in the firm is surrendered D) no ownership in the firm is surrendered and interest payments are tax deductible E) banks are reliable sources of funding for startups and lenders typically take an active interest in borrowers Answer: D Difficulty: Challenging LO: 10.6: Describe common sources of debt financing entrepreneurial firms use.

AACSB: Analytical Thinking Quest. Category: Analytical

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57) The most notable SBA program available to small businesses is the ________.

A) STTR program B) SBIR program C) 7(A) Loan Guaranty Program D) Score Program E) single purpose loan Answer: C Difficulty: Moderate LO: 10.6: Describe common sources of debt financing entrepreneurial firms use.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 58) A financial transaction whereby a business sells its accounts receivable to a third party at a discount in exchange for cash is referred to as ________.

A) Factoring B) Vendor credit C) Peer-to-peer lending D) Crowdfunding E) Leasing Answer: A Difficulty: Moderate LO: 10.6: Describe common sources of debt financing entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 59) Peer-to-peer lenders underwrite borrowers but do not fund the loans directly.

Answer: TRUE Difficulty: Moderate LO: 10.6: Describe common sources of debt financing entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 60) What are the two common types of loans?

Answer: The two common types of loans are single-purpose loans and a line of credit. A single-purpose loan occurs when a firm borrows a specific amount of money that it must repay in a fixed amount of time, with interest. A line of credit is when there is a borrowing "cap" and borrowers can use the credit at their discretion. These require periodic interest payments.

Difficulty: Challenging LO: 10.6: Describe common sources of debt financing entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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61) Kickstarter and Indiegogo are the most popular ________ crowdfunding sites.

A) equity-based B) vendor-based C) mentor-based D) debt-based E) rewards-based Answer: E Difficulty: Moderate LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 62) The two types of crowdfunding sites are ________.

A) rewards-based and equity-based B) equity-based and debt-based C) expectations-based and performance-based D) private-based and nonprivate-based E) domestic-based and international-based Answer: A Difficulty: Moderate LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 63) SeedInvest, AngelList, and WeFunder are examples of ________ crowdfunding sites.

A) debt-based B) reward-based C) government-based D) equity-based E) industry-based Answer: D Difficulty: Moderate LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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64) A(n) ________ is a written agreement in which the owner of a piece of property allows an individual or business to use the property for a specified period of time in exchange for payments.

A) assurance B) loan C) guarantee D) warranty E) lease Answer: E Difficulty: Easy LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 65) The major advantage of leasing is that ________.

A) it enables a company to have access to average or above average facilities and equipment B) it enables a company to acquire the use of assets with little or no down payment C) it is cheaper in the long run than purchasing D) a lease agreement is easier to negotiate than a purchase agreement E) it is easier to obtain credit on a lease than a purchase Answer: B Difficulty: Moderate LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 66) The SBIR and the STTR programs are two important sources of early-stage funding for firms in which industry?

A) Health-care B) Technology C) Automotive D) Banking E) Educational services Answer: B Difficulty: Moderate LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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67) The SBIR and STTR programs are available from ________ A) the National Science Foundation B) the Small Business Administration C) the Federal Trade Commission D) the Food and Drug Administration E) the Social Security Administration Answer: A Difficulty: Moderate LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 68) In 2022, ________ percent of SBIR proposals received funding.

A) 8 B) 18 C) 38 D) 58 E) 78 Answer: B Difficulty: Moderate LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 69) The main difference between the SBIR and the STTR programs is that the STTR program requires the company to have ________, which must receive a minimum of 30 percent of the total grant funds.

A) an attorney B) a venture capitalist C) a partnering research institution D) a certified public accountant E) a government agency in conducting the research Answer: C Difficulty: Challenging LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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70) Which of the following statements is NOT correct about grant programs?

A) Granting agencies are very visible and well-known, so it's typically not difficult to find one.

B) The federal government has grant programs beyond the SBIR and STTR programs.

C) Finding a grant that fits your business is the key.

D) There is a limited number of organizations that offer new businesses grants.

E) There are private foundations that grant money to both existing and startup firms.

Answer: A Difficulty: Challenging LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Analytical Thinking Quest. Category: Analytical 71) The Savvy Entrepreneurial Firm feature in Chapter 10 focuses on the partnerships of biotech firms and large drug companies to bring pharmaceutical products to market. These partnerships allow the entrepreneurial firms to focus on ________ while the larger drug companies bring the products to market.

A) innovation B) marketing C) project management D) fundraising E) product distribution Answer: A Difficulty: Moderate LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 72) Crowdfunding is the practice of funding a project or new venture by raising money from many people, typically via the Internet.

Answer: TRUE Difficulty: Moderate LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 73) Equity-based crowdfunding finds entrepreneurs raising money in exchange for some type of amenity or reward.

Answer: FALSE Difficulty: Moderate LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 22 Copyright © 2025

74) A lease is a written agreement in which the owner of a piece of property allows an individual or business to use the property for a specified period of time in exchange for payments.

Answer: TRUE Difficulty: Moderate LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 75) Many strategic partnerships are formed to gain access to a certain resource or to facilitate speed to market.

Answer: TRUE Difficulty: Moderate LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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Entrepreneurship, 7e (Barringer/Ireland) Chapter 11 Unique Marketing Issues 1) Sweet Nothings, the company profiled in the Opening Profile feature in Chapter 11, uses ________ to promote its products but also to connect with potential brand ambassadors.

A) Instagram B) Google C) its company website D) LinkedIn E) Facebook Answer: A Difficulty: Easy LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 2) Kyle White owns a sporting goods store that appeals to hunters and fishers. The market that Kyle is trying to appeal to is called his ________ market.

A) focal B) objective C) target D) critical E) intention Answer: C Difficulty: Easy LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Analytical Thinking Quest. Category: Analytical 3) The first step in selecting a target market is called ________.

A) market positioning B) market splitting C) market targeting D) market subdividing E) market segmentation Answer: E Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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4) Which of the following is the first step in the process of determining who a company's customers are and how to reach them?

A) Select a target market.

B) Create a unique positioning strategy.

C) Segment the market.

D) Create a product attribute map.

E) Identify a niche market Answer: C Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 5) Katherina is thinking about starting a computer company. After doing some research, she has decided that the computer industry can be divided into eight product categories. She is now trying to decide in which product category she will compete. Katherina is engaged in market ________.

A) splitting B) subdividing C) segmentation D) dividing E) separating Answer: C Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 6) Once a firm has segmented the market, the next step is to ________.

A) decide on a position within the segment B) determine a pricing policy C) decide which specific group of customers to target D) establish the company's brand E) immediately decide on the "4Ps" of the marketing strategy Answer: C Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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7) A place within a market segment that represents a narrower group of customers with similar interests is a ________ market.

A) position B) niche C) slot D) spot E) gap Answer: B Difficulty: Easy LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Analytical Thinking Quest. Category: Analytical 8) A studio teaching ballroom dancing and one teaching ballet to young girls are examples of ________ markets.

A) gap B) task C) position D) hole E) niche Answer: E Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Analytical Thinking Quest. Category: Analytical 9) Which of the following selections is NOT correct regarding a firm's "positioning" strategy?

A) Position is concerned with how the firm is situated relative to its competitors.

B) Positioning deals with how the firm differentiates itself from its competitors.

C) Determining which position in a market to occupy and compete in is a strategic call based on the firm's mission, its overall approach to the marketplace, and its competitive landscape.

D) A product attribute map illustrates the firm's positioning strategy relative to its major rivals.

E) After crafting a positioning strategy, the firm's next step is to select a target market.

Answer: E Difficulty: Challenging LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Analytical Thinking Quest. Category: Analytical

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10) A firm's positioning strategy relative to its major rivals is depicted in a ________.

A) product attribute map B) positioning analysis grid C) positioning plot D) competitive analysis grid E) positioning diagram Answer: A Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 11) The Savvy Entrepreneurial Firm feature in chapter 11 discussed how retail startups compete against ________.

A) Walmart and other big-box retailers B) boutique firms C) online firms like Amazon D) small brick and mortar stores E) regional department stores Answer: A Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 12) Nike's familiar phrase "Just do it" is an example of a(n) ________.

A) attention-line B) tagline C) notice-line D) catchline E) grabline Answer: B Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Application of Knowledge Quest. Category: Application

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13) A(n) ________ is a catchy phrase that a firm uses consistently in its literature, advertisements, stationery, social media platforms, and even invoices.

A) tagline B) grabline C) notice-line D) catchline E) attention-line Answer: A Difficulty: Easy LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Application of Knowledge Quest. Category: Application 14) Overlooking market segmentation can result in a faulty assessment of the size of the potential market for an entrepreneur's new product.

Answer: TRUE Difficulty: Easy LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 15) The proper sequence in selecting a target market and positioning strategy is (1) craft a unique positioning strategy, (2) select a target market, and (3) segment the market.

Answer: FALSE Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 16) Sometimes a firm segments its market in more than one dimension to drill down to a specific market segment that the firm thinks it is uniquely capable of serving.

Answer: TRUE Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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17) A niche market is a place within a market segment that represents a broad group of customers with diverse interests.

Answer: FALSE Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 18) A firm's "position" is concerned with how it is situated relative to its competitors.

Answer: TRUE Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Analytical Thinking Quest. Category: Analytical 19) A product attribute map illustrates the strength of a firm's niche (or target) market relative to competing markets.

Answer: FALSE Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Analytical Thinking Quest. Category: Analytical 20) With consistent use, a tagline becomes associated with a company to reinforce its position in the market.

Answer: TRUE Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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21) What is the purpose of market segmentation? How are markets typically segmented?

Answer: The first step in selecting a target market is to study the industry in which the firm intends to compete and determine the different target markets in that industry. This process is called market segmentation and is important because a new firm typically only has enough resources to target one market segment, at least initially. Markets can be segmented in many ways, such as by geography (city, state, country), demographic variables (age, gender, family size, income), psychographic variables (personality, lifestyle, values), behavioral variables (benefits sought, product usage rate, brand loyalty) and product type (varies by product).

Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 22) What is a tagline? Provide an example of a popular tagline.

Answer: Firms often develop a tagline to reinforce the position they have staked out in their market, or a phrase that is used consistently in a company's literature, advertisements, promotions, stationery, and even invoices and thus becomes associated with that company.

Examples are Nike's familiar tagline, "Just do it" and Burrow's "The Internet's Favorite Couch."

Difficulty: Moderate LO: 11.1: Explain the three steps (segmenting the market, selecting a target market, and establishing a unique market position) entrepreneurial firms use to identify their customers.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 23) A(n) ________ is the set of attributes—positive or negative—that people associate with a company.

A) emblem B) logo C) symbol D) brand E) trade name Answer: D Difficulty: Moderate LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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24) Which of the following statements is correct regarding the concept of branding?

A) Brands cannot be built through advertising, public relations, sponsorships, social media, or similar techniques.

B) A company doesn't normally want its customers to identify with its brand.

C) Startups build a brand then select a company name.

D) A brand can be one of a company's most valuable assets.

E) Brand integrity cannot be managed.

Answer: D Difficulty: Moderate LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 25) Companies can protect their image and value of their brand in consumers' minds through brand ________.

A) administration B) persistence C) determination D) resolution E) management Answer: E Difficulty: Moderate LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 26) According to the textbook, all of the following are ways of thinking about the meaning of a brand EXCEPT ________.

A) it expresses a firm's reputation B) it presents a firm's credentials C) it describes a firm's promise to serve stakeholders' interests D) it describes a company's nature E) it provides a firm's written warranty Answer: E Difficulty: Challenging LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Application of Knowledge Quest. Category: Application

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27) Most experts caution firms about an over reliance on advertising to build their brand. A more affordable approach is to rely on word of mouth to create positive ________ about a company.

A) ruckus B) noise C) clatter D) clamor E) buzz Answer: E Difficulty: Moderate LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 28) When Red Bull was first being introduced into the United States, the company would hand out free samples of its product at extreme sports events (e.g., skateboarding, wakeboarding and mountain biking competitions). Red Bull's objective was to create ________ surrounding its product.

A) buzz B) noise C) clatter D) clamor E) ruckus Answer: A Difficulty: Moderate LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 29) In recent surveys, ________ percent of consumers indicate an important factor when they consider the brands they will buy and support.

A) 18 B) 28 C) 48 D) 68 E) 88 Answer: E Difficulty: Moderate LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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30) ________ is a term that denotes the set of assets and liabilities that are linked with a firm's brand that results in an increase in its valuation.

A) Trademark equity B) Brand equity C) Logo equity D) Trademark value-added E) Trade name strength Answer: B Difficulty: Moderate LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 31) An analysis by the Marketing Accountability Standards Board shows that brands account for an average of 19.5 percent, and in some cases, well over ________ percent of a firm's market value.

A) 95 B) 90 C) 60 D) 50 E) 75 Answer: D Difficulty: Moderate LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 32) Rather than focusing too much on product features and benefits, journalists prefer a humaninterest story about why an entrepreneur launched their firm.

Answer: TRUE Difficulty: Moderate LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 33) Bombas took off, in part, because its founding story was heartfelt and its founders told their story in a sincere and credible way.

Answer: TRUE Difficulty: Easy LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 10 Copyright © 2025

34) Premium is the term that denotes the set of assets and liabilities that are linked to a brand and enable it to raise a firm's valuation.

Answer: FALSE Difficulty: Moderate LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Analytical Thinking Quest. Category: Analytical 35) What is a brand? How does a new firm develop a brand?

Answer: A brand is the set of attributes—positive or negative—that people associate with a company. These attributes can be positive (e.g., trustworthy and dependable) or they can be negative (e.g., cheap and unreliable). The customer loyalty a company creates through its brand is one of its most valuable assets. To develop a brand, a new firm must have meaning in its customers' lives–something for which customers are willing to pay. On a more pragmatic level, brands are built through a number of techniques, including advertising, public relations, sponsorships, and good performance.

Difficulty: Moderate LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 36) The 4Ps refer to a company's ________.

