Business Plan, Business Reality Starting and Managing Your Own Business in Canada, 3E James R Skinne

Business Plan, Business Reality Starting and Managing Your Own Business in Canada, 3E By James R. Skinner

Email: richard@qwconsultancy.com

CHAPTER 1 TEST BANK A) MULTIPLE CHOICE Select the "most correct" option:

1.

Compared to willing entrepreneurs, “reluctant” entrepreneurs: a. are more likely to be successful in starting a business. b. are less likely to be successful in starting a business. c. have the same success rates. d. are more likely to abandon the process of starting a business.

2.

Academics tend to define “small business” as having fewer than: a. 5 employees. b. 10 employees. c. 100 employees. d. 500 employees.

3.

Writing a Business Plan is largely a process of: a. step-by-step construction. b. revision and rewriting. c. getting others to write the plan. d. finding the right format.

4.

Entrepreneurship is best defined as: a. gambling. b. risking money to make profit. c. innovation. d. the management of people.

5.

"Junk research": a. is based on flawed logic or poor scientific method. b. is research conducted by non-academics. c. is totally valid, even though it is not recognized by the research community. d. is the rigorous study of entrepreneurs.

6.

Entrepreneurs in Canada tend to work: a. fewer hours than employed people. b. about the same number of hours as employed people. c. more hours than employed people. d. there is no information on who works more hours.

7.

The more specialized that a business is, the more likely it is to:

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a. make money. b. require more customers. c. need a large inventory. d. go bankrupt.

8.

It is best to have a partner whose personality is: a. the same as yours. b. opposite to yours. c. complimentary to yours. d. conflicting with yours.

9.

The term "micro-enterprise" usually refers to a business that has fewer than: a. 2 employees. b. 5 employees. c. 10 employees. d. 100 employees.

10.

Compared to the general population, successful entrepreneurs tend to be: a. more aggressive. b. more impulsive. c. more confident in their abilities to influence their own futures. d. more willing to take advantage of others.

B) TRUE OR FALSE 1.

T. F. A person can learn the skills of running a small business from this course.

2.

T. F. Generally, a “business” must have some value of its own, apart from its owner.

3.

T. F. All Business Plans follow the same basic model.

4.

T. F. The skills and traits that employers are looking for and the skills and traits needed to own a business are virtually identical.

5.

T. F. If the owner of a sole proprietorship is killed, the “business” no longer exists as a legal entity.

6.

T. F. Freelancers generally work under long-term contract to one employer at a time.

7.

T. F. A single retail clothing store that is part of a national chain is generally considered to be a small business.

8.

T. F. The greater the variety of potential customers that a new business has, the greater its potential for profit.

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9.

T. F. The definition of a business may change a number of times during the writing of a business plan.

10.

T. F. Limited liability partnerships are a legal from reserved for self-governing professions like lawyers and accountants.

C) FILL IN THE BLANKS

1.

A business where the owner is officially a “shareholder” is called a

2.

Having total personal responsibility for company debts is called liability.

3.

The form of business giving all of the owners "unlimited liability" is called a partnership.

4,

The simplest and cheapest legal form of business to start is a .

5.

An unsatisfied need or opportunity in the marketplace is referred to as a .

D) SHORT ANSWER 1)

In three or four sentences discuss your personality traits and explain why you will (or will not) make a good entrepreneur.

2)

Identify a specific kind of business that "right now" would be a good time to start.

Identify the recent change or changes that have given rise to this opportunity.

E) ESSAY 1.

.

Discuss the nature and findings of the research into the personalities of successful entrepreneurs. Suggest some areas that future studies in this field could investigate. (1 page max).

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2.

Discuss the advantages and disadvantages of self-employment compared to working for a large firm. (1 page max).

CHAPTER 1 TEST ANSWERS AND MARKING NOTES Test Bank

Difficulty Level: (e) = easy, (m) = medium, (h) = hard

A) MULTIPLE CHOICE 1d (h); 2d (e); 3b(m); 4b(e); 5a(h); 6c(m); 7a(h); 8c(h); 9b(e); 10c(m)

B) TRUE/FALSE 1F(h); 2T(m); 3F(h); 4F(m); 5T(e); 6F(e); 7F(m); 8F(m); 9T(e); 10T(h)

C) FILL IN THE BLANKS 1. corporation (e); 2. unlimited, liability (m); 3. general (m); 4. sole proprietorship (m); 5. Gap (m)

D) SHORT ANSWER 1. A complete answer should identify the traits of being hard working, selfconfident and goal-oriented and include personal examples. (m) 2. For full marks, the changes should be recent and the link to the business opportunity should be clear. (h)

E) ESSAY 1. The discussion should focus on why much of the research in this area is not valid and the need for "longitudinal" studies that test people before they become successful entrepreneurs. (h) See text, pages 3-4.

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2. Issues discussed should include workload, health, family life, income and a personal sense of control. (m) See text, pages 5-7.

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CHAPTER 2 TEST BANK

A) MULTIPLE CHOICE Select the "most correct" option: 1.

It is best to be situated right next to your competition if you are selling something: a. that is basically a “convenience” item. b. that is not particularly expensive. c. that is particularly expensive. d. that customers tend to “shop” before buying.

2.

Extrapolation means: a. projecting new values based on facts known about similar situations. b. obtaining money by threats. c. using more good manners than necessary. d. making up numbers out of thin air.

3.

The specific address where a business can be found, refers to the: a. location. b. site. c. market area. d. drawing area.

4.

Commonly, for a manufacturing business, the first priority for location is: a. being close to customers. b. being close to wholesalers. c. being close to sources of supply. d. being close to service industries.

5.

Which of the following is a source of primary marketing research information? a. government statistics. b. business publications. c. trade journals. d. a questionnaire survey.

6.

The first marketing research priority for a new business is to determine: a. consumer lifestyle and trends. b. customer buying behaviour. c. market potential. d. advertising effectiveness.

7.

Leasehold Improvements are usually paid for by the: a. landlord. b. lessee.

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c. real estate agent. d. business broker.

8.

Generally, new firms are better to: a. lease the property where the business is situated. b. buy the property where the business is situated. c. have a short-term rental with no contract. d. always start a home-based business.

9.

The sales forecast for a brand new business is not based on: a. industry statistics. b. how long it takes to get new customers. c. expert opinion. d. past sales of the company.

10.

A patent gives protection for: a. an invention. b. a creative work. c. an ornamental design. d. all of the above.

B) TRUE OR FALSE

1.

T. F. In an “on-line” or “web-based” business, the location is usually irrelevant.

2.

T. F. The terms “location” and “site” are totally interchangeable.

3.

T. F. The decision on whether to work from your home should be based on your personal convenience.

4.

T. F. It is generally better for a new business to lease, rather than own, their premises.

5.

T. F. A separate estimate of market potential is required for each different customer group a business is targeting.

6.

T. F. A new business should use several methods of estimating sales forecast.

7.

T. F. A visual symbol is generally protected by copyright.

8.

T. F. A company's customers may, themselves, represent a form of competition.

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9.

T. F. A new business will generally make sales forecasts for at least five years.

10.

T. F. Traffic analysis has little importance for a retail type of business.

C) FILL IN THE BLANKS

1.

How important “location” is to your Business Plan depends on you are selling and you are selling to.

