Entrepreneurship Successfully Launching New Ventures, 5E Bruce R Barringer Test Bank

Entrepreneurship Successfully Launching New Ventures, 5E BY Bruce R. Barringer

Email: richard@qwconsultancy.com

Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 1 Introduction to Entrepreneurship 1) Pure Fix Cycles, the company profiled in the opening feature of Chapter 1, was launched by four co-founders and sells ________.

A) fixed gear, single speed bikes B) entry level bikes that sell in the $100 price range C) bikes the are durable enough that they almost never need to be fixed D) high quality bikes that sell in the $1,000+ price range E) multiple gear, multiple speed bikes Answer: A Diff: 1 Page Ref: 3 LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Reflective 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 Diff: 1 Page Ref: 3 LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Application of Knowledge 3) According to the Global Entrepreneurship Monitor (GEM) 2013 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 3 1/2 years.

A) 3.8 B) 5.5 C) 7.6 D) 9.0 E) 12.7 Answer: E Diff: 3 Page Ref: 5 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) 2013 study, the majority of people in high-income countries are drawn to entrepreneurship ________.

A) to take advantage of an attractive opportunity 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 Diff: 2 Page Ref: 5 LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

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

A) As high as 50 percent after four years B) As high as 60 percent after four years C) As high as 70 percent after four years D) As high as 80 percent after four years E) As high as 90 percent after four years Answer: A Diff: 2 Page Ref: 6 LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Reflective 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 Diff: 2 Page Ref: 6 LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

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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 Diff: 2 Page Ref: 7 LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Reflective 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 Diff: 2 Page Ref: 7 LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Reflective Thinking 9) According to the opening feature on Pure Fix Cycles, one of the biggest challenges the startup now faces is an increasingly competitive marketplace.

Answer: TRUE Diff: 1 Page Ref: 3 LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Reflective Thinking 10) According to the results of the GEM 2013 survey, about 1 out of every 8 American adults is actively engaged in starting a business or is the owner/manager of a business that is less than 3 1/2 years old.

Answer: TRUE Diff: 2 Page Ref: 5 LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

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11) According to reliable statistics, 9 out of 10 businesses fail in their first few years of existence.

Answer: FALSE Diff: 2 Page Ref: 5 LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

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

Answer: FALSE Diff: 1 Page Ref: 6 LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

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

Answer: TRUE Diff: 2 Page Ref: 7 LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Analytical Thinking 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. The essence of entrepreneurial behavior is identifying opportunities and putting useful ideas into practice.

Diff: 1 Page Ref: 6 LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

AACSB: Reflective Thinking 15) 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) realize financial rewards.

The first of these reasons-being one's own boss-is 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.

Diff: 2 Page Ref: 7 LO: 1.1: Describe entrepreneurship, corporate entrepreneurship, and the characteristics of entrepreneurial firms.

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16) 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 realize financial rewards E) take advantage of government subsidies, pursue their own ideas, and realize financial rewards Answer: D Diff: 2 Page Ref: 7 LO: 1.2: Discuss three main reasons people decide to become entrepreneurs.

AACSB: Reflective Thinking 17) According to the textbook, the number one reason that people become 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 Diff: 1 Page Ref: 7 LO: 1.2: Discuss three main reasons people decide to become entrepreneurs.

AACSB: Reflective Thinking 18) Kasey Stevenson is starting a firm in the women's clothing industry primarily to pursue financial rewards. 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 Diff: 2 Page Ref: 8 LO: 1.2: Discuss three main reasons people decide to become entrepreneurs.

AACSB: Reflective Thinking 19) The number one reason that people become entrepreneurs is to pursue financial rewards.

Answer: FALSE Diff: 2 Page Ref: 7 LO: 1.2: Discuss three main reasons people decide to become entrepreneurs.

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20) According to the textbook, the four characteristics of successful entrepreneurs 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 Diff: 2 Page Ref: 9 LO: 1.3: Identify four main characteristics of successful entrepreneurs.

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

A) a desire to achieve financial rewards B) a passion for the business C) a desire to employ other people D) a desire to fulfill a lifetime dream E) a desire to bring a revolutionary new product or service to market Answer: B Diff: 2 Page Ref: 9 LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Reflective Thinking 22) According to the textbook, the passion that motivates people to launch entrepreneurial firms typically stems from the entrepreneur's belief that the business will ________.