A) tactical mix B) promotional blend C) organizational mix D) marketing mix E) selling mix Answer: D Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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37) Which of the following is NOT one of the four elements that constitute a firm's marketing mix?

A) Price B) Promotion C) Press D) Place E) Product Answer: C Difficulty: Easy LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 38) A firm's marketing mix consists of ________.

A) product, price, promotion, and place B) passion, pride, promotion, and place C) passion, pleasure, product, and price D) press, passion, product, and price E) place, promotion, passion, and product Answer: A Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 39) A firm's ________, in the context of its marketing mix, is the good or service it offers to its target market.

A) channel B) idea C) creation D) product E) invention Answer: D Difficulty: Easy LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Application of Knowledge Quest. Category: Application

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40) An activity or benefit that is intangible, such as an airplane trip or advice from an accountant, is called a(n) ________.

A) service B) component C) offering D) provision E) product Answer: A Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 41) The Partnering for Success feature in Chapter 11 focuses on firms partnering with individuals who have a significant following on social media platforms to promote their products or services. These individuals are known as ________.

A) advertisers B) co-branders C) influencers D) promoters E) licensees Answer: C Difficulty: Easy LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Analytical Thinking Quest. Category: Analytical 42) To overcome the challenge of getting customer to buy their products in the initial rollout, some startups use a(n) ________ who is willing to give a testimonial regarding their experience with the product.

A) tribute account B) reference account C) approval account D) appreciation account E) acknowledgment account Answer: B Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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43) When opening her print store, Serena processed several large print jobs for local merchants for free, to demonstrate the quality of her service and to solicit feedback. Two of the merchants wrote favorable reviews, and agreed to let Serena post the reviews on her company's website.

The companies that wrote the favorable reviews are referred to as ________.

A) appreciation accounts B) acknowledgement accounts C) market segments D) tribute reports E) price-quality attributions Answer: C Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Analytical Thinking Quest. Category: Analytical 44) The amount of money consumers pay to buy a product is its ________.

A) price B) fee C) value D) cost E) charge Answer: A Difficulty: Easy LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 45) Which element of the marketing mix is the only one that produces revenue?

A) Product B) Place C) Press D) Price E) Promotion Answer: D Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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46) If a company's strategy is to maintain a consistent profit margin and be transparent about pricing, ________ pricing can be an effective pricing strategy.

A) cost-based B) compliance-based C) value-based D) competitive-based E) economic-based Answer: A Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 47) Samir owns a general contracting company. The way he prices his services is to figure the cost and then add a 33 percent markup. This method of determining prices is called ________ pricing.

A) economic-based B) value-based C) competitive-based D) cost-based E) conformity-based Answer: D Difficulty: Easy LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Analytical Thinking Quest. Category: Analytical 48) Which of the following is NOT a common form of digital marketing?

A) Real-time analytics B) Search engine ads C) Email marketing D) Mobile advertising E) Social media Answer: A Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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49) Armando owns a smartphone app development firm. The way he prices his products is to determine what consumers are willing to pay, and then he backs off a bit to provide a cushion.

The method that Armando is using to determine prices is called ________ pricing.

A) predatory-based B) technical-based C) cost-based D) competitive-based E) value-based Answer: E Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 50) The most popular social networking site for Gen Z is ________.

A) Instagram B) LinkedIn C) YouTube D) Pinterest E) Facebook Answer: A Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 51) Karen Simon recently purchased a digital camera. She considered three cameras–a Sony that was priced at $239, a Canon priced at $319, and a Nikon priced at $399.. Karen couldn't tell much difference between the cameras, so she bought the Nikon, figuring that because it was the most expensive of the three, it must be the best. According to the textbook, Karen was making a ________.

A) price-quality attribution B) price-merit attribution C) cost-value acknowledgement D) cost-worth attribution E) price-worth acknowledgement Answer: A Difficulty: Challenging LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Analytical Thinking Quest. Category: Critical Thinking

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52) ________ is the collection, analysis, and interpretation of data from online sources.

A) Impressions B) Reach C) Engagement D) Digital analytics E) Viral marketing Answer: D Difficulty: Easy LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 53) The What Went Wrong? feature in Chapter 11 focuses on a series of missteps at JCPenney under the tenure of then CEO Ron Johnson. According to the feature, Johnson's three most damaging marketing-related mistakes were ________.

A) no testing of ideas in advance, poor product quality, and poor sales training for employees B) reluctance to embrace online sales, a shift from value-based to cost-based pricing, and poor sales training for employees C) poor product quality, a total misread of JCPenney's brand, and poor use of social media D) Fair and Square Pricing, no testing of ideas in advance, and a total misread of JCPenney's brand E) poor use of social media, Fair and Square Pricing, and poor sales training for employees Answer: D Difficulty: Challenging LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 54) According to Buzzsprout, what percent of Americans age 12 and older are monthly podcast listeners?

A) 8% B) 18% C) 38% D) 58% E) 88% Answer: C Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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55) Efforts to establish and maintain a company's image with the public are referred to as ________.

A) open relations B) public relations C) civic relations D) community relations E) advertising Answer: B Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 56) Every January thousands of electronic products manufacturers gather in Las Vegas to display their products and to see what their competitors are up to. This type of event is called a ________ show.

A) trade B) promotions C) deal D) goods E) skill Answer: A Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Application of Knowledge Quest. Category: Application 57) Which of the following is NOT a public relations technique?

A) Blogging B) Community involvement C) Exclusive distribution arrangements D) Social media coverage E) Monthly newsletters Answer: C Difficulty: Easy LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

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58) ________ marketing is a low-budget approach to marketing that relies on ingenuity, cleverness, and surprise rather than traditional techniques.

A) Rebel B) Mobile C) Viral D) Guerrilla E) Revolutionary Answer: D Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 59) A(n) ________ channel is a route a product takes from the place it is made to the customer, who is the end user.

A) trade B) product C) allotment D) promotion E) distribution Answer: E Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 60) The terms "product" and "service" are synonymous in the marketing field.

Answer: FALSE Difficulty: Easy LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 61) While the core product may be a device that contains an antivirus software program, the actual product may have a number of characteristics, including a quality level, features, design, a brand name, and packaging.

Answer: TRUE Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

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62) A reference account is a late adopter of a firm's product who is willing to give a testimonial regarding their experience with the product.

Answer: FALSE Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 63) Price is the only element in the marketing mix that represents a cost–all other elements produce revenue.

Answer: FALSE Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 64) Value-based pricing works best for products that are highly valuable or unique.

Answer: TRUE Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 65) Digital marketing has largely taken the place of traditional print and media advertising over the past few years.

Answer: TRUE Difficulty: Easy LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 66) Most experts warn entrepreneurs to resist the temptation to charge a low price for their products in hopes of capturing market share.

Answer: TRUE Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

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67) Digital marketing can provide real-time analytics that entrepreneurial ventures can use to sharpen their messages.

Answer: TRUE Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 68) Blogs are tools that websites can use to provide users with personalized social experiences.

Answer: FALSE Difficulty: Moderate LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 69) What is guerrilla marketing. Why is it particularly suitable for entrepreneurial firms?

Answer: Guerrilla marketing is a low-budget approach to marketing that relies on ingenuity, cleverness, and surprise rather than traditional techniques. The point is to create awareness of a firm and its products, often in unconventional and memorable ways. Guerrilla marketing is particularly suitable for entrepreneurial firms, which are often on a tight budget but have creativity, enthusiasm, and passion to draw from. Firms often use very entertaining and engaging guerilla marketing techniques to build awareness for their products and services.

Difficulty: Challenging LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 70) What is an exclusive distribution agreement? What is its advantage?

Answer: Exclusive distribution agreements give a retailer or other intermediary the exclusive rights to sell a company's products. The advantage to giving out an exclusive distribution agreement is to motivate a retailer or other intermediary to make a concerted effort to sell a firm's products without having to worry about direct competition.

Difficulty: Challenging LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) that entrepreneurial firms use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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71) A firm's sales process ________.

A) is typically not put in place until a year or more after a startup launches B) describes its branding strategy C) is the set of steps it goes through to identify prospects and close sales D) describes its social media strategy E) the set of steps it goes through to identify its target market and positioning strategy Answer: C Difficulty: Moderate LO: 11.4: Describe the seven-step sales process an entrepreneurial firm uses to identify prospects and close sales.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 72) The first step in the structured sales process is ________.

A) qualify the lead B) make the sales presentation C) prospect for sales leads D) meet objections and concerns E) make the initial contact Answer: C Difficulty: Moderate LO: 11.4: Describe the seven-step sales process an entrepreneurial firm uses to identify prospects and close sales.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 73) Which of the following statements is NOT true regarding a firm's sales process?

A) A formal sales process helps a firm fine tune its approach to sales and build uniformity into the process.

B) Following a formal or structured process to generate and close sales benefits a firm.

C) A "sales process" is equally valuable whether a firm is selling directly to customers or through intermediaries.

D) A firm's sales process depicts the steps it goes through to identify its target market.

E) A formal sales process involves a number of identifiable steps.

Answer: D Difficulty: Moderate LO: 11.4: Describe the seven-step sales process an entrepreneurial firm uses to identify prospects and close sales.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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74) ________ is the final step in the structured sales process.

A) Qualify the lead B) Make the sales presentation C) Follow up D) Close the sale E) Meet objections and concerns Answer: C Difficulty: Moderate LO: 11.4: Describe the seven-step sales process an entrepreneurial firm uses to identify prospects and close sales.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 75) A well-thought-out sales process has triggers that help a salesperson discern if spending time with a prospect is a good use of their time.

Answer: TRUE Difficulty: Easy LO: 11.4: Describe the seven-step sales process an entrepreneurial firm uses to identify prospects and close sales.

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Entrepreneurship, 7e (Barringer/Ireland) Chapter 12 The Importance of Intellectual Property 1) The opening feature in chapter 12 focuses on Pashion Footwear, a company that makes innovative convertible high heels. The company has worked hard to bolster its ________.

A) intellectual property protection B) Internet domain name C) board of advisors D) marketing team E) advertising efforts Answer: A Difficulty: Moderate LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Analytical Thinking Quest. Category: Analytical 2) Which of the following is an example of intellectual property?

A) Pashion Footwear's cash reserves B) Amazon's drivers C) Nike's swoosh logo D) United's fleet of planes E) Google's headquarters in Mountain View, California Answer: C Difficulty: Easy LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 3) Any product of human imagination, creativity, and inventiveness that is intangible but has value in the marketplace is called ________.

A) intellectual property B) a derivative work C) fair use D) infringement E) certification Answer: A Difficulty: Moderate LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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4) Which of the following was NOT identified as one of the common mistakes that entrepreneurs make regarding intellectual property?

A) Not fully recognizing the value of their intellectual property B) Not properly identifying all their intellectual property C) Not properly protecting their key marketing executives D) Not using their intellectual property as part of their overall plan for success E) Not legally protecting the intellectual property that needs protecting Answer: C Difficulty: Moderate LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Analytical Thinking Quest. Category: Analytical 5) To decide if intellectual property protection should be pursued for a particular intellectual asset, a firm should first determine if the intellectual property in question has a direct relationship with its competitive advantage. Then, the firm should determine if its intellectual property in question has ________.

A) value in the marketplace B) could be licensed to another company C) is more than three years old D) is something that was developed "in-house" E) rightfully belongs to the firm or the employees who developed it Answer: A Difficulty: Moderate LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Analytical Thinking Quest. Category: Analytical 6) Which type of intellectual property protection covers new or useful process, machine, manufacturing, or composition of material or any new and useful improvement thereof?

A) Utility patent B) Design patent C) Plant patent D) Trademark E) Copyright Answer: A Difficulty: Moderate LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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7) Which of the following is NOT one of the four key forms of intellectual property protection?

A) Innovations B) Copyrights C) Trademarks D) Trade secrets E) Patents Answer: A Difficulty: Easy LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 8) While not one of the four key forms of intellectual property, Internet domain names are an important form.

Answer: TRUE Difficulty: Easy LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 9) Patents, trademarks, copyrights, and licenses are the four key forms of intellectual property.

Answer: FALSE Difficulty: Easy LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Analytical Thinking Quest. Category: Analytical 10) What is intellectual property? Why is it called "intellectual" property?

Answer: Intellectual property is any product of human intellect that is intangible but has value in the marketplace. It is called "intellectual" property because it is the product of human imagination, creativity, and inventiveness. A firm's intellectual assets, which include inventions, trademarks, brands, and methods of doing business, are becoming their most valuable assets.

Difficulty: Easy LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 11) What are the two primary rules of thumb for determining whether intellectual property protection should be pursued for a particular intellectual asset?

Answer: First, a firm should determine whether the intellectual property in question is directly related to its competitive advantage. Second, a firm should determine whether the item has independent value in the marketplace. If either or both of these conditions exist, intellectual property protection for an asset should be strongly considered.

Difficulty: Moderate LO: 12.1: Define the term intellectual property and describe its importance.

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12) A grant from the federal government conferring the rights to exclude others from making, selling, or using an invention for a specific period of time is referred to as a(n) ________.

A) trademark B) patent C) idea secret D) innovation E) copyright Answer: B Difficulty: Easy LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Analytical Thinking Quest. Category: Analytical 13) Which form of intellectual property protection is the only one expressly mentioned in the original articles of the U.S. Constitution?

A) Assurances B) Patents C) Copyrights D) Trade secrets E) Trademarks Answer: B Difficulty: Challenging LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Analytical Thinking Quest. Category: Analytical 14) Which inventor received the first patent, which was granted for a process of making potash, an ingredient in fertilizer in 1790?

A) John Adams B) Alexander Graham Bell C) Samuel Hopkins D) Benjamin Franklin E) George Washington Answer: C Difficulty: Challenging LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Application of Knowledge Quest. Category: Application

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15) The sole entity responsible for granting patents in the United States is the ________.