2.

Retail and consumer service businesses should try to be situated right next to a business.

3.

How much money a particular group of potential customers will spend on a particular product or service is called .

4.

Businesses similar to your own, in terms of size, location services and the customers they are pursuing, would be classified as competition.

5.

Theft by deceit or trickery is referred to as

.

D) SHORT ANSWER 1) In three or four sentences identify the major disadvantages of having a home-based business.

2) List and briefly explain several techniques for forecasting the sales of a new business.

E) ESSAY 1. Discuss the major considerations for the "site" of a retail business. (1 page max).

2. Identify and explain the major types of protection a business can use for intellectual property. (1 page max).

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CHAPTER 2 TEST ANSWERS AND MARKING NOTES Test Bank

Difficulty Level: (e) = easy, (m) = medium, (h) = hard

A) MULTIPLE CHOICE 1d (m); 2a (m); 3b(e); 4c(h); 5d(m); 6c(h); 7b(m); 8a(m); 9d(e); 10a(m)

B) TRUE/FALSE 1T(e); 2F(m); 3F(h); 4T(m); 5T(h); 6T(e); 7F(m); 8T(e); 9F(h); 10F(m)

C) FILL IN THE BLANKS 1. what, whom (h); 2. complimentary (h); 3. market, potential (m); 4. direct (m); 5. fraud (m)

D) SHORT ANSWER 1. A complete answer should include how this might affect the image of the business (related to "what" the business is selling and to "whom" as well as the practical considerations of interruptions and never getting away from work (m) 2. Depending on the number of marks assigned, a point for listing any one of the seven techniques in the book (pgs. 33-36) and a point for each brief explanation should be awarded. (h)

E) ESSAY 1. Traffic volume, traffic times, visibility, accessibility, parking, surrounding businesses and lease issues are major points which should be explained for full marks.

2. Patent, copyright and trademark are the major types of protection to be explained, while bonus marks can be awarded for discussion of industrial design and ICT.

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CHAPTER 3 TEST BANK A) MULTIPLE CHOICE Select the "most correct" option: 1.

The psychological discomfort that people feel when they encounter something too different from their expectations is called: a. image shock. b. cognitive dissonance. c. buyer’s remorse. d. paranoia

2.

“Marketing mix” is: a. marketing strategy. b. how a company makes itself appear different from the competition. c. how a company projects its image. d. all of the above.

3.

“Marketing mix” is typically broken down into: a. production, pricing, promotion. b. process, patrons, packaging, profit. c. product, price, distribution, promotion. d. perception, prestige, public relations, publicity.

4.

The “contractual elements” of getting a product/service to the final user, refers to: a. distribution channel. b. physical distribution. c. consumerism. d. elemental contracting

5.

“Sales Promotions” refers to promotional activity that is not: a. advertising. b. publicity. c. personal selling. d. any of the above.

6.

The most effective negotiating style tends to be: a. aggressive. b. competitive. c. compromising. d. co-operative.

7.

In direct mail advertising, "compiled" lists tend to be: a. more expensive than subscription lists. b. cheaper than subscription lists. c. more valuable than customer lists. d. not available in Canada.

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8.

Coupons, premiums and trade shows are all examples of: a. advertising. b. sales promotions. c. personal selling. d. publicity.

9.

Which of the following is not part of personal selling? a. attracting. b. prospecting. c. qualifying. d. closing.

10.

Which of the following is a pricing strategy? a. discount pricing. b. sale pricing. c. penetration pricing. d. half-pricing.

B) TRUE OR FALSE 1.

T. F. “Competitive” pricing means pricing lower than your competition.

2.

T. F. “Advertising” and Marketing basically mean the same thing.

3.

T. F. Your Pricing Strategy is described in comparison to the prices of your competitors.

4.

T. F. A company's image is the perception of that firm held in the minds of potential customers.

5.

T. F. “Giveaway” items tend to end up in the hands of people who are not prospective customers.

6.

T. F. Selecting a name should be the first step in planning a business venture.

7.

T. F. Agents do not own the services or products that they are selling.

8.

T. F. "Cold calling" refers to approaching customers with whom there has been no previous contact.

9.

T. F. Sales "objections" are often raised by a prospect to avoid having to make a decision.

10.

T. F. Getting the customer to agree to the purchase is called "qualifying".

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C) FILL IN THE BLANKS

1.

The perception people have about “what your business is like,” is known as your company’s .

2.

Advertising or exposure that a business gets “for free” is called

3.

Free samples and Trade Shows are examples of

4.

Meeting prospective customers and asking them to buy from you is called .

5.

Giving a free seminar where you hand out your business cards at the local library is an example of .

. .

D) SHORT ANSWER 1. Briefly name and define the elements of the Marketing Mix. 2. Compare the three basic pricing strategies explaining when each might be used.

E) ESSAY 1. Identify and explain the various steps in the selling process. Describe how you might develop your own selling skills. (1 page max) 2. Pick a well-known local business and analyze its name in terms of how it projects an appropriate image for its products/services and target customers. (1 page max)

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CHAPTER 3 TEST ANSWERS AND MARKING NOTES Test Bank

Difficulty Level: (e) = easy, (m) = medium, (h) = hard

A) MULTIPLE CHOICE 1b (m); 2d (h); 3c(m); 4a(m); 5d(e); 6d(e); 7a(h); 8b(m); 9a(m); 10c(e)

B) TRUE/FALSE 1F(h); 2F(m); 3T(e); 4T(e); 5T(m); 6F(e); 7T(m); 8T(h); 9T(e); 10F(m)

C) FILL IN THE BLANKS 1. image(e); 2. publicity (m); 3. sales promotion (m); 4. personal selling (e); 5. publicity (m)

D) SHORT ANSWER 1. Half marks are for correctly naming the elements and the other half are for clearly defining them so that they are distinctly separate. (m) 2. Half marks are for correctly identifying the three basic strategies and the other half are for describing situations where each might be appropriate. (h)

E) ESSAY 1. Out of 10 marks, 4 would be for correctly identifying the steps in the selling process (one deducted for each missing step) 4 would be for explaining each step and the final 2 marks would be for ways of developing selling skills. (practice) 2. Half of the marks would be for explaining the projected and how the name projects it. The other half are for how this image is appropriate, for the product/service customer group and the expected image.

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CHAPTER 4 TEST BANK A) MULTIPLE CHOICE Select the "most correct" option: 1.

Which of the following is a major consideration when setting up an office? a. personal work habits. b. visitors. c. ergonomics. d. All are major concerns.

2.

In Canada, a business can be incorporated through: a. the federal government. b. a provincial government. c. the federal or a provincial government. e. the federal, a provincial or a municipal government.

3.

Which of the following techniques involves a Bar Graph? a. flow chart. b. Gantt chart. c. PERT. chart. d. sequential list.

4.

Which of the following is not a management “tip” offered by the text? a. punish swiftly. b. measure behaviour. c. take responsibility for employee well-being. d. reward improvement.

5.

Cash that a sole proprietor takes out of the business for his/her personal use is called: a. dividends. b. benefits. c. drawings. d. personal incentive.

6.

The credit requirements for leasing equipment: a. are about the same as for purchasing the equipment. b. are more stringent than for purchasing the equipment. c. are much less than for purchasing the equipment. d. There are no credit requirements for leasing equipment.