A) USPTO B) FTC C) SEC D) SBA E) NSF Answer: A Difficulty: Easy LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Application of Knowledge Quest. Category: Application 16) Since the first patent was granted, there have been ________ patents granted in the United States.

A) 500,000 B) 2 million C) 15 million D) 10 million E) 13 million Answer: D Difficulty: Challenging LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 17) The three types of patents are ________.

A) manufacturing; process; plant B) usefulness; purpose; genetic C) explicit; implicit; plant D) utility; design; plant E) manufacturing; service; other Answer: D Difficulty: Moderate LO: 12.2: Explain what a patent is and describe different types of patents.

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18) ________ patents are the most common type of patent and cover what we generally think of as new inventions.

A) Value B) Product C) Method D) Utility E) Design Answer: D Difficulty: Moderate LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 19) Which of the following is an example of a business method patent?

A) Shock-absorbing prosthetic device B) Intel's chip C) Apple's smartphone cameras D) Underwriters Laboratories certification mark E) Amazon.com's one-click ordering system Answer: E Difficulty: Moderate LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 20) The three basic requirements for a patent to be granted are ________.

A) useful, difficult to copy, and novel B) based on cutting edge science or technology, not obvious C) useful, novel, and not obvious to a person of ordinary skill in the field D) rare, difficult to copy, and not obvious E) useful, scientific, and novel Answer: C Difficulty: Challenging LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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21) The term of a utility patent is ________ years.

A) 7 B) 15 C) 35 D) 20 E) 100 Answer: D Difficulty: Moderate LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 22) ________ patents protect the way an invention looks.

A) Aesthetic B) Utility C) Visual D) Blueprint E) Design Answer: E Difficulty: Easy LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Analytical Thinking Quest. Category: Analytical 23) The Partnering for Success feature in chapter 12 deals with the Maker Movement and makers ________.

A) selling or licensing an invention to a larger firm B) creating derivative works C) willfully engaging in patent infringement D) applying for a provisional patent application E) conducting a patent search Answer: A Difficulty: Easy LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Application of Knowledge Quest. Category: Application

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24) A(n) ________ allows for the use of the term "patent pending."

A) provisional patent application B) patent infringement C) copyright D) trademark E) trade secret Answer: A Difficulty: Easy LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 25) Patent ________ takes place when one party engages in the unauthorized use of another party's patent.

A) breach B) encroachment C) violation D) infraction E) infringement Answer: E Difficulty: Moderate LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 26) A new color for a rose or a new type of hybrid vegetable is eligible for ________ protection A) plant patent B) design patent C) copyright D) trademark E) utility patent Answer: A Difficulty: Easy LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Application of Knowledge Quest. Category: Application 27) With the enactment of the Leahy-Smith America Invents Act, the U.S. switched to a first-tofile system from a first-to-invent system in 2013.

Answer: TRUE Difficulty: Moderate LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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28) The average time for the approval of a patent is approximately seven months.

Answer: FALSE Difficulty: Moderate LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Application of Knowledge Quest. Category: Application 29) Without patent laws, inventors would have little incentive to invest time and money in new inventions.

Answer: TRUE Difficulty: Moderate LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Application of Knowledge Quest. Category: Application 30) A utility patent can be obtained for the invention of new, original, and ornamental designs for manufactured products.

Answer: FALSE Difficulty: Moderate LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Analytical Thinking Quest. Category: Analytical 31) What are the three basic requirements for a patent?

Answer: The three basic requirements for a patent are that is must be useful, novel, and not obvious. That is, the subject of the patent must have utility, be different from what has come before, and must not be obvious to a person of ordinary skill in the field.

Difficulty: Moderate LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 32) Identify and briefly describe the three types of patents.

Answer: The three types of patents are utility patents, design patents, and plant patents.

Utility patents are the most common type of patent and cover what we generally think of as new inventions. Patents in this category may be granted to anyone who "invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." Design patents are the second most common type of patent and cover the invention of new, original, and ornamental designs for manufactured products. While a utility patent protects the way an invention is used and works, a design patent protects the way it looks.

The third type of patent is plant patents. Plant patents protect new varieties of plants that can be reproduced asexually. Such plants are reproduced by grafting or crossbreeding rather than by planting seeds.

Difficulty: Moderate LO: 12.2: Explain what a patent is and describe different types of patents.

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33) A ________ is any word, name, symbol, or device used to identify the source or origin of products or services and to distinguish those products or services from others.

A) copyright B) trademark C) license D) trade secret E) patent Answer: B Difficulty: Easy LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 34) The four types of trademark protection are ________.

A) trademarks, service marks, collective marks, and certification marks B) examination marks, trademarks, combined marks, and service marks C) shared marks, collective marks, mutual marks, and trademarks D) service marks, cooperative marks, trademarks, and shared marks E) trademarks, collective marks, documentation marks, and combined marks Answer: A Difficulty: Moderate LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 35) The Good Housekeeping Seal of Approval is an example of which of the following?

A) Trademark B) Certification mark C) Documentation mark D) Collective mark E) Service mark Answer: B Difficulty: Easy LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

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36) Spotify for audio streaming, Apple for computers, and Proactiv for acne medication are examples of ________.

A) certifications B) copyrights C) patents D) trade secrets E) trademarks Answer: E Difficulty: Moderate LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 37) eBay for online auctions is an example which type of trademark?

A) Creative B) Intangible C) Examination D) Service E) Subtle Answer: D Difficulty: Moderate LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 38) The marks belonging to the American Bar Association are an example of which type of trademark?

A) Collective B) Share C) Examination D) Joint E) Certification Answer: A Difficulty: Moderate LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

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39) The Coca-Cola Company's famous curved bottle has a trademark registration. This is an example of trademark law protection for which type of item?

A) Words B) Numbers and letters C) Shapes D) Trade dress E) Colors Answer: C Difficulty: Easy LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 40) Which of the following is NOT generally eligible for trademark protection?

A) Trade dress B) Shapes C) Words D) Surnames E) Designs or logos Answer: D Difficulty: Challenging LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 41) All of the following are excluded from trademark protection EXCEPT ________.

A) fragrances B) deceptive matter C) surnames D) scandalous matter E) descriptive marks Answer: A Difficulty: Moderate LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Analytical Thinking Quest. Category: Analytical 42) A trademark is a word, name, symbol, or device used to identify the source or origin of products or services and to distinguish those products or services from others.

Answer: TRUE Difficulty: Easy LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

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43) A company cannot trademark profane words.

Answer: TRUE Difficulty: Easy LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Application of Knowledge Quest. Category: Application 44) All types of trademarks are renewable every 10 years, if the mark remains in use.

Answer: TRUE Difficulty: Moderate LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 45) Trademark law falls under the Lanham Act, which passed in 1946.

Answer: TRUE Difficulty: Moderate LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 46) After filing an intent-to-use trademark application, the owner obtains the benefits of registration.

Answer: TRUE Difficulty: Easy LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Analytical Thinking Quest. Category: Analytical 47) What is a trademark? What is the difference between a service mark and a certification mark?

Answer: A trademark is any word, name, symbol, or device used to identify the source or origin of products or services and to distinguish those products or services from others. Service marks are like ordinary trademarks, but firms use these to identify their services or intangible activities rather than their physical product. Certification marks are marks, words, names, symbols, or devices used by a person other than its owner to certify a specific quality about a product or service.

Difficulty: Moderate LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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48) A(n) ________ is a form of intellectual property protection that grants to the owner of a work of authorship the legal right to determine how to use the work and to obtain the economic benefits by doing so.

A) assurance document B) patent C) trade secret D) brand E) copyright Answer: E Difficulty: Easy LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 49) Which of the following statements about copyrights is NOT correct?

A) Businesses typically possess a treasure trove of copyrightable material.

B) A musical composition in a fixed form that is written down is copyrightable.

C) Copyrightable material may be in tangible or intangible form.

D) The Copyright Revision Act of 1976 governs copyright law in the United States.

E) A copyright is a form of intellectual property protection.

Answer: C Difficulty: Moderate LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Application of Knowledge Quest. Category: Application 50) Copyright law is governed by the ________.

A) U.S. Constitution B) Intellectual Property Act of 1946 C) Trademark Act of 1946 D) Inventors and Writer's Protection Act of 1955 E) Copyright Revision Act of 1976 Answer: E Difficulty: Challenging LO: 12.4: Define a copyright and identify what a copyright can protect.

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51) If a local band wrote their own rendition of a Katy Perry song, the band could try to copyright their rendition of the song as a(n) ________ work.

A) pantomime B) offshoot C) derivative D) subsequent E) dramatic Answer: C Difficulty: Moderate LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Application of Knowledge Quest. Category: Application 52) ________ permits the limited use of copyrighted material for purposes such as comment, teaching, or news reporting.

A) Fair use B) Copyright infringement C) A derivative work D) The idea-expression dichotomy E) A secondary meaning Answer: A Difficulty: Easy LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 53) Which of the following symbols is the copyright bug?

A) ç B) € C) ¢ D) © E) ™ Answer: D Difficulty: Moderate LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Application of Knowledge Quest. Category: Application

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54) According to current regulations, any copyrightable work created on or after January 1, 1978, is protected by copyright law for the life of the author plus ________ years.

A) 28.5 B) 101 C) 40 D) 55 E) 70 Answer: E Difficulty: Challenging LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 55) The main exclusion from copyright laws is ________.

A) ideas B) dramatic works C) computer software D) musical compositions E) literary works Answer: A Difficulty: Challenging LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Analytical Thinking Quest. Category: Analytical 56) Copyright ________ occurs when one work derives from another, is an exact copy, or shows substantial similarity to the original work.

A) infringement B) violation C) intrusion D) breach E) duplication Answer: A Difficulty: Moderate LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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57) The What Went Wrong? feature in chapter 12 focuses on trademark disputes between large firms and startups. The claims of the large companies focused on the use of a ________ that was "confusingly similar" to a trademark they owned.

A) name B) song C) tagline D) fragrance E) product Answer: A Difficulty: Moderate LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Analytical Thinking Quest. Category: Analytical 58) A trademark is a form of intellectual property protection that grants to the owner of a work of authorship the legal right to determine how the work is used and to obtain the economic benefits from the work.

Answer: FALSE Difficulty: Easy LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 59) In 1980, Congress passed the Computer Software Copyright Act, which amended previous copyright acts.

Answer: TRUE Difficulty: Moderate LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 60) A literary character that looks and acts like Garfield, the cartoon cat, would infringe on the copyright that protects Garfield.

Answer: TRUE Difficulty: Easy LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Analytical Thinking Quest. Category: Analytical 61) Copyright infringement occurs when one work derives from another or is an exact copy.

Answer: TRUE Difficulty: Moderate LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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62) What is a copyright? What are the primary categories of material that you can copyright?

Answer: A copyright is a form of intellectual property protection that grants to the owner of a work of authorship the legal right to determine how the work is used and to obtain the economic benefits from the work. The work must be in tangible form, such as a book, operating manual, or magazine article. If something is not in a tangible form, such as a speech that has never been recorded or saved on a computer disk, copyright law does not protect it.

The primary categories of material that can be copyrighted include literary works, musical compositions, computer software, pantomimes and choreographic works, and pictorial, graphic, and sculptural works.

Difficulty: Challenging LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 63) A company's customer list is most commonly protected under ________ regulations.

A) patent B) copyright C) trade secret D) trademark E) collective mark Answer: C Difficulty: Moderate LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 64) All of the following are examples of physical measures firms use to protect trade secrets EXCEPT ________.

A) restricting access B) maintaining log books for visitors C) maintaining logbooks for access to sensitive material D) utilizing polygraphs E) using certification marks Answer: D Difficulty: Moderate LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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65) When do trade secret disputes arise most frequently?

A) When a passage from a book is copied without permission B) When a firm name sounds significantly similar to another's C) When an employee leaves a firm to join a competitor and the person's former employer believes that they took confidential information with them D) When a software program is duplicated E) When an employee steals office supplies Answer: C Difficulty: Moderate LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 66) The federal Economic Espionage Act, passed in 1996, criminalizes ________.

A) copyright infringement B) utility patent violations C) trademark violations D) design patent violations E) the theft of trade secrets by third parties Answer: E Difficulty: Challenging LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 67) The ________ attempted to set nationwide standards for trade secret legislation.

A) Intangible Assets Protection Act B) Fairness in Intellectual Property Act C) Uniform Trade Secrets Act D) Trademark & Copyright Act E) Economic Espionage Act Answer: C Difficulty: Challenging LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Application of Knowledge Quest. Category: Application

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68) Which of the following statement is NOT true concerning the Uniform Trade Secrets Act? A) The Uniform Trade Secrets Act was drafted by a special commission in 1979.

B) The Uniform Trade Secrets Act was an addendum to the Economic Espionage Act. C) The Uniform Trade Secrets Act sought to set nationwide standards for trade secret legislation.

D) The Uniform Trade Secrets Act was adopted in most states.

E) Many states revised the Uniform Trade Secrets Act resulting in a wide disparity among states when it comes to enforcement practices.

Answer: B Difficulty: Moderate LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 69) For the best protection of trade secrets, a firm should ask its employees to sign nondisclosure and noncompete agreements.

Answer: TRUE Difficulty: Easy LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Application of Knowledge Quest. Category: Critical Thinking 70) Unlike patents, trademarks, and copyrights, no single government agency regulates trade secrets.

Answer: TRUE Difficulty: Moderate LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 71) What is a trade secret? List some examples of physical measures firms can use to protect trade secrets.

Answer: A trade secret is any formula, pattern, physical device, idea, process, or other information that provides the owner of the information with a competitive advantage in the marketplace. Some examples of physical measures firms can use to protect trade secrets include restricting access, labeling documents, password-protecting confidential computer files, maintaining logbooks for visitors, maintaining logbooks for access to sensitive material and maintaining adequate overall security measures.

Difficulty: Moderate LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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72) An ________ is conducted to determine the intellectual property a company owns.

A) intellectual property audit B) intangible materials audit C) academic property inventory D) intellectual materials inventory E) intangible property inventory Answer: A Difficulty: Easy LO: 12.6: Explain what an intellectual property audit is and identify the two primary reasons entrepreneurial firms should complete this type of audit.

AACSB: Analytical Thinking Quest. Category: Analytical 73) The two primary reasons to conduct an intellectual property audit are to periodically determine whether its intellectual property is being properly protected and to ________.

A) remain prepared for a Security & Exchange Commission spot inspection B) remain prepared to justify its value in the event of a merger or acquisition C) remain prepared for an initial public offering D) update the value of its intellectual property on its balance sheet E) make sure no intellectual property has been stolen Answer: B Difficulty: Moderate LO: 12.6: Explain what an intellectual property audit is and identify the two primary reasons entrepreneurial firms should complete this type of audit.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 74) An intellectual property audit is conducted to determine the intellectual property a company owns.

Answer: TRUE Difficulty: Easy LO: 12.6: Explain what an intellectual property audit is and identify the two primary reasons entrepreneurial firms should complete this type of audit.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 75) What are the three steps in conducting an intellectual property audit?

Answer: There are three steps in conducting an intellectual property audit. The first step is to develop an inventory of a firm's existing intellectual property. The second step is to identify works in progress to ensure that the firm is documenting them in a systematic, orderly manner.

The third step is to specify the firm's key trade secret s and describe how the firm is protecting them.

Difficulty: Moderate LO: 12.6: Explain what an intellectual property audit is and identify the two primary reasons entrepreneurial firms should complete this type of audit.

AACSB: Application of Knowledge Quest. Category: Analytical 21 Copyright © 2025

Entrepreneurship, 7e (Barringer/Ireland) Chapter 13 Preparing for and Evaluating the Challenges of Growth 1) Yishi Foods, the company profiled in the opening feature of Chapter 13, reinforced the importance of having ________.

A) a sound initial marketing plan B) an excellent location on which to build C) a powerful value proposition that can sustain an organization D) a thorough business plan E) cash available to support the firm's current and extended operations.

Answer: E Difficulty: Moderate LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Analytical Thinking Quest. Category: Analytical 2) Jeremy Westbrook owns an organic food company which has increased both its profits and revenues over an extended period of time. Jeremy's firm is experiencing ________ growth.

A) persistent B) unremitting C) sustained D) unbroken E) moderate Answer: C Difficulty: Easy LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 3) The degree to which a firm prepares for its future growth has direct bearing on its ________.

A) level of success B) ability to market poor products C) level of diversification at founding D) ability to develop core competencies E) level of fixed costs Answer: A Difficulty: Easy LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Application of Knowledge Quest. Category: Application

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4) Which of the following statements regarding firm growth is NOT correct?

A) Most entrepreneurial firms want to grow.

B) Especially in the short term, growth in sales revenue is a poor indicator of an entrepreneurial firm's potential to survive today and be successful tomorrow.

C) Appreciating its nature is the first action a business can take to prepare for growth.

D) Many entrepreneurial firms have grown quickly, producing impressive results for their employees and owners.

E) Growing a business successfully requires preparation, good management, and an appreciation of the issues involved.

Answer: B Difficulty: Moderate LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 5) According to the textbook, many entrepreneurial firms experience ________.

A) ambivalence about growth B) rapid growth C) no growth D) no sales for at least two years E) little knowledge of their industry Answer: B Difficulty: Moderate LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 6) ________ is an example of a firm that understood the importance of handling growth carefully and knowing when to put the brakes on.

A) Bombas B) The Pampered Chef C) Apple D) Virgin Airlines E) Microsoft Answer: B Difficulty: Easy LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Application of Knowledge Quest. Category: Application

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7) The businesses that have the potential to grow the fastest over a sustained period of time are ones that ________.

A) solve a significant problem or have a major impact on their customers' productivity or lives B) are cost leaders and promote themselves aggressively C) have a major entertainment value D) take advantage of environmental trends and are cost leaders E) sell high quality products that are environmentally friendly Answer: A Difficulty: Moderate LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 8) According to the textbook, there are three issues about business growth that entrepreneurs should appreciate. These issues are ________.

A) not all businesses have the potential to be aggressive growth firms, business success scales, and business growth is a top priority of most entrepreneurial firms B) business growth is a top priority of most entrepreneurial firms, a business can't grow too fast, and businesses that price their products aggressively grow the fastest C) a business's valuation increases with its growth, a business can grow too fast, and business growth is a top priority of most entrepreneurial firms D) the majority of businesses have the potential to be aggressive growth firms, a business can't grow too fast, and business success scales E) not all businesses have the potential to be aggressive growth firms, a business can grow too fast, and business success doesn't always scale Answer: E Difficulty: Moderate LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Analytical Thinking Quest. Category: Analytical 9) Which of the following is NOT one of the 10 warning signs that a business is growing too fast?

A) Borrowing money to pay for routine operating expenses B) Underutilized staff C) Customer complaints are up D) Worry about the business's financial structure E) E-mail and text messages start going unanswered Answer: B Difficulty: Moderate LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Analytical Thinking Quest. Category: Analytical

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10) Growth in both revenues and profits over a length of time is called ________ growth.

A) limited B) external C) abnormal D) sustained E) perpetual Answer: D Difficulty: Moderate LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 11) Sustained growth is defined as growth in both revenues and profits over an extended period of time.

Answer: TRUE Difficulty: Easy LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Analytical Thinking Quest. Category: Analytical 12) A firm's core competencies largely determine the details of its core strategy.

Answer: TRUE Difficulty: Easy LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Analytical Thinking Quest. Category: Analytical 13) All businesses have the potential to be aggressive growth firms.

Answer: FALSE Difficulty: Moderate LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 14) The very thing that makes a firm successful might suffer as the result of growth.

Answer: TRUE Difficulty: Moderate LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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15) Navdy, the company discussed in the What Went Wrong? feature of chapter 13, had revenue and satisfied customers but could not grow fast enough to cover its cost structure as a foundation for financial success.

Answer: TRUE Difficulty: Moderate LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 16) List five of the ten warning signs that a business is growing too fast.

Answer: The warning signs that a business is growing too fast include: borrowing money to pay for routine operating expenses, extremely tight profit margins, overstretched staff, declining product quality, email and text messages start going unanswered, customer complaints are up, employees dread coming to work, falling productivity, operating in a "crisis" mode is the norm rather than the exception, and worry about the business's financial structure.

Difficulty: Moderate LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Application of Knowledge Quest. Category: Application 17) Explain why Jim Collins says business that are successful over the long term are more like hedgehogs than foxes.

Answer: In Good to Great, Jim Collins says businesses that are successful over the long haul are more like hedgehogs than foxes. Rather than moving swiftly in all directions, like foxes, successful businesses keep their heads down and do one thing particularly well. Like the hedgehog, they see what is essential and ignore the rest.

Difficulty: Moderate LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 18) A firm's pace of growth is the rate it is growing ________.

A) on a monthly basis B) compared to a national index of all firms C) on an annual basis D) compared to the national economy E) compared to its closest competitor Answer: C Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking Quest. Category: Analytical

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19) Which of the following options was NOT identified as an appropriate reason for growth?

A) Accommodating the growth of key customers B) Attracting and retaining talented employees C) Capturing economies of scale D) Capturing economies of scope E) Maintaining the appearance that the firm is successful Answer: E Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 20) Which of the following is the reason for firm growth that occurs when a firm holds the number-one position in an industry in terms of sales volume?

A) Increasing the compensation of the top managers of the firm B) Ability to attract and retain talented employees C) Need to accommodate the growth of key customers D) Market leadership E) Economies of scale Answer: D Difficulty: Easy LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 21) ________ are(is) generated when increasing production lowers the average cost of each unit produced.

A) Fixed costs B) Economies of scale C) Scaling for growth D) Market leadership E) Economies of scope Answer: B Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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22) Economies of scale occur when ________.

A) increasing production lowers the average cost of each unit produced B) increasing production increases the average cost of each unit produced C) decreasing production lowers the average cost of each unit produced D) decreasing production increases the average cost of each unit E) increasing production increases the fixed cost of doing business Answer: A Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking Quest. Category: Analytical 23) London Simpson owns a company that makes smartphone accessories. She is trying to increase her sales, primarily because she knows that increasing production lowers the average cost of each unit produced. London's reason for growth is ________.

A) economies of scope B) market leadership C) influence, power, and survivability D) need to accommodate the growth of key customers E) economies of scale Answer: E Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking Quest. Category: Analytical 24) ________ costs are costs that a company incurs whether it sells something or not.

A) Preset B) Variable C) Set D) Fixed E) Marginal Answer: D Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking Quest. Category: Analytical

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25) ________ is a firm's primary mechanism to generate promotional opportunities for employees.

A) Growth B) Benefits C) Salary D) Power E) Influence Answer: A Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking Quest. Category: Analytical 26) ________ costs are the costs a company incurs as it makes sales.

A) Static B) Irregular C) Balanced D) Variable E) Flexible Answer: D Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking Quest. Category: Analytical 27) Zack Shields leases a manufacturing facility that produces computer monitors. Zack tries to keep production high, because his lease payments are $10,500 a month. Zach's lease payment is a ________ cost.

A) variable B) secondary C) fixed D) marginal E) tangible Answer: C Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking Quest. Category: Analytical

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28) Karen West owns a barbecue restaurant. Karen closely watches the cost of propane, which she uses to heat her ovens. The more barbecue food Karen sells, the more it costs her for propane on a monthly basis. For Karen, the cost of propane is a(n) ________ cost.

A) variable B) secondary C) resultant D) fixed E) irregular Answer: A Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking Quest. Category: Analytical 29) Paul Mason's firm sells medical equipment to heart surgeons. The company fields a direct sales force that travels the country demonstrating its equipment to heart surgeons and hospital administrators. Recently, Paul's company started producing equipment for eye surgeons, partly to maximize the value of his sales force, which can now call on both heart surgeons and eye surgeons when it makes hospital visits. Paul's firm is attempting to capture economies of ________ through this strategy.

A) reach B) scope C) capacity D) range E) scale Answer: B Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 30) Market leadership occurs when a firm ________.

A) is the number one or number two firm in an industry or niche market in terms of net profits B) is one of the top five firms in an industry or market niche in terms of sales volume C) earns twice as much as its closest competitor D) sells twice as much as its closest competitor E) is the number one or the number two firm in an industry or niche market in terms of sales volume Answer: E Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking Quest. Category: Critical Thinking

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31) Some firms feel that they can better appeal to their customers if they can advertise that they are the "Number 1 firm" in their industry. This sentiment is motivated by which reason for growth?

A) Economies of scope B) Need to accommodate the growth of key customer C) Economies of scale D) Market leadership E) Influence, power, and survivability Answer: D Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 32) Katlyn Williams owns a company that makes specialized components for the aerospace industry. Her most important customer is growing at a rate of 33% per year. Katlyn is likely motivated by which reason for growth?

A) Capturing economies of scope B) Executing a scalable business model C) Market leadership D) Influence, power, and survivability E) Need to accommodate the growth of a key customer Answer: E Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking Quest. Category: Analytical 33) Smaller firms usually have more influence and power to get "a foot in the door" or an introduction to major customers than their larger competitors.

Answer: FALSE Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking Quest. Category: Analytical 34) A firm may grow to try to generate value from unused resources.

Answer: TRUE Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking Quest. Category: Analytical

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35) As a firm grows and adds employees, it tends to become less vulnerable to the loss of a single person or a small group of people's participation.

Answer: TRUE Difficulty: Easy LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 36) List the primary reasons for firm growth.

Answer: The primary reasons for firm growth are economies of scale, economies of scope, market leadership, influence, power, and survivability, need to accommodate the growth of key customers, and ability to attract and retain talented employees.

Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 37) Define the term "market leadership." Why do firms work hard to obtain market leadership?

Answer: Market leadership occurs when a firm is the number one or number two firm in an industry or niche market in terms of sales volume. Many firms work hard to achieve market leadership, to realize economies of scale in production, and to be recognized as the brand leader.

Being the market leader also permits a firm to use slogans such as "Number 1 Software Producer in America" in its promotions, helping the firm to win customers and attract talented employees, as well as business partners.

Difficulty: Moderate LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 38) The majority of businesses go through a discernable set of stages of growth referred to as the ________.

A) business evolutionary cycle B) business existence cycle C) organizational sequence D) business life circle E) organizational life cycle Answer: E Difficulty: Easy LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Analytical Thinking Quest. Category: Analytical

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39) Which of the following is NOT one of the five stages in the organizational life cycle?

A) Introduction B) Early growth C) Scaling D) Maturity E) Decline Answer: C Difficulty: Moderate LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Analytical Thinking Quest. Category: Analytical 40) In which stage of the organizational life cycle does a business identify its strengths and core competencies and starts selling its product or service.

A) Introduction B) Launch C) Ramp-up D) Early growth E) Continuous growth Answer: A Difficulty: Moderate LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Analytical Thinking Quest. Category: Analytical 41) Making sure the initial product is right and laying the groundwork for building a larger organization is the main challenge for a business in which stage of the organizational life cycle?

A) Introduction B) Launch C) Ramp-up D) Early growth E) Decline Answer: A Difficulty: Moderate LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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42) For a business to be successful in the early growth stage of the organizational life cycle, the two important things that must happen are ________.

A) the founder or owner of the business must start transitioning from his or her role as the handson supervisor to a more managerial role, and increased formalization must take place B) a decision must be made whether the owner-manager and the current management team is capable of taking the business further, and the organization must start laying the groundwork for future growth C) increased formalization must take place, and the business must achieve price stability D) a decision must be made whether the owner-manager or the current management team is capable of taking the business further, and business partnerships must be established E) the founder or owner of the business must start transitioning from his or her role as the handson supervisor to a more managerial role, and the business must be cash flow positive Answer: A Difficulty: Challenging LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 43) In which stage of the organizational life cycle are the toughest decisions generally made?