7.

Ergonomics is about selecting equipment that: a. is comfortable. b. that is visually pleasing. c. that reduces eye, joint and muscle strain. d. none of the above.

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8.

The traditional assembly line is an example of: a. process set-up. b. product set-up. c. free-low layout d. service set up.

9.

Logistics is about: a. logical decision making processes. b. assessing the feasibility of any given business venture. c. planning, procurement, transportation and storage. d. a logical series of quality control procedures.

10.

The purpose of a purchasing system is to: a. avoid running out of inventory or supplies. b. reduce inventory costs. c. both of the above. d. none of the above.

B) TRUE OR FALSE 1. T

F

Equipment or materials you already own and will use in your business, are considered to be part of your investment in the business.

2. T

F

It is generally best for a small business to pay an accountant to perform the day-to-day bookkeeping chores.

3. T

F

According to the text, the first step in setting up an accounting system is to prepare a “chart of accounts.”

4. T

F

A corporation may be registered with either the Federal Government or a Provincial Government.

5. T

F

Zoning for land use comes under Federal jurisdiction.

6. T

F

Customer files are typically maintained with database software.

7. T

F

Financial transactions are recorded in a chart of accounts.

8. T

F

The Canadian Federation of Independent Business is a lobby group.

9. T

F

"Bookkeeping" and "accounting" are interchangeable terms.

10. T

F

"Accountability" refers to those things on which a person's performance will be measured.

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C) FILL IN THE BLANKS

1.

An office is basically a place for processing and storing

2.

A list of all the particular areas in which a business expects to have transactions is called a

of

.

.

3.

A business in Canada is required to collect GST if it has sales in excess of $ .

4.

Dental care, drug plans and disability insurance are examples of employee .

5.

is a term that originally applied to the planning and carrying out of military movements.

D) SHORT ANSWER 1) Briefly identify and explain three main considerations for the layout of retail space.

2) Pick one type of chart or graph that can be used to control businesses processes. Sketch an example and explain how it can be used.

E) ESSAY 1. Identify four broad Functions of Management and explain ways each can be carried out.

(1 page max) 2. Identify the major ways in which small businesses are involved with government and explain why these can be a source of frustration to the business owner. (1 page max)

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CHAPTER 4 TEST ANSWERS AND MARKING NOTES Test Bank

Difficulty Level: (e) = easy, (m) = medium, (h) = hard

A) MULTIPLE CHOICE 1d (e); 2c (h); 3b(h); 4a(e); 5c(m); 6a(h); 7c(m); 8b(h); 9c(m); 10c(e)

B) TRUE/FALSE 1T(m); 2F(m); 3T(e); 4T(h); 5F(e); 6T(e); 7F(m); 8T(m); 9F(e); 10T(m)

C) FILL IN THE BLANKS 1. information (m); 2. Chart , Accounts (m); 3. $30 000(h); 4. Benefits (m); 5. Logistics (e) D) SHORT ANSWER 1. A complete answer should identify: space allocation, positioning of merchandise and security as the main considerations and a brief explanation of each should be included.. (m) 2. Half of the marks is for naming and sketching an example correctly and the other half is for providing a realistic example of the use. (e)

E) ESSAY 1. If marked out of 10, 4 of the marks would be for naming the management functions, 2 marks would be for reasonable explaining them and 4 of the marks would be for describing ways in which they can be carried out. (h) 2. Half of the marks should be assigned for identifying ways in which businesses are involved with government (at least three ways) and the other half is for explaining the potential frustrations of each. (m)

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CHAPTER 5 TEST BANK A) MULTIPLE CHOICE Select the "most correct" option: 1.

Credit Bureaus: a. are provincially regulated. b. are owned by their members. c. must allow individuals to see their own files. d. all of the above.

2.

The Financial Statement that shows the financial position of a company at a particular moment in time is the: a. balance sheet. b. income statement. c. cash flow statement d. all of the above.

3.

The Sales of a company minus its Cost of Goods Sold are equal to: a. the operating expenses. b. the gross profit. c. the net profit. d. the variable expenses.

4.

Equity is: a. the amount of claim an owner has on an asset. b. how rich someone is. c. the difference between assets and liabilities. d. all of the above.

5.

Liabilities are: a. legal debts. b. nuisance situations. c. negative personality attributes. d. favours that you owe.

6. Financial Statements that predict future performance of a company are called: a. ad-hoc financial statements. b. minimum value financial statements. c. pro forma financial statements. d. all of the above.

7. BDC stands for: a. Business Department of Commerce. b. Business Development Bank of Canada. c. British Development Corporation. d. Banking for Developing Companies. .

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8.

The break-even point is where: a. all of a company's overhead is covered. b. a company starts to make net profit. c. the income from sales is equal to all of a company=s costs and expenses. d. all of the above.

9.

Money loaned to entrepreneurs by relatives and friends is called: a. sweat equity. b. family fund equity. c. personal equity. d. love money.

10.

A new small business is only likely to sell shares through: a. a stock exchange. b. private placement. c. the securities commission. d. going public.

B) TRUE OR FALSE 1. T

F

Personal finance and business finance involve largely the same ideas.

2. T

F

There is basically a single, precise accounting term for each accounting concept.

3. T

F

“Posted” interest rates at the bank are negotiable.

4. T

F

The amount of collateral required for a bank loan is negotiable.

5. T

F

Venture capital companies are particularly interested in providing start-up capital for new firms.

6. T

F

"Cash" is an example of a fixed asset.

7. T

F

Assets can depreciate even if they are not being used in a business.

8. T

F

Almost all businesses have some seasonal fluctuation in sales.

9.

T

F

A break-even number is a very precise financial tool.

10. T

F

Loans under the Canada Small Business Financing program are negotiated through regular chartered banks.

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C) FILL IN THE BLANKS

1.

A bank loan in the form of an overdraft allowance is called a .

2.

A “profitable” business can still go bankrupt because of problems with .

3.

Expenses that do not vary with sales are called

expenses.

4.

The loss in value of an asset over time is called

.

5.

The Accounting Equation is + ,

=

D) SHORT ANSWER 1) Briefly explain the difference between "fixed" and "variable" expenses and give examples of each.

2) Prepare a personal Balance Sheet for yourself.

E) ESSAY 1. Discuss the advantages and disadvantages for each of the major sources of start-up financing.

(1 page max) 2. Discuss the process and need for cash-flow planning. (1 page max)

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CHAPTER 5 TEST ANSWERS AND MARKING NOTES Test Bank

Difficulty Level: (e) = easy, (m) = medium, (h) = hard

A) MULTIPLE CHOICE 1d (m); 2a (m); 3b (m); 4d (h); 5a (e); 6c (m); 7b (m); 8d (h); 9d (e); 10b (m)

B) TRUE/FALSE 1T(e); 2F(m); 3T(e); 4T(h); 5F(m); 6F(m); 7T(e); 8T(m); 9F(e); 10T(m)

C) FILL IN THE BLANKS 1. line of credit (m); 2. cash flow (m); 3. fixed (e); 4. depreciation (e); 5. Assets = Liabilities + Equity (m)

D) SHORT ANSWER 1. Half of the marks should be awarded for complete definitions of each of Fixed and Variable expenses. The other half should be awarded for valid examples of each. (m) 2. A complete answer has entries in each of the categories of fixed and current assets and equity.