A) Introduction B) Early growth C) Continuous growth D) Maturity E) Decline Answer: C Difficulty: Moderate LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Analytical Thinking Quest. Category: Analytical 44) A well-managed business in the maturity stage of its life cycle that finds its products and services are mature often ________.

A) replaces its board of directors to breathe new life into the firm B) looks for licensing opportunities C) looks for partnering or acquisition opportunities to breathe new life into the firm D) looks for new managerial talent to breathe new life into the firm E) looks for international business opportunities Answer: C Difficulty: Moderate LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Application of Knowledge Quest. Category: Application

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45) Which of the following statement about the decline stage is true?

A) It is not inevitable that a business will enter the decline stage and either deteriorate or die.

B) It is inevitable that a business will enter the decline stage of the organizational life cycle C) It is not inevitable that service firms enter the decline stage of the organizational life cycle but is inevitable for manufacturing firms.

D) It is not inevitable that manufacturing firms enter the decline stage of the organizational life cycle but is inevitable for service firms.

E) It is not inevitable that international firms enter the decline stage of the organizational life cycle but is inevitable for strictly domestic firms.

Answer: A Difficulty: Moderate LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 46) The Savvy Entrepreneurial Firm feature in Chapter 13 focuses on Salesforce, a company that pioneered the idea of software as a service (SaaS). The main point of the case is that the company has ________ and appeals to mainstream customers.

A) remained in a small niche B) selected a second niche C) leaped the technology curve D) crossed the chasm E) abandoned its product Answer: D Difficulty: Moderate LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 47) The majority of businesses go through a discernable set of stages referred to as the organizational life cycle.

Answer: TRUE Difficulty: Moderate LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 48) The main challenges for a business in the introduction stage are to make sure the initial product or service is right and to start laying the groundwork for building a larger organization.

Answer: TRUE Difficulty: Moderate LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Analytical Thinking Quest. Category: Analytical

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49) Michael Gerber's book The E-Myth Revisited reinforced the point that in the early growth stage, the owner must start working "on the business" rather than "in the business."

Answer: TRUE Difficulty: Easy LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Analytical Thinking Quest. Category: Analytical 50) As a business moves beyond its early growth stage and its pace of growth accelerates, the need for structure and formalization decreases.

Answer: FALSE Difficulty: Moderate LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 51) List the stages in the organizational life cycle.

Answer: The stages in the organizational life cycle are introduction, early growth, continuous growth, maturity, and decline.

Difficulty: Easy LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 52) The book The Theory of the Growth of the Firm argued that firms are collections of productive resources that are organized in an administrative framework. Who is the author of this book?

A) Jim Collins B) Joseph Schumpeter C) Edith Penrose D) Michael E. Gerber E) Seth Godin Answer: C Difficulty: Easy LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Application of Knowledge Quest. Category: Analytical

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53) Trevor Kimble owns a firm that sells products to the publishing industry. Trevor is currently evaluating a set of opportunities that he feels his firm is capable of pursuing. According to the textbook, Trevor is evaluating his firm's ________.

A) core strategy B) dynamic opportunity options C) productive opportunity set D) marketing plan E) core competencies Answer: C Difficulty: Easy LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 54) According to Penrose, ________ services generate new market, product and service ideas, while ________ services administer the routine functions of the firm and facilitate the profitable execution of new opportunities.

A) managerial; entrepreneurial B) administrative; business C) entrepreneurial; managerial D) business; commercial E) commercial; administrative Answer: C Difficulty: Challenging LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 55) The ________ problem refers to the subsequent bottleneck that occurs when a firm's resources are insufficient to take advantage of its new product and service opportunities.

A) commercial capacity B) entrepreneurial aptitude C) managerial capacity D) business capacity E) business aptitude Answer: C Difficulty: Moderate LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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56) Jacquin owns a commercial nursery and has more business than he can handle. In fact, he is presently turning away exciting new business opportunities because it is expensive to hire new employees. He knows that if he did hire new employees it would take time for the new employees to be trained and to be socialized into the culture of his firm. Jacquin's inability to take advantage of the new business opportunities that are coming his way is due largely to the ________ problem.

A) business aptitude B) entrepreneurial aptitude C) commercial opportunity D) business capacity E) managerial capacity Answer: E Difficulty: Moderate LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Analytical Thinking Quest. Category: Analytical 57) ________ means that as the number of employees a firm needs increases, it becomes increasingly difficult for it to find the right employees, place them in appropriate positions, and provide adequate supervision.

A) Entrepreneurial capacity B) Adverse bottleneck C) Adverse selection D) Moral selection E) Moral hazard Answer: C Difficulty: Moderate LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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58) Kwame owns a software development company. When he first launched his firm, he was careful to hire employees who had the experience he was looking for, were good matches for the positions he had available, and could be properly supervised. As Kwame's firm has grown, and his need for employees has increased, he is concerned with evaluating the suitability of job candidates and is increasingly hiring unsuitable employees. Kwame is dealing with an issue referred to as ________.

A) adverse hazard B) adverse selection C) complicated hazard D) ethical hazard E) moral selection Answer: B Difficulty: Challenging LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 59) A main reason that entrepreneurs and managers worry so much about growth is the ________ problem.

A) moral hazard B) managerial capacity C) adverse hazard D) business structure E) complex selection Answer: B Difficulty: Moderate LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 60) The solution to which challenge often creates a costly hierarchy that isolates the top management team from its rank and file?

A) Difficult selection B) Adverse hazard C) Ethical selection D) Productivity hazard E) Moral hazard Answer: E Difficulty: Challenging LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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61) Which of the following selections is NOT one of the constraints on efforts to increase a firm's managerial services?

A) The time required to socialize new managers B) How motivated entrepreneurs and/or managers are to grow the firm C) Adverse selection D) Moral hazard E) Benchmarking Answer: E Difficulty: Challenging LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 62) Which of the following was NOT identified in the textbook as one of the most common dayto-day challenges involved with growing a firm?

A) Cash flow management B) Channel conflict C) Capital constraints D) Quality control E) Price stability Answer: B Difficulty: Moderate LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Analytical Thinking Quest. Category: Analytical 63) Which of the following statements is NOT true regarding the day-to-day challenges of growing a firm?

A) As a firm grows, it requires a decreasing amount of cash to service its customers.

B) If firm growth comes at the expense of a competitor's market share, price competition can set in.

C) Most businesses, regardless of their industry, need capital from time to time to invest in growth-enabling projects.

D) Although most businesses are started fairly inexpensively, the need for capital is typically the most prevalent in the early growth and continuous stages of the organizational life cycle.

E) One of the most difficult challenges that businesses encounter as they grow is maintaining high levels of quality and customer service.

Answer: A Difficulty: Easy LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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64) Tamika owns a growing company that makes innovative kitchen appliances. She has to continually work to keep enough cash on hand for sufficient liquidity to meet her payroll and cover her other short-term obligations. This is an example of which day-to-day challenge of firm growth?

A) quality control B) capital constraints C) price stability D) cash-flow management E) personnel issues Answer: D Difficulty: Easy LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Analytical Thinking Quest. Category: Analytical 65) The Partnering for Success feature in Chapter 13 focuses on the choices for fulfilling orders for an online company. Which choice was recommended for a company that is in a rapidgrowth mode?

A) Partner with drop shippers B) Fulfill your own orders.

C) Obtain additional physical locations.

D) Build more warehouses.

E) Use a fulfillment company.

Answer: E Difficulty: Moderate LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 66) Majeeda owns a kitchen and bathroom cabinet company. Her market research is telling her that she is taking business away from the large home improvement stores in her trade area.

Majeeda is worried that the large stores might fight back by lowering their prices, which hurts everyone except the consumer. Which of the day-to-day challenge of firm growth is Majeeda worried about?

A) Quality control B) Price stability C) Capital constraints D) Cash flow management E) Benchmarking Answer: B Difficulty: Moderate LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 20 Copyright © 2025

67) Kelly Andrews owns a company that makes office furniture. Recently, a favorable article was written about Kelly's company in a business magazine, and as a result, Kelly has seen a spike in his orders. Although Kelly is grateful for the additional orders, he is worried that an increase in activity means that his firm must handle more service requests and paperwork and contend with more customers, stakeholders, and vendors. Kelly knows that if he doesn't handle this increased activity properly, the workmanship of his products could decline. The day-to-day challenge of firm growth that this example illustrates is ________.

A) quality control B) price stability C) capital constraints D) benchmarking E) cash flow management Answer: A Difficulty: Moderate LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 68) According to Penrose, managerial services generate new market, product, and service ideas.

Answer: FALSE Difficulty: Moderate LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 69) When a firm's managerial resources are insufficient to take advantage of opportunities available to it, the subsequent bottleneck is known as the managerial capacity problem.

Answer: TRUE Difficulty: Easy LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 70) Moral hazard means that as the number of employees a firm needs increases, it becomes increasingly difficult for it to find the right employees, place them in appropriate positions, and provide adequate supervision.

Answer: FALSE Difficulty: Challenging LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 21 Copyright © 2025

71) Adverse selection means that as a firm grows and adds personnel, the new hires typically do not have the same ownership incentives as the original founders, so the new hires may not be as motivated as the founders to put in long hours or may even try to avoid hard work.

Answer: FALSE Difficulty: Challenging LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 72) When a firm's growth comes at the expense of a competitor's market share, price competition can set in.

Answer: TRUE Difficulty: Easy LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 73) One of the most difficult challenges that businesses encounter as they grow is maintaining high levels of quality and customer service.

Answer: TRUE Difficulty: Moderate LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 74) What is the managerial capacity problem?

Answer: When a firm's managerial resources are insufficient to take advantage of opportunities available to it, the subsequent bottleneck is referred to as the managerial capacity problem.

Difficulty: Easy LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Analytical Thinking Quest. Category: Critical Thinking

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75) What are the four most common day-to-day challenges involved with growing a firm?

Briefly describe each challenge.

Answer: The primary day-to-day challenges involved with growing a firm are cash flow management, price stability, quality control, and capital constraints. As a firm grows, it requires an increasing amount of cash to service its customers. In addition, a firm must carefully manage its cash on hand to make sure it maintains sufficient liquidity to meet its payroll and cover its other short-term obligations. If a firm's growth comes at the expense of a competitor's market share, a price war can result. The best thing for a small firm to do is to avoid price competition by serving a different market and by serving that market particularly well. As a firm handles the increase in activity that accompanies growth, unless it is careful, quality can suffer. Finally, growth often requires the expansion of a firm's facilities, which is difficult because purchasing or building facilities takes capital.

Difficulty: Moderate LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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Entrepreneurship, 7e (Barringer/Ireland) Chapter 14 Strategies for Firm Growth 1) College Pulse, the company profiled in the opening feature of Chapter 14, is an online survey and analytics company dedicated to understanding the attitudes, preferences, and behaviors of today's ________.

A) university professors B) college students C) research assistants D) single parents E) working adults Answer: B Difficulty: Easy LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Application of Knowledge Quest. Category: Application 2) Shelby Collins owns a firm that designs and sells women's clothing. She is currently trying to grow her firm by developing new product lines. Shelby is pursuing a(n) ________ growth strategy.

A) in-house B) center C) domestic D) external E) internal Answer: E Difficulty: Easy LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Analytical Thinking Quest. Category: Analytical 3) Which of the following is an example of an internal growth strategy?

A) Mergers and acquisitions B) Licensing C) Strategic alliances D) International expansion E) Joint ventures Answer: D Difficulty: Easy LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Application of Knowledge Quest. Category: Application

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4) Internally generated growth is often called organic growth because it does not rely on ________.

A) outside intervention B) its own skills and capabilities C) its own business practices D) internal leadership E) internal design expertise Answer: A Difficulty: Moderate LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Analytical Thinking Quest. Category: Analytical 5) Which of the following is an example of an external growth strategy?

A) New product development B) Existing product improvement C) International expansion D) Product line extensions E) Strategic alliances Answer: E Difficulty: Moderate LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Application of Knowledge Quest. Category: Application 6) Allbirds, JIGGY Puzzles, and Sir Kensington's are examples of firms that are growing via ________ growth strategies.

A) in-house B) external C) internal D) central E) derivative Answer: C Difficulty: Moderate LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Application of Knowledge Quest. Category: Application

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7) Which internal growth strategy is particularly important for technology companies to remain competitive?

A) Strategic alliances B) New product development C) Licensing D) Franchising E) Joint ventures Answer: B Difficulty: Easy LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Application of Knowledge Quest. Category: Application 8) Which of the following is an advantage of an internal growth strategy?

A) Reducing competition B) Getting access to proprietary products C) Economies of scale D) Preserving organizational culture E) Diversification of business risk Answer: D Difficulty: Moderate LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Application of Knowledge Quest. Category: Application 9) Which of the following statements is NOT true regarding new product development?

A) New product development involves designing, producing, and selling new products as a means of increasing firm revenues and profits.

B) For some companies, developing new products continuously is the foundation for competitive success.

C) The key to successful new product development strategy is to develop products that aren't simply "me-too" products.

D) In general, developing new products is a low-risk strategy.

E) In many fast-paced industries, new product development is a competitive necessity.

Answer: D Difficulty: Moderate LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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10) Internally generated growth is often called ________.

A) growth by spin-out B) growth by merger C) growth by acquisition D) organic growth E) licensing growth Answer: D Difficulty: Moderate LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 11) Which of the following was NOT identified as a key to effective new product development?

A) Develop products that add value.

B) Get quality and pricing right.

C) Find a need and fill it.

D) Conduct ongoing feasibility analysis.

E) Focus on broad target markets.

Answer: E Difficulty: Moderate LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 12) Which of the following was NOT identified as one of the top seven reasons new products fail?

A) Wrong market was picked B) Business case is flawed C) Market entry was delayed D) Marketing plan was poor E) Product is too similar to others Answer: E Difficulty: Moderate LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Application of Knowledge Quest. Category: Application 13) New product development, other product-related strategies, and international expansion are examples of external growth strategies.

Answer: FALSE Difficulty: Easy LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Application of Knowledge Quest. Category: Application

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14) Internally generated growth is often-called organic growth because it does not rely on outside intervention.

Answer: TRUE Difficulty: Moderate LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 15) An advantage of internal growth strategies is that it allows firms to promote from within.

Answer: TRUE Difficulty: Easy LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 16) A disadvantage of internal growth is that it is a slow form of growth.

Answer: TRUE Difficulty: Moderate LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 17) New product development is a low-risk growth strategy.

Answer: FALSE Difficulty: Moderate LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 18) List the top seven reasons new products fail.

Answer: The top seven reasons new products fail are product does not solve the right problem, wrong market was picked, product is too expensive or provides poor value to the customer, business case is flawed, products is not good enough/poor execution, market entry was delayed and marketing plan was poor.

Difficulty: Moderate LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 19) List the keys to effective successful product innovation efforts.

Answer: The keys to effective successful product innovation efforts are: find a need and fill it, develop products that add value, get quality and pricing right, focus on a specific target market, and conduct ongoing feasibility analysis.

Difficulty: Moderate LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 5 Copyright © 2025

20) When a business enhances the quality of a product, makes it more convenient to use, improves its durability, or makes it more up-to-date, it is pursuing a(n) ________ strategy.

A) market penetration B) product line extension C) geographic expansion D) licensing E) existing product improvement Answer: E Difficulty: Easy LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Application of Knowledge Quest. Category: Application 21) A ________ strategy seeks to increase the sales of a product or service through greater marketing efforts or through increased production capacity and efficiency.

A) product line extension B) franchising C) licensing D) market penetration E) market expansion Answer: D Difficulty: Moderate LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Analytical Thinking Quest. Category: Analytical 22) Fatma owns a store that sells running shoes and related products. She is currently trying to increase sales through endorsements by famous runners and former Olympic athletes. Fatma is pursuing a(n) ________ strategy.

A) strategic alliance B) licensing C) market penetration D) geographic expansion E) improving an existing product or service Answer: C Difficulty: Moderate LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Analytical Thinking Quest. Category: Analytical

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23) ________ refers to work that is done for a company by people other than the company's fulltime employees.

A) Franchising B) Licensing C) Personnel extension D) Outsourcing E) Capacity enhancement Answer: D Difficulty: Easy LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 24) A(n) ________ strategy involves making additional versions of a product so that it will appeal to different clientele or making related products to sell to the same clientele.

A) market penetration B) geographic expansion C) outsourcing D) strategic alliance E) product line extension Answer: E Difficulty: Moderate LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Application of Knowledge Quest. Category: Application 25) Chris Smith owns a store that sells all-terrain vehicles (ATVs). In the past, Chris just sold one version of each of the ATVs in his showroom. To increase sales, Chris now sells a low-end, a medium-priced, and a high-end version of each of the ATVs. Chris's new strategy is called a(n) ________ strategy.

A) improving an existing product or service B) market penetration C) product line extension D) geographic expansion E) joint venture Answer: C Difficulty: Moderate LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Analytical Thinking Quest. Category: Analytical

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26) Entrepreneurial businesses that grow by expanding from their original location to additional locations are pursuing a ________ strategy.

A) common expansion B) market penetration C) universal networking D) geographic expansion E) product line extension Answer: D Difficulty: Moderate LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Analytical Thinking Quest. Category: Analytical 27) Shelly Watters owns a chain of fashion boutiques that started in Washington, DC and has expanded into Maryland, Virginia, and West Virginia. Shelly is growing her company via a strategy of ________.

A) geographic expansion B) market penetration C) product line extension D) outsourcing E) licensing Answer: A Difficulty: Moderate LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Analytical Thinking Quest. Category: Analytical 28) The prepaid card is an example of a market penetration strategy.

Answer: TRUE Difficulty: Moderate LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Application of Knowledge Quest. Category: Application 29) Computer manufacturers use a product line extension strategy frequently by selling several versions of its desktop and laptop computers representing good, better, and best.

Answer: TRUE Difficulty: Moderate LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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30) Geographic expansion occurs most frequently in retail settings.

Answer: TRUE Difficulty: Easy LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 31) What are the keys to successfully using the geographic expansion strategy?

Answer: The keys to successfully using the geographic expansion strategy are to perform well in the initial location, establish the legitimacy of the business concept in the expansion location, and do not isolate the expansion location.

Difficulty: Moderate LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 32) According to Macrotrends, almost ________ percent of all U.S. exports are small businesses.

A) 78 B) 97 C) 41 D) 53 E) 66 Answer: B Difficulty: Easy LO: 14.3: Examine international expansion as a growth strategy.

AACSB: Application of Knowledge Quest. Category: Application 33) International new ventures are businesses that ________.

A) have employees located in two or more countries B) sell products in two or more countries C) from inception, seek to derive significant competitive advantage by using their resources to sell products or services in multiple countries D) are headquartered in a foreign country and export their products to the United States E) export at least one-third of their products to foreign countries Answer: C Difficulty: Moderate LO: 14.3: Examine international expansion as a growth strategy.

AACSB: Analytical Thinking Quest. Category: Analytical

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34) Most entrepreneurial firms first enter foreign markets as ________.

A) wholly owned subsidiaries B) franchisers C) exporters D) licensers E) partners in joint ventures Answer: C Difficulty: Moderate LO: 14.3: Examine international expansion as a growth strategy.

AACSB: Analytical Thinking Quest. Category: Analytical 35) Which of the following is the primary advantage of exporting as a foreign market entry strategy?

A) Exporting provides a firm total control over its foreign operations.

B) Exporting is a one-time activity.

C) Exporting is a relatively inexpensive way for a firm to establish a presence in foreign markets.

D) The exporting company's customers put up most of the capital needed to establish the export operation.

E) Exporting involves very little effort on the part of a firm.

Answer: C Difficulty: Moderate LO: 14.3: Examine international expansion as a growth strategy.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 36) Which of the following is the primary disadvantage of licensing as a foreign market entry strategy?

A) A firm in effect "teaching" a foreign company how to produce its proprietary products B) The firm incurring high transportation costs C) It is usually a one-time activity D) A firm losing partial control of its business operations E) Quality control problems the firm experiences Answer: A Difficulty: Moderate LO: 14.3: Examine international expansion as a growth strategy.

AACSB: Application of Knowledge Quest. Category: Application

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37) Which of the following is NOT one of the issues when evaluating a firm's overall sustainability for growth through international markets?

A) International partner issues B) Depth of management commitment C) Product issues D) Distribution issues E) Foreign currency risk Answer: A Difficulty: Challenging LO: 14.3: Examine international expansion as a growth strategy.

AACSB: Analytical Thinking Quest. Category: Analytical 38) What is exporting? What is the primary advantage and the primary disadvantage of exporting as a foreign-market entry strategy?

Answer: Exporting is the process of producing a product at home and shipping it to a foreign market. Most entrepreneurial firms begin their international involvement as exporters. The primary advantage is that it is a relatively inexpensive way for a firm to establish a presence in foreign markets. The primary disadvantage is that high transportation costs can make exporting uneconomical, particularly for bulky products.

Difficulty: Moderate LO: 14.3: Examine international expansion as a growth strategy.

AACSB: Application of Knowledge Quest. Category: Application 39) ________ growth strategies rely on establishing relationships with third parties, such as mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising.

A) Internal B) Domestic C) Established D) External E) Peripheral Answer: D Difficulty: Easy LO: 14.4: Discuss different types of external growth strategies.

AACSB: Application of Knowledge Quest. Category: Application

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40) Pedro owns a firm that develops and sells smartphone accessories. He is currently trying to grow his firm through strategic alliances and joint ventures which is called a(n) ________ growth strategy.

A) domestic B) external C) subsidiary D) internal E) secondary Answer: B Difficulty: Easy LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking Quest. Category: Analytical 41) Which of the following is an example of an external growth strategy?

A) New product development B) Licensing C) Market penetration D) Product line extension E) Geographic expansion Answer: B Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Application of Knowledge Quest. Category: Application 42) Rachel Watts owns a chain of office supply stores. Over the past three years, Rachel has significantly increased her sales through the outright purchase of additional office supply stores.

Rachel is pursuing a(n) ________ strategy.

A) acquisition B) merger C) strategic alliance D) joint venture E) licensing Answer: A Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking Quest. Category: Analytical

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43) A(n) ________ is the pooling of interests to combine two or more firms into one.

A) acquisition B) merger C) licensing agreement D) joint venture E) strategic alliance Answer: B Difficulty: Easy LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking Quest. Category: Analytical 44) Many acquisitions fail because the companies ________.

A) lacked resolve B) were geographically separated C) had similar cultures D) were a poor match to begin with E) had weak management teams Answer: D Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking Quest. Category: Analytical 45) Cameron Jones and Mary Scott each owned a small chain of smoothie shops in Philadelphia.

Just recently, they decided to pool their interests and combine their individual chains of restaurants into one business. What is this strategy called?

A) Licensing agreement B) Strategic alliance C) Acquisition D) Joint venture E) Merger Answer: E Difficulty: Easy LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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46) Which of the following is NOT a disadvantage of emphasizing external growth strategies?

A) Incompatibility of top management B) Antitrust implications C) Clash of corporate cultures D) Obtaining access to technical expertise E) Loss of organizational flexibility Answer: D Difficulty: Easy LO: 14.4: Discuss different types of external growth strategies.

AACSB: Application of Knowledge Quest. Category: Application 47) Which of the following is an advantage of growth by means of external growth strategies?

A) Gaining access to new products and markets B) Increased business complexity C) Clash of corporate cultures D) Antitrust implications E) Loss of organizational flexibility Answer: A Difficulty: Easy LO: 14.4: Discuss different types of external growth strategies.

AACSB: Application of Knowledge Quest. Category: Application 48) What is the first step in the process of completing an acquisition?

A) Schedule a meeting with the target firm's executives.

B) Determine if acquiring each candidate is financially feasible.

C) Hire a consulting firm to determine the best acquisition candidate.

D) Evaluate the feelings of the target firm's executives about the acquisition.

E) Negotiate with the target firm actively.

Answer: A Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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49) ________ is the granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions.

A) Verifying B) Confirming C) Endorsing D) Licensing E) Certifying Answer: D Difficulty: Easy LO: 14.4: Discuss different types of external growth strategies.

AACSB: Application of Knowledge Quest. Category: Application 50) The ________ is the company that owns the intellectual property. The ________ is the company purchasing the right to use it.

A) endorsee; endorser B) licensor; licensee C) licensor; endorsee D) endorser; endorsee E) licensee; licensor Answer: B Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 51) ________ licensing is a licensing agreement where the licensor typically controls a utility patent.

A) Character B) Intellectual property C) International D) Technology E) Merchandise Answer: D Difficulty: Easy LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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52) Company ABC, a high-tech company headquartered in San Diego, owns the rights to several of the key components that permit cell phones to work. Instead of selling cell phones itself, Company ABC grants permission to many companies to use specific forms of its intellectual property in exchange for monetary compensation. Company ABC is in engaging in an external growth strategy referred to as ________.

A) licensing B) strategic alliances C) acquisitions D) new product development E) joint ventures Answer: A Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking Quest. Category: Analytical 53) ________ licensing is the licensing of a recognized trademark or brand that the licensor typically controls through a registered trademark or copyright.

A) Goods and character B) Products and trademark C) Products and brand D) Merchandise and character E) Products and services Answer: D Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Application of Knowledge Quest. Category: Application 54) When Harley-Davidson allows companies to place the Harley trademark on T-shirts, jackets, watches, and collectibles, it is pursuing a ________ strategy.

A) merchandise and character licensing B) technology licensing C) joint venture D) strategic alliance E) merger Answer: A Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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55) Samantha Jones owns a chain of ice cream stores in New England. To draw attention to her stores, she adopted a very colorful and distinctive logo several years ago, which depicts a funnylooking cow churning ice cream. Recently, a dairy company asked Samantha if it could use a characterization of her funny-looking cow on a line of yogurt it is coming out with, and offered to pay Samantha's company 3 cents for every carton of yogurt it sells that has the cow's image on the carton. If Samantha accepts this proposal, she will need to enter into a(n) ________ agreement with the dairy.

A) licensing B) joint venture C) strategic alliance D) new product development E) exporting Answer: A Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking Quest. Category: Analytical 56) ________ is the key to effective merchandise and character licensing.

A) Getting licensing income monthly rather than yearly B) Resisting the temptation to license a trademark too widely C) Avoiding dependence on a partner D) Restricting licensing agreements to one year E) Retaining decision autonomy Answer: B Difficulty: Challenging LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 57) A ________ is a partnership between two or more firms that is developed to achieve a specific goal and has no joint ownership involved.

A) franchise B) joint venture C) licensing agreement D) merger E) strategic alliance Answer: E Difficulty: Easy LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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58) Which of the following strategies allows firms to focus on their area of expertise and to partner with others to fill their expertise gap?

A) Technology alliances B) Mergers C) Franchising D) Licensing E) Exporting Answer: A Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 59) Which of the following is a disadvantage of participating in strategic alliances and joint ventures?

A) Diminished quality control B) Expanded economies of scale C) Partial loss of decision autonomy D) Limited access to a foreign market E) High transportation costs Answer: C Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 60) In the context of strategic alliances, ________ alliances feature cooperation in research and development, engineering, and manufacturing.

A) administrative B) directorial C) marketing D) organizational E) technological Answer: E Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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61) Which strategy typically matches a company with a distribution system with a company that has a product to sell to increase sales of a product or service?

A) Exporting B) Marketing alliance C) Merchandise licensing D) Wholly owned subsidiary E) Technology alliance Answer: B Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 62) According to the Partnering for Success feature in Chapter 14 discussing the three steps to alliance success, the biggest obstacle to making an alliance work is that ________.