Liabilities may not exist for some. (m)

E) ESSAY 1. For full marks, at least four categories of financing sources should be clearly identified and described. Advantages and disadvantages of each should be listed and explain.

2. A complete answer will discuss the forecasting process for sales (broken down by month) as well as the issues of "cash in". "Cash out" should be explained as both costs and expenses and the issue of opening cash balance (or operating cash) should be explained. As well the ideas of monthly change in cash and closing balance should be covered.

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CHAPTER 6 TEST BANK A) MULTIPLE CHOICE Select the "most correct" option: 1.

Written business plans are typically required by a. formal business lenders. b. investors. c. both of the above. d. none of the above.

2.

Writing a business plan motivates the entrepreneur by: a. acting as a checklist. b. producing something tangible. c. communicating the plan d. The business plan does not function as a motivator.

3.

Compared to the past, business plans today tend to be: a. more concise. b. longer. c. a minimum of 100 pages. d. less than 10 pages.

4.

The model for a basic start-up business plan used by the textbook has: a. 3 sections. b. 5 sections. c. 10 sections. d. 18 sections.

5.

Professional business plans should be written in: a. the first person. b. the second person. c. the third person. d. any of the above.

6.

“Looping back to change previous decisions” describes the business plan as: a. a process. b. a consulting tool. c. a teaching tool. d. a research tool.

7.

The section of the business plan most likely to require revision of previous sections is: a. Finances. b. Marketing. c. Operations. d. Finances.

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8.

For the consultant, the business plan outline represents: a. a logical series of decisions for planning. b. a logical series of questions to ask a business owner. c. a logical series of steps for start-up. d. none of the above.

9.

Credit policies and cash flow are more likely to be emphasized in the business plan for: a. a service firm. b. a retailer. c. a wholesaler. d. Emphasis will be equal for all three.

10.

The departmental business plan will be unlikely to include: a. goals and objectives. b. organization and management. c. operations. d. financial statements.

B) TRUE OR FALSE 1. T

F

A common error in writing business plans is vague bragging about service quality.

2. T

F

If using an online proofreading service for your business plan, it is better to use one based in Canada.

3. T

F

The maximum reasonable length for a business plan is 75 pages.

4. T

F

The process of setting up a business is usually a simple series of linear steps.

5. T

F

For established firms, the business plan is a process of renewal.

6. T

F

The best renewal strategy for a business is to add new products and services while improving efficiency at the same time.

7. T

F

Arranging the finances is usually the last step in the business planning process.

8. T

F

In the business planning process, “organinzing the operations” usually comes before “creating a marketing strategy.”

9.

T

F

Knowing the structure of a business plan provides students with a system of classifying information.

10. T

F

The business plan for a non-profit organization includes an analysis of the competition.

.

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C) FILL IN THE BLANKS 1.

An outline or pattern for a business plan is called a business plan .

2.

The basic categories for business “type” are , and .

3.

In a business context, the letters SBU stand for .

4.

The attempt to make departments of large firms function as if they were small businesses is referred to as .

5.

The use of business practices to achieve goals that are of public benefit is known as ,

,

,

D) SHORT ANSWER 1. Briefly explain the difference between "business plan templates” and “interactive plan writers. (1/3 page max) 2. Explain how the maintenance department of a large business would describe its customers and its competition in a departmental business plan. (1/2 page max)

E) ESSAY 1. Name the five major sections for a basic start-up business plan and briefly discuss what each covers. (1 page max) 2. Explain five ways in which non-profit organizations are similar to businesses. How are they different? Why do non-profits need business plans? (1 page max)

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CHAPTER 5 TEST ANSWERS AND MARKING NOTES Difficulty Level: (e) = easy, (m) = medium, (h) = hard

A) MULTIPLE CHOICE 1c(e); 2b(h); 3a(e); 4b(m); 5a(m); 6a(h); 7d(h); 8b(e); 9c(h); 10d(h)

B) TRUE/FALSE 1T(m); 2T(h); 3F(e); 4F(m); 5T(e);

6F(h); 7T(e); 8F(m); 9T(e); 10T(h)

C) FILL IN THE BLANKS 1. template (m); 2. manufacturing, wholesale, retail, service(e); 3. strategic business unit(h); 4. intrapreneurship(e); 5. social entrepreneurship.

D) SHORT ANSWER 1. Half of the marks should be awarded for explanations of business plan templates and Interactive writers. The other half should be awarded for identifying specific differences. (m) 2. Half of the marks should be awarded for identifying and giving examples of the other departments that “maintenance” would service. The other half of the marks would be for explaining how these other departments could provide their own maintenance or contract out to another company. (h)

E) ESSAY 1. Half of the marks would be for correctly naming the five sections of the start-up business plan. The other half would be for detailed explanations of what each covers. (m) 2. A complete answer will identify five ways in which non-profits are similar to businesses (there is a list of 6 on page 145 but other similarities can be included.) The discussion of their differences should include the profit motive for businesses and how those who receive the services of non-profits are typically not those who provide money to the organization. At least two reasons for having a business plan (uses of the business plan) should be identified. (m)

.

6-4

CHAPTER 7 TEST BANK A) MULTIPLE CHOICE Select the "most correct" option: 1.

"Goodwill" is classified as: a. intellectual property. b. licensing rights. c. a key ratio. d. an intangible asset.

2.

The single biggest danger for the naive business buyer is: a. overvalued assets. b. interference from the previous owner. c. lack of market. d. hidden company debts.

3.

On average, the risk of buying an existing business is a. the same as for starting a brand new business. b. higher than for starting a brand new business. c. lower than for buying a franchise. d. lower than for starting a brand new business.

4.

Setting a value for a business by using a "price multiplier" is: a. a discounted cash flow approach. b. a balance sheet approach. c. a rule of thumb approach. d. a liquidation value approach.

5.

Typically, the business valuation method showing the lowest value is: a. discounted future earnings. b. net book value. c. modified book value. d. liquidation value.

6.

Which of the following is an "asset" method of business valuation? a. liquidation value. b. book value. c. adjusted book value. d. all of the above.

7.

Which of the following is an "income" method of business valuation? a. capitalization of earnings. b. capitalized cash flow. c. discounted cash flow. d. all of the above.

.

7-1

8.

A company's financial statements are interpreted by using: a. ratio analysis. b. business valuation. c. the present value method. d. the discount rate.

9.

The ratio that indicates the "liquidity" of a company is: a. the current ratio. b. debt to equity. c. gross margin. d. the average collection period.

10.

A negotiating plan for purchasing a business will include values for: a. a fair market price. b. the lowest reasonable price. c. the maximum the buyer is willing to pay. d. all of the above.

B) TRUE OR FALSE 1. T

F

Cash skimming is a legal but misleading practice.

2. T

F

You must know your desired "rate of return" to use the Capitalization of Earnings method.

3. T

F

"Asset" methods of valuation are also known as "balance sheet" methods.

4. T

F

Real estate agents often act as intermediaries for the sale of a business.

5. T

F

"Taking over" a company means buying more than 50% ownership.

6. T

F

It is relatively easy to change an existing negative image of a firm.

7. T

F

The "core" business refers to a firm's primary services/products and primary market segments.