A) the corporate cultures of organizations often vary in important ways B) the financial stability of organizations tends to vary C) negotiations often fail in the early stages D) companies don't focus on the product compatibility E) there is no synergy between the firms Answer: A Difficulty: Challenging LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 63) A spin-out occurs when a larger firm with a small equity stake acquires a smaller firm.

Answer: FALSE Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 64) An acquisition is the outright purchase of one firm by another.

Answer: TRUE Difficulty: Easy LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking Quest. Category: Analytical 65) In a scale joint venture, the partners collaborate at a single point in the value chain to gain economies of scale in production or distribution.

Answer: TRUE Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 19 Copyright © 2025

66) In regard to acquisitions, many firms have found that the process of assimilating another company into their current operations is relatively easy and is not disruptive to the current operations of their firm.

Answer: FALSE Difficulty: Challenging LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 67) Licensing is the granting of permission by one company to another company to use a specific form of its intellectual property under clearly-defined conditions.

Answer: TRUE Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 68) Combining two or more previously separate firms often leads to more substantial economies of scale for the combined firms.

Answer: TRUE Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 69) Loss of proprietary information is a disadvantage of participating in strategic alliances and joint ventures.

Answer: TRUE Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 70) Acquisitions and alliances are subject to antitrust review Answer: TRUE Difficulty: Easy LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking Quest. Category: Analytical

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71) In a scale joint venture, the partners collaborate at a single point in the value chain to gain economies of scale in production or distribution.

Answer: TRUE Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking Quest. Category: Analytical 72) The incompatibility of top management is a disadvantage of emphasizing external growth strategies.

Answer: TRUE Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking Quest. Category: Analytical 73) List the advantages of participating in strategic alliances and joint ventures.

Answer: The advantages of participating in strategic alliances and joint ventures are: gain access to a certain resource, economies of scale, risk and cost sharing, gain access to a foreign market, learning, speed to market, and neutralizing or blocking competitors.

Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 74) Define licensing. Identify the two types of licensing pursued by entrepreneurial firms.

Answer: Licensing is the granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions. There are two principle types of licensing. Technology licensing is the licensing of proprietary technology that the licensor typically controls by virtue of a utility patent. Merchandise and character licensing is the licensing of a recognized trademark or brand that the licensor typically controls through a registered trademark or copyright.

Difficulty: Moderate LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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75) What is a joint venture? Identify the two types of joint ventures.

Answer: A joint venture is an entity created when two or more firms pool a portion of their resources to create a separate, jointly owned organization. The two types of joint ventures are scale joint ventures and link joint ventures. In a scale joint venture, the partners collaborate at a single point in the value chain to gain economies of scale in production and distribution. In a link joint venture, the position of the parties is not symmetrical, and the objectives of the parties may diverge.

Difficulty: Challenging LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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Entrepreneurship, 7e (Barringer/Ireland) Chapter 15 Franchising 1) Toastique, the company profiled in the opening feature of Chapter 15, was seeking to grow by ________.

A) looking for quality franchisees B) capturing the prestige of being the largest franchise organization C) seeking strategic alliances D) maintaining maximum control of their business E) recruiting a top management team Answer: A Difficulty: Easy LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 2) Which of the following statements is NOT correct regarding franchising?

A) An area franchise agreement allows a franchisee to own and operate a specific a number of outlets in a certain geographic area.

B) Franchising is often more difficult than a franchisee expects.

C) Franchising is a relatively new form of business organization.

D) Franchising, by its very nature, involves the sharing of knowledge between a franchisor and a franchisee.

E) Franchising is a form of business organization in which a firm with a successful product or services licenses its trademark and method of doing business to other businesses in exchange for an initial franchise fee and an ongoing royalty.

Answer: C Difficulty: Moderate LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Application of Knowledge Quest. Category: Application 3) ________ is a form of business ownership in which a firm that already has a successful product or service licenses its trademark and method of doing business to other businesses in exchange for an initial franchise fee and an ongoing royalty.

A) Licensing B) Joint Venturing C) Contracting D) Franchising E) Subfranchising Answer: D Difficulty: Easy LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking Quest. Category: Analytical

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4) Which of the following is NOT one of the 14 industries cited in which formal franchises are common?

A) Hospitals B) Automotive C) Financial services D) Full-service restaurants E) Home improvement Answer: A Difficulty: Moderate LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking Quest. Category: Critical Thinking 5) According to the textbook, the Comfort Keepers business idea lends itself to franchising because the ________.

A) company has the ability to grow profitably and has a good geographic location B) company's business concept is easy to teach and individual outlets are inexpensive to open and operate C) company has new technology to introduce to the marketplace D) company has intellectual property and the ability to sustain growth E) company has a good trademark and a good business method Answer: E Difficulty: Challenging LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 6) The two distinctly different types of franchise systems are ________ franchise and ________ franchise.

A) product and trademark; business arrangement B) product plus; business format C) business design; product improvement D) product extension; business design E) product and trademark; business format Answer: E Difficulty: Moderate LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Application of Knowledge Quest. Category: Application

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7) The ________ franchise is by far the more popular approach and is the one entrepreneurs use frequently to establish their ventures.

A) product and trademark B) product extension C) business format D) production plus E) business design Answer: C Difficulty: Easy LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking Quest. Category: Analytical 8) General Motors operates a ________ franchise system.

A) product format and trademark B) product extension C) product and trademark D) business format E) business format and trademark Answer: C Difficulty: Moderate LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 9) James Ryan has been a Coors Beer distributor for the past 20 years. James owns a ________ franchise.

A) business format B) product and trademark C) business design D) product plus E) product and business format Answer: B Difficulty: Moderate LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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10) Which of the following statements is NOT correct regarding product and trademark franchises?

A) The product and trademark franchisor obtains the majority of its income from selling its products to its dealers or distributors at a markup.

B) Ford Motors establishes product trademark rather than business format franchises.

C) Product and trademark franchisors obtain a royalty or franchise fee.

D) Product and trademark franchisees are typically permitted to operate in a fairly autonomous manner.

E) A product trademark franchise typically connects a single manufacturer with a network of dealers or distributors.

Answer: C Difficulty: Moderate LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Application of Knowledge Quest. Category: Application 11) Jobari recently opened a Papa John's franchise. In exchange for an initial franchise fee and an ongoing royalty payment, Papa John's has provided Jobari a formula for doing business along with training, advertising, and other forms of assistance. What type of franchise did Jobari purchase?

A) Business extension B) Formula driven C) Sales extension D) Product and trademark E) Business format Answer: E Difficulty: Moderate LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 12) Which of the following statements is correct regarding business format franchises?

A) Business format franchises are less popular than product and trademark franchises.

B) A business format franchise can be very rigid and demanding.

C) Agricultural machinery dealerships and soft-drink bottlers are well-known examples of business format franchises.

D) Business format franchises are not used frequently by entrepreneurs but are better suited to large organizations.

E) The business format franchisor obtains the majority of its income from selling its products to its dealers at a markup.

Answer: B Difficulty: Challenging LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking Quest. Category: Analytical

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13) McDonald's and Burger King teach their franchisees every detail of how to run their restaurants. This is an example of a ________ franchise.

A) business format B) business design C) product and trademark D) product plus E) service Answer: A Difficulty: Easy LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Application of Knowledge Quest. Category: Application 14) A(n) ________ franchise agreement involves the sale of a single franchise for a specific location.

A) individual B) subfranchise C) multi-unit D) area E) master Answer: A Difficulty: Easy LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking Quest. Category: Analytical 15) Jamal recently entered into an agreement with Anytime Fitness to open five Anytime Fitness franchises. According to the agreement, Jamal has the right to open up to five Anytime Fitness franchises within the city limits of Scottsdale, Arizona. Jamal has entered into a(n) ________ franchise agreement.

A) individual B) district C) locality D) area E) city Answer: D Difficulty: Moderate LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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16) A master franchisee, in addition to having the right to open and operate a specific number of locations in a particular area, also has the right to ________.

A) use unapproved marketing materials B) sell products made by companies other than the franchisor C) offer and sell the franchise to other people in its area D) use its own operating manuals to run its franchise outlets E) stop making royalty payments if it is losing money Answer: C Difficulty: Challenging LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking Quest. Category: Analytical 17) The people who buy franchises from master franchises are typically called ________ franchisees.

A) minor B) secondary C) multiple D) subordinate E) subfranchisees Answer: E Difficulty: Moderate LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Application of Knowledge Quest. Category: Application 18) A multiple-unit franchisee is a person who owns ________.

A) franchise units in more than 10 areas B) both product and trademark franchise outlets and business format franchise outlets C) more than one outlet of the same franchisor D) more than 10 franchise outlets E) franchise units from multiple franchisors Answer: C Difficulty: Moderate LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking Quest. Category: Analytical 19) Franchising is a form of business organization in which a firm that already has a successful product or service licenses its trademark and method of doing business to other businesses in exchange for an initial franchise fee and an ongoing royalty.

Answer: TRUE Difficulty: Easy LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Application of Knowledge Quest. Category: Application 6 Copyright © 2025

20) A business format franchise typically connects a single manufacturer with a network of dealers or distributors.

Answer: FALSE Difficulty: Easy LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking Quest. Category: Analytical 21) A Pepsi Cola bottling dealership is an example of a product and trademark franchise.

Answer: TRUE Difficulty: Easy LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking Quest. Category: Analytical 22) In a business format franchise, the franchisor provides a formula for doing business to the franchisee along with training, advertising, and other forms of assistance.

Answer: TRUE Difficulty: Moderate LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 23) Business format franchises are common in the automotive and lodging industries.

Answer: TRUE Difficulty: Moderate LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 24) People who buy franchises from master franchisees are called subfranchisees.

Answer: TRUE Difficulty: Moderate LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 25) What is an area franchise?

Answer: An area franchise agreement allows a franchisee to own and operate a specific number of outlets in a certain geographic area.

Difficulty: Easy LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking Quest. Category: Analytical

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26) What is the difference between a product and trademark franchise and a business format franchise? Which type of franchise is most common for entrepreneurial firms?

Answer: A product and trademark franchise is an arrangement in which the franchisor grants to the franchisee the right to buy its products and use its trade name. This approach typically connects a single manufacturer with a network of dealers or distributors. In a business format franchise, the franchisor provides a formula for doing business to the franchisee along with training, advertising, and other forms of assistance. A business format franchise is by far the more popular approach to franchising for entrepreneurial firms.

Difficulty: Moderate LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking Quest. Category: Analytical 27) From the franchisor's point of view, which of the following is NOT correct regarding franchising?

A) Establishing a franchise system should be approached carefully and deliberately.

B) Franchising is a relatively simple business endeavor.

C) Franchising involves managerially demanding tasks.

D) Over the years a number of fraudulent franchise organizations have come and gone.

E) Many regulations exist to guide the franchising process.

Answer: B Difficulty: Challenging LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Application of Knowledge Quest. Category: Application 28) Franchising is appropriate when a ________.

A) firm's business methods are not polished, it has a desire to grow, and it is trying to commercialize a technology product B) firm has a strong trademark, a desire to grow, and a well-designed business method C) firm is trying to commercialize a technology product, it is well-funded, and it has a desire to grow D) firm has a weak trademark, it is well-funded, and it has a desire to grow E) firm has a desire to grow, it has a well-designed business method, and it is well funded Answer: B Difficulty: Moderate LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Analytical Thinking Quest. Category: Analytical

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29) Which of the following is NOT cited as a way franchisors can develop their franchisees' potential?

A) Provide mentoring that supersedes routine training.

B) Keep operating manuals up to date.

C) Encourage franchisees to avoid franchise associations.

D) Maintain the franchise system's integrity.

E) Solicit input from franchisees to reinforce their importance in the larger system.

Answer: C Difficulty: Moderate LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Analytical Thinking Quest. Category: Analytical 30) The Savvy Entrepreneurial Firm feature in Chapter 15 focuses on Hawaii Fluid Art. What strategy did the firm use effectively as the foundation of its success?

A) Franchising B) Geographic expansion C) Licensing D) Exporting E) A first-mover advantage Answer: A Difficulty: Easy LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 31) Which of the following is NOT included as a quality to look for in prospective franchisees?

A) Individual, rather than team-oriented B) Ability to follow instructions C) Experience in the industry in which the franchisee operates D) Ability to operate with minimal supervision E) Adequate financial resources and a good credit history Answer: A Difficulty: Moderate LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Interpersonal Relations and Teamwork Quest. Category: Critical Thinking 32) Business can expand rapidly through franchising.

Answer: TRUE Difficulty: Easy LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Application of Knowledge Quest. Category: Application

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33) McDonald's is an example of an organization that is perfectly suited for franchising.

Answer: TRUE Difficulty: Moderate LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 34) List the qualities to look for in prospective franchisees.

Answer: The qualities to look for in prospective franchisees include good work ethic, ability to follow instructions, ability to operate with minimal supervision, team oriented, experience in the industry in which the franchise competes, adequate financial resources and a good credit history, ability to make suggestions without becoming confrontational or upset if the suggestions are not adopted, and ability to represent the franchisor in a positive manner.

Difficulty: Moderate LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 35) List the nine steps to franchising a business.

Answer: The nine steps to franchising a business are: • Develop a franchise business plan.

• Get professional advice.

• Conduct an intellectual property audit.

• Develop franchise documents.

• Prepare operating manuals.

• Plan an advertising strategy and a franchisee training program.

• Put together a team for opening new franchise units.

• Plan a strategy for soliciting prospective franchisees.

• Help franchisees with site selection and the grand opening of their franchise outlets.

Difficulty: Challenging LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Analytical Thinking Quest. Category: Analytical

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36) According to ________ theory, it is more effective for organizations with multiple units to have the units run by franchisees than by managers who run co-owned stores, because managers are usually paid a salary and may not be as committed to the success of their individual units as franchisees, who are in effect the owners of the units they manage.