8. T

F

The critical question to ask a business seller is "what is the price?"

9. T

F

Buying an independent business is on average lower risk than buying a franchise.

10. T

F

Present value calculations are based on the idea that money is more valuable if received now than if received in the future.

.

7-2

C) FILL IN THE BLANKS

1.

A clause that requires a business seller to tell the buyer about anything that might discourage the sale is called a clause.

2.

Unnecessary items that a company owns are know as

3.

The right of a creditor to take over a particular asset is called a

.

4.

The alternative to buying shares of a business is to just buy the

.

5.

A firm's ability to pay all of its financial obligations is called

.

assets.

D) SHORT ANSWER 1) Identify three negotiating tips that could be used when buying a business. Explain the importance of each.

2) Explain "rule of thumb" valuation techniques and provide one or two examples of how they work.

E) ESSAY 1. Explain the concept of ratio analysis. Identify several key ratios and explain what they might indicate about the health of a company. (1 page max).

2. Explain and contrast both Asset and Income methods of business valuation giving clear examples of each. Explain how these values can be used to produce a weighted average business value. (1 page max).

.

7-3

CHAPTER 7 TEST ANSWERS AND MARKING NOTES Difficulty Level: (e) = easy, (m) = medium, (h) = hard

A) MULTIPLE CHOICE 1d (m); 2a (m); 3d(h); 4c(e); 5d(e); 6d(m); 7d(m); 8a(m); 9a(m); 10d(m)

B) TRUE/FALSE 1F(m); 2T(m); 3T(m); 4T(e); 5T(e); 6F(m); 7T(m); 8F(h); 9F(m); 10T(m)

C) FILL IN THE BLANKS 1. disclosure (m); 2. redundant (m); 3. Lien (e); 4. assets (e); 5. solvency (h)

D) SHORT ANSWER 1. Half marks are for providing three clear tips for a successful negotiation on a business purchase. The other half of the marks is for a clear explanation of each. (m) 2. For full marks, "rule of thumb" techniques should be clearly explained including the idea that they are only common in some industries. As well, the examples provided should be feasible. (h)

E) ESSAY 1. Half of the marks are given for explaining that the pure numbers only have meaning within the ratios and then only when compared to industry averages. At least three ratios should be explained in terms of what they indicate about the firm. (m) 2. Both asset and income methods must be explained for one third of the marks. Another third is for good examples of each. And the final third is for clearly explaining the use of the weighted average. (h)

.

7-4

CHAPTER 8 TEST BANK A) MULTIPLE CHOICE Select the "most correct" option: 1.

Which of the following would be an example of a Business Format franchise? a. Petro Canada. b. Tim Horton's. c. Toyota. d. Popsicle.

2.

The most popular franchise arrangement is: a. single-unit. b. multi-unit. c. multi-brand. d. master franchise.

3.

The right to produce and sell the franchisor's product is called: a. licensing. b. dealership. c. conversion franchising. d. none of the above.

4.

The cost of a franchise may include: a. royalty payments. b. advertising expenditures. c. the franchise fee. d. all of the above.

5.

Multi-level marketers usually: a. work from their homes. b. sell to consumers. c. receive commissions from the sales of their recruits. d. all of the above.

6.

The code of the Canadian Franchise Association gives franchisees: a. freedom to form and join associations. b. the right to see the financial statements of the franchisor. c. the right to a full refund if dissatisfied. d. all of the above.

7.

The biggest advantage of owning a franchise over an independent firm is likely: a. training provided by the franchisor. b. brand recognition. c. advertising. d. marketing research.

.

8-1

8.

Most of the magazines and other publications about franchising: a. are critical of the industry. b. forbid advertising of specific franchises. c. are published by franchisor associations. d. are published by franchisee associations.

9.

With "floor plan" financing, title to the product in the franchisee's inventory is: a. held by the franchisee. b. held by a third party. c. held by the franchisor. d. there is no title to the product.

10.

On average, buying a franchise: a. is the lowest risk start-up method. b. has the same risk as starting a brand new business. c. has the same risk as buying an existing independent firm. d. is risk-free.

B) TRUE OR FALSE 1. T

F

Dealership franchising tends to give the franchisee more freedom than business format franchising.

2. T

F

Pyramid Selling is an illegal form of Multi-level Marketing.

3. T

F

Most Multi-level Marketers make well-above-average incomes.

4. T

F

The owner of a territory franchise has the right to sell franchises to others.

5. T

F

Franchisors such as automobile manufacturers can dictate the prices charged by their franchisees.

6. T

F

The Franchisor is the buyer of a complete method of doing business.

7. T

F

Canada tends to have stricter franchising regulations than most of the US.

8. T

F

Buying an existing franchise is legally simpler than buying a new one.

9. T

F

Major franchisors tend to be highly negotiable over contract details.

10. T

F

The ability to innovate is an important characteristic for a franchisee.

.

8-2

C) FILL IN THE BLANKS 1.

When the same franchisee owns two different franchise brands at the same site, this is called franchising.

2.

Assets against which there are no liens are referred to as

3.

Changing an independent small business into a franchise outlet is referred to as franchising.

4.

An arrangement where a franchisee has the right to sell franchises to others within a particular territory is called a franchise.

5.

The law that restricts national price setting is known as the federal Act.

.

D) SHORT ANSWER 1) In three or four sentences discuss your personality and skills explaining why you would (or would not) make a good franchisee.

2. Briefly explain the major advantages of buying a franchise over other start-up methods.

E) ESSAY 1. Explain the major provisions of existing or pending franchise legislation. Explain the growing trend for disclosure requirements. (1 page max).

2) Outline a typical process of buying a franchise from the first contact with the franchisor to the final signing of the contract. Note how the process favours the franchisor.

.

8-3

CHAPTER 8 TEST ANSWERS AND MARKING NOTES Difficulty Level: (e) = easy, (m) = medium, (h) = hard

A) MULTIPLE CHOICE 1b(m); 2a(e); 3a(m); 4d(e); 5d(m); 6a(h); 7c(h); 8c(m); 9c(m); 10a(m)

B) TRUE/FALSE 1T(h); 2T(m); 3F(h); 4F(h); 5F(m); 6F(e); 7F(m); 8F(h); 9F(m); 10F(m)

C) FILL IN THE BLANKS 1. multi-brand (m); 2. unencumbered (m); 3. conversion (m); 4. master (m); 5. competition (h).

D) SHORT ANSWER 1. A complete answer should differentiate between the independent personality and the more conforming personality suitable for the franchisee. As well, the answer must distinguish between entrepreneurial skills and the management skill more suitable for the franchisee. (e) 2. For full marks, at least three valid advantages should be clearly identified and each fully explained. (m)

E) ESSAY 1. For full marks, at least four major provisions should be identified and clearly explained. As well, the issue of disclosure should be defined and at least one reason for this trend should be identified.

2. For full marks, the student should be able to identify at least four clear steps in the process (see text pg.207). A comment should be made on franchisor control of each step.

.

8-4

CHAPTER 9 TEST BANK A) MULTIPLE CHOICE Select the "most correct" option: 1.

Which of the following is a family business? a. A woman owns a small garage where her four sons work as mechanics. b. A man owns a delivery service where the five children of his dispatcher work. c. A woman is self-employed as a writer and is the only earner in her family. d. None of the above are family businesses.

2.

Which of the following is not a typical family business problem? a. incompetent family members in positions of responsibility. b. theft of the assets by family members. c. battles for control among family members. d. attempts to use the business as a weapon in family feuds.

3.

Family businesses can be used to sponsor qualified relatives as immigrants when: a. the relative is economic distress. b. when the business cannot find a skilled Canadian for the job. c. when the relative is required for a position of trust. d. when quotas for that country have not been filled.

4.

A well-run family business has: a. a single family member in control. b. formal lines of authority. c. competitive industry pay rates. d. all of the above.

5.

History has shown that family firms are more successful when: a. the business is seen as a long-term trust of the family. b. it is seen as disloyal to not work for the business. c. personal issues are given priority over business issues. d. all of the above.

6.

The key advisors for a retiring business owner are: a. consultant, lawyer, doctor, insurance agent. b. financial planner, doctor, real estate agent, lawyer. c. accountant, financial planner, lawyer, personal advisor. d. lawyer, doctor, accountant, estate planner.

7.

Which of the following is not one of the plans for retiring business owners? a. retirement plan. b. estate plan. c. succession plan. d. tax plan.

.

9-1

8.

The increase in value of an investment is subject to: a. capital gain tax. b. retirement tax. c. estate tax. d. probate tax.

9.

Creating two classes of shares, only one of which will grow in value is called: a. probate. b. estate freeze. c. bequeathing. d. share succession.

10.

Family businesses are successfully transferred to the next generation in: a. ninety percent of all cases. b. more than two thirds of all cases. c. less than one third of all cases. d. less than ten percent of all cases.

B) TRUE OR FALSE 1. T

F

A second-generation owner of a family business is not a true entrepreneur.

2. T

F

Parents generally find it easy to delegate to their offspring.

3. T

F

There are no formal educational requirements for taking over a family business.

4. T

F

Customer loyalty is more likely to be retained when there is an abrupt transition of power.

5. T

F

Siblings close in age and of the same gender are more likely to continue rivalries into adulthood.

6. T

F

A family council carries the same authority as a board of directors.

7. T

F

"Family Business" is not available as a field of study in any major North American business school.

8. T

F

On retirement, the main advisor for a family business owner should be the family member taking over the business.

9. T

F

Business owners are most likely to commit to a succession plan when they are in their fifties.

10. T

F

Leading the family business requires a deep involvement with family politics.

.

9-2

C) FILL IN THE BLANKS 1.

When life partners are partners in a small business, they are likely to have none of the

that would be provided by an employer.

2.

refers to a training program where the trainee gets increasing responsibility over a long period of time.

3.

The ability to experience the feelings and motives of others is called .

4.

Generally, the most advantageous legal form, for passing a business to the next generation is

5.

.

The process of making contacts and building relationships for mutual support is called

.

D) SHORT ANSWER 1. Define the term "family business" and use examples to show that this could cover a wide assortment of ownership and employment arrangements.

2. Explain several basic approaches to reducing conflict within family businesses.

E) ESSAY 1. Outline the process of planning for retirement and identify the major advisors involved, specifying the roles of each. (1 page max).

2. Discuss the major advantages and disadvantages of a career in the family business.

(1 page max).

.

9-3

CHAPTER 9 TEST ANSWERS AND MARKING NOTES Difficulty Level: (e) = easy, (m) = medium, (h) = hard

A) MULTIPLE CHOICE 1a(h); 2b(h); 3c(m); 4d(e); 5a(m); 6c(h); 7d(m); 8a(e); 9b(m); 10c(m)

B) TRUE/FALSE 1F(e); 2F(m); 3T(e); 4F(h); 5T(m); 6F(m); 7F(m); 8F(h); 9T(m); 10F(m)

C) FILL IN THE BLANKS 1. family benefits (m); 2. apprenticeship (m); 3. empathy (m); 4. corporation (h); 5. networking (e).

D) SHORT ANSWER 1. For full marks, the ideas of controlling interest and multiple family members employed must be covered. At least two examples should be given. (m) 2. The student may choose to identify either family values that reduce conflict or (preferably) specific policies that achieve this. A bonus mark should be given for the latter.

E) ESSAY 1. Half of the marks should be awarded for identifying the key retirement, estate and succession decisions and the other half for identifying and explaining the roles of the four key advisors.

2. Note that this question does not specify a role as the owner or leader of a family business so the question refers to the more general advantages (half marks) and disadvantages (the other half) outlined on pages 221-222 of the text.

.

9-4

CHAPTER 10 TEST BANK A) MULTIPLE CHOICE Select the "most correct" option: 1.

Which of the following is not a stage in the business life cycle: a. introduction. b. growth. c. maturity. d. decline.

2.

The growth stage of the business cycle is characterized by: a. increasing revenue. b. increasing profits. c. declining risk of failure. d. all of the above.

3. Which of the following is not an indicator of the need for renewal: a. declining sales and profits. b. declining market share. c. declining employee turnover. d. None of the above are indicators.

4. When a business is operating at a small percentage of its capacity, the strategy should be to: a. increase capacity. b. increase sales. c. reduce promotion. d. all of the above.

5. SWOT analysis examines: a. the situation, the work, the organization, the tactics. b. internal and external advantages and disadvantages of a business. c. the predictions of the Conference Board of Canada. d. the ethical issues of conducting business.

6. An increase in market share is usually related to changes in: 1. distribution strategy.

2. the decor and design of the business.

3. a re-design of the product.

4. price and promotion strategies.

.

10 - 1

7. Compared to building your own chain of company-owned stores, selling franchises is: a. faster. b. more expensive. c. legally simpler. d. all of the above.

8. Multinational corporations tend to: a. come in large and small sizes. b. have supply sources in a single country. c. conduct marketing on an international basis. d. all of the above.

9. EDC stands for: a. External Distribution Control. b. Economic Development Corporation. c. Export Development Canada. d. Environmental Disaster Control.

10. The amount of time it takes to recoup the amount of an investment is called the: a. project R.O.I. b. future value. c. payback period. d. return interval.

B) TRUE OR FALSE 1. T

F

It is possible to have increasing sales while the market potential is shrinking.

2. T

F

Predatory pricing is an aggressive, but perfectly legal activity.

3. T

F

The concept of "100 % Capacity" can be applied to most businesses.

4. T

F

Mexico is a partner in NAFTA.

5. T

F

Market potential is made up of your market share plus the market share of all your competitors.

6. T

F

"Going public" is the most common way for a small business to acquire growth capital.

.

10 - 2

7. T

F

Features of both debt and equity financing are found in "subordinate financing".

8. T

F

As a business grows, there tends to be a shift from equity capital to debt capital.

9. T

F

The biggest trading partner (volume of trade) of Canada is the U.S.

10. T F

The biggest trading partner of the U.S. (volume of trade) is Japan.

C) FILL IN THE BLANKS 1. The renewal stage of the Business Life Cycle is followed by

.

2. Meeting with a departing employee is referred to as an .

3. The "T" in SWOT analysis refers to

.

4. " expansion" means selling more of what you're already selling to the customer groups you're already selling to.

5. " expansion" means selling what you're already selling to new groups of customers.

D) SHORT ANSWER 1. Identify the stages of the business cycle and list one or two characteristics of each stage.