A) incentive B) stimulus C) agency D) stewardship E) motivation Answer: C Difficulty: Easy LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB: Analytical Thinking Quest. Category: Analytical 37) From the franchisor's point of view, the primary disadvantage of franchising is that ________.

A) it is a poorly understood form of business ownership B) an organization allows others to profit from its trademark and business method C) franchise organizations consistently make less money than alternative forms of business ownership D) it typically takes longer to grow an organization via franchising than company-owned stores E) it is not legal in seven states and the District of Columbia Answer: B Difficulty: Challenging LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB: Analytical Thinking Quest. Category: Analytical 38) The two primary advantages of franchising are that it helps a venture grow quickly because franchisees provide much-needed capital for growth and ________.

A) the firm's business systems can be quickly refined B) it alleviates the need for prototype outlets C) there is no need to share any profits earned D) it is more effective for the units to be run by franchisees than by managers who run companyowned stores E) strict control is easily maintained Answer: D Difficulty: Challenging LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB: Application of Knowledge Quest. Category: Application

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39) Which of the following was NOT identified in the textbook as one of the disadvantages of franchising a business?

A) Loss of control B) Friction with franchisees C) Franchisee motivation D) Differences in required business skills E) Legal expenses Answer: C Difficulty: Moderate LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB: Application of Knowledge Quest. Category: Application 40) An advantage of franchising, from the franchisors point of view, is that franchising helps a venture grow because the franchisees provide the majority of the capital.

Answer: TRUE Difficulty: Easy LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 41) Before deciding to franchise, what factors should a firm consider?

Answer: Before deciding to franchise, a firm should consider the uniqueness of its product or service, the consistent profitability of the firm, the firm's year-round profitability, the degree of refinement of the firm's business systems, and the clarity of the business proposition.

Difficulty: Moderate LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB: Analytical Thinking Quest. Category: Analytical

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42) What are the primary advantages and disadvantages to establishing a franchise system (from the franchisor's point of view)?

Answer: There are two primary advantages to franchising. First, early in the life of an organization, capital is typically scarce, and rapid growth is needed to achieve brand recognition and economies of scale. Franchising helps an organization grow quickly because franchisees provide the majority of capital. Second, a management concept called agency theory argues that for organizations with multiple units, it is more effective for the units to be run by franchisees than by managers, who run company-owned stores. The theory is that managers, because they are usually paid a salary, may not be as committed to the success of their individual units as franchisees, who are in effect the owners of the units they manage. The primary disadvantage of franchising is that an organization allows others to profit from its trademark and business method.

Difficulty: Moderate LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB: Application of Knowledge Quest. Category: Application 43) The What Went Wrong? feature in Chapter 15 discusses two primary benefits to buying a franchise. The first is that franchising provides an entrepreneur with the opportunity to own a business using a tested and refined business model. The second is that ________.

A) the trademark that normally accompanies it has value B) profits are generated immediately C) unit management is not needed D) the costs are usually extremely low E) due diligence and legal fees are avoided Answer: A Difficulty: Challenging LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 44) Which of the following is NOT a cost that is typically associated with buying a franchise?

A) Advertising fees B) Continuing royalty payments C) Trademark acquisition fee D) Initial franchise fee E) Capital requirements Answer: C Difficulty: Moderate LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Application of Knowledge Quest. Category: Critical Thinking

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45) A franchisee's weekly or monthly royalty fees are typically around ________ percent of gross income.

A) 1 B) 3 C) 4 D) 10 E) 6 Answer: E Difficulty: Challenging LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Application of Knowledge Quest. Category: Application 46) Which of the following is true concerning the costs associated with buying and operating a franchise?

A) Franchisees have both immediate and long-term costs.

B) High-overhead, brick-and-mortar franchises charge about 8 to 10 percent of gross sales.

C) Low-overhead, home-based, and service businesses charge 4 to 5 percent of gross sales.

D) Advertising fees are typically less than one percent.

E) A "grand opening" fee is always included in the initial franchise fee.

Answer: A Difficulty: Moderate LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Analytical Thinking Quest. Category: Analytical 47) Advertising fees that franchisees have to pay the franchisor are typically less than ________ percent of gross income.

A) 1 B) 2 C) 3 D) 4 E) 5 Answer: C Difficulty: Moderate LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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48) There are two primary advantages to buying a franchise over other forms of business ownership. First, the franchisor typically provides training, technical expertise, and other forms of support, and second, ________.

A) franchising is almost a sure way of making a profit B) a franchise agreement is typically easy to exit if expectations aren't met C) franchisors typically encourage creativity on the part of franchisees D) the franchisor provides an entrepreneur the ability to own a business using a tested and refined business method E) franchise organizations are consistently more profitable than non-franchise organizations in the same industry Answer: D Difficulty: Challenging LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Application of Knowledge Quest. Category: Application 49) The main disadvantage of buying a franchise is ________.

A) franchise organizations typically grow slower than non-franchise organizations in the same industry B) franchisors typically provide poor levels of support C) the cost involved — both initially and long-term D) the service sector of the U.S. economy is waning in importance E) franchising is waning in its popularity Answer: C Difficulty: Moderate LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Analytical Thinking Quest. Category: Analytical 50) Which of the following is NOT an advantage of buying a franchise?

A) A proven product or service within an established system B) Franchisor ongoing support C) Availability of financing D) Potential for business growth E) Duration and nature of the commitment Answer: E Difficulty: Moderate LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Application of Knowledge Quest. Category: Application

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51) Which of the following is NOT one of the five reasons explaining why franchisees fail A) The franchisee has too many restrictions on creativity.

B) The franchise system is not sound.

C) The franchisor fails to provide adequate training and support.

D) The franchisee lacks the technical skills needed to operate the franchise unit successfully.

E) The franchisee believes that operating a successful franchise is easier than it is.

Answer: A Difficulty: Moderate LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Analytical Thinking Quest. Category: Analytical 52) In the majority of cases, a franchisee pays a royalty based on a percentage of weekly or monthly net income.

Answer: FALSE Difficulty: Easy LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Application of Knowledge Quest. Category: Application 53) Franchisees are often required to pay into a national or regional advertising fund, even if the advertisements are directed at goals other than promoting the franchisor's product or service.

Answer: TRUE Difficulty: Moderate LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Analytical Thinking Quest. Category: Analytical 54) By law, franchisors must disclose their costs in the Franchise Disclosure Document and send it to the prospective franchisee.

Answer: TRUE Difficulty: Easy LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 55) One of the questions a prospective franchisor should consider is whether they are willing to take orders.

Answer: TRUE Difficulty: Easy LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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56) What are the typical types of costs incurred to buy a franchise?

Answer: The typical types of costs incurred to buy a franchise include an initial franchise fee, capital requirements, continuing royalty payments, advertising fees, and other fees for various activities such as training, providing management expertise when needed, providing computer assistance or providing a host of other items or support services.

Difficulty: Moderate LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Reflective Thinking Quest. Category: Critical Thinking 57) According to the textbook, the first rule of buying a franchise is ________.

A) asking for a copy of the franchisor's annual report B) checking the profitability of similar franchises C) making sure the franchisor's industry is conductive to franchising D) making proper arrangements for financing E) avoiding a hasty decision Answer: E Difficulty: Challenging LO: 15.5: Explain the steps an entrepreneur goes through to buy a franchise.

AACSB: Analytical Thinking Quest. Category: Analytical 58) Describe the common misconceptions about franchising.

Answer: The common misconceptions about franchising are as follows: • Franchising is a safe investment. Franchising, in and of itself, is no safer an investment than any other form of business ownership.

• A strong industry ensures franchise success. While it is generally important to operate in a growing industry, the strength of an industry does not make up for a poor product, a poor business system, poor management, or inappropriate advertising. There are many firms that fail in growing industries just as there are firms that succeed in unattractive ones.

• The franchisor is a nice person-he'll help me out if I need it. Although it may be human nature to rely on the goodwill of others, don't expect anything from your franchisor that isn't spelled out in the franchise agreement.

• A franchise is a "proven" business system. Whether the model is the foundation for success or not is subject to the test of time.

• There is no need to hire a franchise attorney or an accountant. A prospective franchisee should never give in to the temptation to save money by relying solely on the franchisor's advice.

• The best systems grow rapidly, and it is best to be a part of a rapid-growth system. Some franchise systems grow so quickly that they outrun their ability to provide their franchisees adequate support.

• I can operate my franchise outlet for less than the franchisor predicts. The operation of a franchise outlet usually costs just as much as the franchisor predicts.

Difficulty: Challenging LO: 15.5: Explain the steps an entrepreneur goes through to buy a franchise.

AACSB: Application of Knowledge Quest. Category: Application 17 Copyright © 2025

59) To avoid making a hasty judgment, a franchisee may not purchase a franchise for ________ days from the time the Franchise Disclosure Document is received.

A) 3 B) 5 C) 10 D) 14 E) 30 Answer: D Difficulty: Challenging LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge Quest. Category: Application 60) The ________ contains 23 categories of information that give a prospective franchisee a broad base of information about the background and financial health of the franchisor.

A) Franchise Due Diligence Certificate B) Individual Franchise Agreement C) Master Franchise Agreement D) Franchise Disclosure Document E) Franchise Code of Conduct Answer: D Difficulty: Moderate LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge Quest. Category: Application 61) All of the following are main categories of franchise laws EXCEPT ________.

A) SEC filing requirements B) franchise registration laws C) franchise filing laws D) FTC disclosure requirements E) franchise relationship laws Answer: A Difficulty: Moderate LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge Quest. Category: Application

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62) The Franchise Disclosure Document contains ________ categories of information.

A) 8 B) 14 C) 23 D) 35 E) 44 Answer: C Difficulty: Easy LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge Quest. Category: Application 63) The ________ typically contains the purchase agreement and the license agreement.

A) franchise disclosure document B) franchise agreement C) commitment agreement D) uniform franchise contract E) franchise circular Answer: B Difficulty: Moderate LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge Quest. Category: Application 64) All of the following are contained in the FDD EXCEPT ________.

A) litigation experience of the franchisee B) business experience of the franchisor C) initial franchise fee D) list of outlets E) trademarks Answer: A Difficulty: Moderate LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge Quest. Category: Application

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65) The list of outlets section of the FDD contains all of the following EXCEPT ________.

A) a list of all franchisees who left the system B) the number of franchises sold by the franchisor C) the number of co-owned outlets D) an estimate of the number of franchises the franchisor seeks to sell in the next year E) the income generated by each franchise location Answer: E Difficulty: Moderate LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge Quest. Category: Application 66) The ________ stipulates the rights granted to the franchisee, the franchisor's obligations and duties, the franchisee's obligations and duties, trade restrictions, and who is responsible for attorney fees if disputes arise.

A) FDD B) fiduciary obligation C) license agreement D) master franchise agreement E) FTC Answer: C Difficulty: Challenging LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge Quest. Category: Application 67) The Franchise Disclosure Document contains a total of 23 categories of information that give a prospective franchisee a broad base of information about the background and financial health of the franchisor.

Answer: TRUE Difficulty: Moderate LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge Quest. Category: Application 68) The FDD is accepted in all 50 states and parts of Canada.

Answer: TRUE Difficulty: Easy LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge Quest. Category: Application

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69) The Franchise Disclosure Document is the document that consummates the sale of a franchise.

Answer: FALSE Difficulty: Moderate LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge Quest. Category: Application 70) Instances of problems between franchisors and their franchisees occur ________.

A) more with international agreements B) infrequently C) when there is no FDD D) most often after 10 years E) most often over area disputes Answer: B Difficulty: Easy LO: 15.7: Discuss two additional issues—franchise ethics and international franchising— entrepreneurs should think about when considering franchising.

AACSB: Ethical Understanding and Reasoning Quest. Category: Critical Thinking 71) All of the following are steps for U.S. citizens to take before buying a franchise in a foreign country EXCEPT ________.

A) work with a knowledgeable lawyer B) evaluate currency restrictions C) consider the value of the franchisor's name in the foreign country D) work with a franchisor who wants you to be a test case in a foreign market E) determine whether the product or service is salable in another country Answer: D Difficulty: Moderate LO: 15.7: Discuss two additional issues—franchise ethics and international franchising— entrepreneurs should think about when considering franchising.

AACSB: Reflective Thinking Quest. Category: Critical Thinking

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72) In international franchising, under a(n) ________ franchise agreement, the U.S. franchisor grants the rights to an individual or a company (the developer) to establish multiple franchised businesses within a country or territory.

A) indirect B) global C) concurrent D) direct E) master Answer: D Difficulty: Moderate LO: 15.7: Discuss two additional issues—franchise ethics and international franchising— entrepreneurs should think about when considering franchising.

AACSB: Application of Knowledge Quest. Category: Application 73) Jim Pierce just purchased the rights to develop multiple School of Rock franchises in Germany. Jim just purchased a(n) ________ franchise arrangement.

A) concurrent B) indirect C) lateral D) direct E) joint venture Answer: D Difficulty: Moderate LO: 15.7: Discuss two additional issues—franchise ethics and international franchising— entrepreneurs should think about when considering franchising.

AACSB: Application of Knowledge Quest. Category: Application 74) In international franchising, under a ________ franchise arrangement, the U.S. firm grants the rights to an individual or company to develop one or more franchise businesses and to license others to develop one or more franchise businesses within the country.

A) master B) direct C) subordinate D) concurrent E) multinational Answer: A Difficulty: Moderate LO: 15.7: Discuss two additional issues—franchise ethics and international franchising— entrepreneurs should think about when considering franchising.

AACSB: Application of Knowledge Quest. Category: Application

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75) The majority of franchisors are highly ethical individuals who are interested only in making a fair return on their investment.

Answer: TRUE Difficulty: Easy LO: 15.7: Discuss two additional issues—franchise ethics and international franchising— entrepreneurs should think about when considering franchising.

AACSB: Ethical Understanding and Reasoning Quest. Category: Critical Thinking

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