2. Outline the Product Life Cycle and explain how it can be extended. Use examples.

E) ESSAY 1. Identify and explain the major indicators that a business is in decline and ready for renewal. (1 page max).

2. Discuss the dangers of entering into Export Markets for small Canadian firms. .

10 - 3

CHAPTER 10 TEST ANSWERS AND MARKING NOTES Difficulty Level: (e) = easy, (m) = medium, (h) = hard

A) MULTIPLE CHOICE 1a (m); 2d (e); 3c(h); 4b(m); 5b(h); 6e(h); 7a(h); 8c(e); 9c(m); 10c(m)

B) TRUE/FALSE 1T(m); 2F(m); 3T(e); 4T(e); 5T(h); 6F(m); 7T(h); 8F(h); 9T(e); 10F(m)

C) FILL IN THE BLANKS 1. growth(e); 2. exit interview (m); 3. threats (m); 4. market share (h); 5. market segment (h)

D) SHORT ANSWER 1. For full marks the student should list all five stages (including "renewal") and at least one major characteristic for each stage. (e) 2. For full marks, the stages of introduction, growth, maturity and decline should be identified.

Extending the product life cycle should be explained in terms of finding new segments, finding new uses or improvement to the product. (h)

E) ESSAY 1. The five categories of indicators (sales and profits; employee turnover; available capacity; market share/potential; competition) should all be identified and specific indicators should be identified as warnings of decline in each category. (h) 2. Potential problems with shipping and payment systems must be identified and explained for full marks. There is some room for more flexible, creative answers in this question where the student might want to discuss exchange rates, cultural issues and foreign conflict issues. (m)

.

10 - 4

CHAPTER 11 TEST BANK A) MULTIPLE CHOICE Select the "most correct" option: 1. Compared to making a product or component, buying it has the advantage of: a. guaranteed source of supply. b. greater specialization of your own business. c. direct control of quality. d. direct control of delivery.

2. The broadest indicator of efficiency is: a. return on sales. b. return on assets c. inventory turnover d. collection period.

3. Company history, dress codes, termination policies and pay schedules are typically outlined in: a. operations manuals. b. templates. c. work design forms. d. employee handbooks.

4. Reasonable expectations for the time to perform a particular job are set down in: a. job descriptions. b. job standards. c. employee handbooks. d. all of the above. e. none of the above.

5. Customer Relationship Management is: a. an attempt to satisfy all customers. b. an information technology based strategy for classifying customers. c. a promotional technique for getting new customers. d. all of the above. e. none of the above.

6. The majority of dissatisfied customers: a. do not complain to the service provider. b. tell numerous others about the problem. c. can be kept as customers if the problem is resolved. d. all of the above. e. none of the above.

.

11 - 1

7. The Leadership Program based on Peter Senge's Fifth Discipline books is called: a. Management by Objectives. b. Participative Management. c. Total Quality Management. d. The Learning Organization.

8. A costing worksheet for a contractor is likely to include sections for: a. direct materials. b. direct labour. c. overhead. d. all of the above. e. none of the above.

9. The pricing strategy of a business should primarily be based on: a. its own costs. b. marketing considerations. c. the amount of profit it wants. d. all of the above. e. none of the above.

10. The Collection Period is; a. the time it takes on average for customers to pay what they owe to a firm. b. the ratio of accounts receivable to the average sales per day. c. an indicator of efficiency. d. all of the above. e. none of the above.

B) TRUE OR FALSE 1. T

F

Recruiting is the process of picking the best possible candidate for a job.

2. T

F

Leadership programs tend to produce productivity improvements that last for over a decade.

3. T

F

"On-the-job training" usually requires the employee to spend some time in a classroom.

4. T

F

The make-or-buy decision applies only to manufacturing type firms.

5. T

F

Inventory Turnover is the ratio of cost of goods sold to current assets.

.

11 - 2

6. T

F

The "Core Business" means the products and markets that a firm dealt with at the time of start-up.

7. T

F

Greater specialization requires abandoning all products or services except those that are most profitable.

8. T

F

Accounting procedures are typically outlined in Operations Manuals.

9. T

F

The more successful firms tend to be those more willing to adopt new technologies.

10. T F

For waiting customers, pre-process waits seem longer than mid-process waits.

C) FILL IN THE BLANKS

1. .

Developing the most efficient procedures to use in a job is referred to as .

2.

3.

describes the relative enthusiasm felt by employees for a business.

Businesses that deliver no or insignificant physical product are called .

4.

The Services Canada online resource that helps employers find suitable candidates is called:

5.

The grooming of specific employees for promotion to specific jobs in the future is known as:

.

.

.

11 - 3

D) SHORT ANSWER 1. Using examples, discuss the difference in meaning between "automation" and "robotics".

2. .Give concrete examples of how small firms use the Internet for marketing research, promotion, distribution and financial applications.

E) ESSAY 1. List the various types of problem customers that a business can encounter, describe the characteristics of each type and the best approaches for dealing with them.

2. Discuss the main issues to be considered by a small firm in developing its first website.

.

11 - 4

CHAPTER 11 TEST ANSWERS AND MARKING NOTES Difficulty Level: (e) = easy, (m) = medium, (h) = hard

A) MULTIPLE CHOICE 1b(h); 2a(h); 3d(m); 4b(m); 5b(m); 6d(e); 7d(m); 8d(e); 9b(e); 10d(e)

B) TRUE/FALSE 1F(e); 2F(h); 3F(e); 4F(m); 5F(m); 6F(m); 7F(h); 8T(m); 9T(e); 10T(h)

C) FILL IN THE BLANKS 1. work design (h); 2. morale (m); 3. pure services (e); 4. Job Match (h); 5. succession planning (m)

D) SHORT ANSWER 1. Answers should indicate that automation has been around for some time (since the start of the Industrial Revolution). and includes all mechanized activities that save labour, for example, weaving machines. Robotics is an example of automation relying on microprocessors, for example the Canada Arm. A bonus mark could be assigned for pointing out that the newest robots have learning capacity. (m) 2. One example for each category is required for full marks. Marketing Research: access to Statistics Canada; Promotion: banner ads on web sites; Distribution: delivering music online; Financial applications: paying bills or receiving payments online. (e)

E) ESSAY 1. All five categories of problem customer (genuine, bullying, abusive, fraudulent and needy) should be identified and described. At least two approaches or steps to deal with each type of customer should be outlined for full marks.(h) 2. At least five of the six main issues need to be clearly listed and explained for full marks: Host selection; Domain name choice; Site design; Tracking programs; Search Engine strategy; Web developer contract. (h)

.

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CHAPTER 12 TEST BANK A) MULTIPLE CHOICE Select the "most correct" option: 1.

As companies get larger, the concerns of the entrepreneur tend to become more: a. strategic. b. long-term c. proactive d. all of the above.

2.

Generally, a website should get the action you want from a customer by using: a. command verbs. b. polite requests. c. bright colours. d. a variety of styles.

3.

A "coaching" management style depends largely on: a. positive reinforcement. b. negative reinforcement. c. clear warnings. d. team building.

4.

The main government web portal for Canadian entrepreneurs is: a. The Small Business Administration. b. Canadian Entrepreneur. c. Canada Business. d. INC.gov.

5.

Which of the following is not part of Active Listening? a. using body language. b. attending to the speaker. c. asking for clarification d. summarizing.

6.

Decisions that are not Strategic Decisions can be classified as: a. long-term decisions. b. administrative decisions. c. positioning decisions d. high-risk decisions.

.

12 - 1

7.

Software that helps an entrepreneur compile an email mailing list is called: a. an email extractor. b. a list compiler. c. a B2B targeter. d. a B2C compiler.

8.

CIDA is an acronym for: a. Canadian Investment Dealers Association. b. Customs Import Duty Authority. c. Canadian International Development Agency. d. Co-operative Insurance Default Act.

9.

The single biggest influence on the economy of Canada is: a. world money markets. b. the manufacturing sector. c. the housing market. d. the economy of the United States.

10.

The absence of, or control over disease process refers to: a. health. b. fitness. c. well-being. d. none of the above.

B) TRUE OR FALSE 1. T

F

Writing is a two-way communication process.

2. T

F

"Microfinance" refers to government grants to very small firms.

3. T

F

It is impossible to plan for an unpredicted crisis.

4. T

F

Industry associations are examples of mutual benefit societies.

5. T

F

A person who owned a single business for 20 years would still be classified as a “novice” entrepreneur.

6. T

F

Small business research journals are intended to be read by entrepreneurs.

7. T

F

When making a formal presentation, the speaker should avoid eye contact with audience members.

.

12 - 2

8. T

F

Research indicates that physically fit entrepreneurs are more likely to achieve their business and personal goals.

9. T

F

Using your intuition is more likely to gain employee support than using evidencebased decision making.

10. T F

It is possible to have a strategic alliance with a direct competitor.

C) FILL IN THE BLANKS

1. .

The process of giving employees full authority and responsibility for completing assigned tasks is known as

2.

.

People who own all or part of at least two independent businesses at the same time are known as

entrepreneurs.

3.

Overly close supervision of subordinates is referred to as

4.

The motivational aspects of management are referred to as

5.

Any action that makes a particular behaviour more likely to re-occur is known as .

.

. .

12 - 3

D) SHORT ANSWER

1.

Briefly explain how a small business can do crisis planning. (1/2 page max)

2.

Describe two examples of how social media can be used to promote a small business.

(1/2 page max)

E) ESSAY 1.

Discuss the major issues that you would negotiate with a web developer who was designing the site for your company. (1 page max)

2.

Define the term ethics and explain who can be harmed by unethical behaviour on the part of an entrepreneur. Use examples. Explain how ethics is different from morality and give examples to show how there may be a conflict between the two.

(1 page max)

.

12 - 4

CHAPTER 12 TEST ANSWERS AND MARKING NOTES Difficulty Level: (e) = easy, (m) = medium, (h) = hard

A) MULTIPLE CHOICE 1d(e); 2a(m); 3a(m); 4c(e); 5a(h); 6b(e); 7a(h); 8c(h); 9d(m); 10a(h)

B) TRUE/FALSE 1F(e); 2F(m); 3F(e); 4T(m); 5T(h); 6F(h); 7F(m); 8T(e); 9F(h); 10T(m)

C) FILL IN THE BLANKS 1. delegation (m); 2. portfolio (h); 3. micro-management (e); 4. leadership (m); 5. positive reinforcement (h).

D) SHORT ANSWER 1. The business can predetermine a general approach to any crisis (values and priorities) identify crisis team (legal advice, contact tree, media spokesperson) create crisis contingency fund, staff training in first aid, fire response, CPR etc. (m) 2. Half marks are for identifying any of the media on pages 291-292 (or any of the emerging social media.) The other half the marks are for providing realistic applications for small firms.(h)

E) ESSAY 1. Half the marks should be awarded for identifying at least five major issues of the six listed Pages 288-289 of the text. The remainder of the marks are for explanations of these issues. (m) 2. Ethics should be defined in terms of its modern usage. Potential victims of an entrepreneur include customers, suppliers employees, competitors, the community at large. One clear example should be used for each category. Morality should be defined as a system with one example to show the difference from ethics. One clear example must be given of how the two could be in conflict. (h)

.

12 - 5

Instructor’s Resource Manual

(Sample) COMPREHENSIVE EXAMINATION/ CHALLENGE TEST Scoring: 100 marks Time: 3 hours

page 1 of 5. __________________________________ student name Part A

Define each of the following terms in one or two COMPLETE SENTENCES. Up to 1/3 of the total value of these questions may be deducted for grammar or spelling errors. Please answer in the space provided. (value: 2 marks each = 14 marks).

1. Entrepreneurship __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ ___________________________

_____

2. Liability Insurance ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ _________________________

.

Business Plan, Business Reality

Page 2 of 5.

3. Venture Capitalist ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

4. Marketing ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

5. Key Ratio ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ _________________________

6. Market Potential ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ _________________________

.

Instructor’s Resource Manual

Page 3 of 5.

7. Small Business ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ _________________________

Part B Calculate the correct answer to each of the following questions. Show your calculations in the space provided. (value: 2 marks each = 6 marks).

1. Angela has a business that prints promotional T-shirts for which she charges about $18.00 apiece. Angela pays $6.00 each for the T-shirts and her monthly overhead runs about $1,020.00. How many T-shirts must Angela sell each month in order to breakeven?

.

Business Plan, Business Reality

Page 4 of 5.

2. Last year, Gunther invested $5,000 to start a business and his partners invested $15,000. The new company also borrowed $5,000 from the bank and made a profit of $1,000 in the first year. What is the RETURN ON OWNERS' EQUITY in the first year.

(Express your answer as a percentage).

3. Zena is thinking of buying a business that makes a profit of about $20,000 per year.

She would like to get a Return on Investment of about 20%. How much should she be willing to pay for the business?

.

Instructor’s Resource Manual

Page 5 of 5.

Part C Answer each of the following questions in COMPLETE SENTENCES and paragraphs.

Up to 1/3 of the total value of each question may be deducted for grammar or spelling errors. Please write carefully on the answer sheets provided.

1. Explain how a business can protect its intellectual property by each of: Patent, Copyright, Trademark, Industrial Design. Explain what each protects and give concrete examples. (value: 10 marks each = 80 marks) 2. List and discuss the advantages and disadvantages of "Buying an Existing Business", as opposed to other start-up methods. (value: 10 marks).

3. You have saved $7 000 toward the start-up of a retail business. Your total start-up costs (including rent-deposit, inventory, lease-hold improvements and operating capital) will be around $45 000. Identify a variety of sources where you could secure the additional finance and explain the terms under which you would expect to get the money. (value: 10 marks).

4. You have decided to open a restaurant that will target wealthy seniors. Describe both the location and site that would be ideal. (value: 10 marks).

5. You and your sister have decided to open a business that you will jointly own and operate. What are your options as to Legal Form? Discuss the advantages and disadvantages of each. (value: 10 marks).

6. Name the five major sections for a basic start-up business plan and briefly discuss what each covers. (value: 10 marks) 7. Explain five ways in which non-profit organizations are similar to businesses. How are they different? Why do non-profits need business plans? (value: 10 marks) 8. Define the term ethics and explain who can be harmed by unethical behaviour on the part of an entrepreneur. Use examples. Explain how ethics is different from morality and give examples to show how there may be a conflict between the two. (value: 10 marks)

.