A) positively influence people's lives B) make a lot of money C) increase his or her prestige D) lead to a high-level job in the corporate sector E) provide for a secure retirement Answer: A Diff: 2 Page Ref: 9 LO: 1.3: Identify four main characteristics of successful entrepreneurs.

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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) The ability to learn and iterate.

Answer: A Diff: 3 Page Ref: 10 LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Analytical Thinking 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 Diff: 2 Page Ref: 11 LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Reflective Thinking 25) Stacey Wills, who is at heart a craftsperson, recently started a firm to manufacturer 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 Diff: 1 Page Ref: 12 LO: 1.3: Identify four main characteristics of successful entrepreneurs.

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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 Diff: 2 Page Ref: 13 LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Reflective Thinking 27) The Savvy Entrepreneurial Firm feature in Chapter 1 focuses on Pandora, the Internet streaming music company. The feature's main purpose is to illustrate the importance of ________ as a key characteristic of the founders and employees of entrepreneurial firms.

A) execution intelligence B) a desire to pursue financial rewards C) tenacity despite failure D) passion for the business E) product/customer focus Answer: C Diff: 3 Page Ref: 14 LO: 1.3: Identify four main characteristics of successful entrepreneurs.

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

Answer: TRUE Diff: 1 Page Ref: 9 LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Reflective 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 Diff: 2 Page Ref: 9 LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Reflective Thinking 30) The passion that entrepreneurs have typically stems from the ability to pursue their own ideas.

Answer: FALSE Diff: 3 Page Ref: 9 LO: 1.3: Identify four main characteristics of successful entrepreneurs.

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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.

Diff: 2 Page Ref: 9 LO: 1.3: Identify four main characteristics of successful entrepreneurs.

AACSB: Reflective Thinking 32) Which of the following is not one of the five common myths about entrepreneurs?

A) Entrepreneurs are tenacious.

B) Entrepreneurs are moderate risk takers.

C) Entrepreneurs should be young and energetic.

D) Entrepreneurs love the spotlight.

E) Entrepreneurs are born not made.

Answer: A Diff: 2 Page Ref: 14 LO: 1.4: Explain five common myths regarding entrepreneurship.

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

A) gamblers B) moderate risk takers C) aggressive risk takers D) forceful risk takers E) minimal risk takers Answer: B Diff: 2 Page Ref: 15 LO: 1.4: Explain five common myths regarding entrepreneurship.

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34) Which of the following was not identified in the textbook as one of the common traits and characteristics of entrepreneurs?

A) Lengthy attention span B) Self-starter C) Tolerant of ambiguity D) Tenacious E) Pessimistic disposition Answer: E Diff: 3 Page Ref: 16 LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Reflective Thinking 35) Suppose you are a Small Business Development Center counselor and you're looking at the personality profiles of five potential entrepreneurs. Based on the profiles, which individual 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 Diff: 3 Page Ref: 16 LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Reflective Thinking 36) Which of the following is not a personality trait or characteristic common among entrepreneurs?

A) Promoter B) Visionary C) Short attention span D) Alert to opportunities E) Self-starter Answer: C Diff: 3 Page Ref: 16 LO: 1.4: Explain five common myths regarding entrepreneurship.

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37) Which of the following statements is correct regarding entrepreneurial activity and age ranges?

A) The highest percentage of entrepreneurs falls in the 18 to 29 age range.

B) The highest percentage of entrepreneurs falls in the 30 to 39 age range.

C) The highest percentage of entrepreneurs falls in the 40 to 49 age range.

D) The highest percentage of entrepreneurs falls in the 50 to 59 age range.

E) The highest percentage of entrepreneurs falls in the 60+ age range.

Answer: B Diff: 2 Page Ref: 17 LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Application of Knowledge 38) Which of the following statements is incorrect regarding entrepreneurial activity and age range?

A) The highest percent of business owners fall in the 30-39 age range.

B) The lowest percent of business owners fall in the 60+ age rage.

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

D) The majority of individuals who start companies are in their thirties and forties.

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

Answer: C Diff: 2 Page Ref: 17 LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Analytical Thinking 39) According to Chapter 1, investors often cite the ________ as their most important criterion in the decision to fund new ventures.

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 Diff: 2 Page Ref: 17 LO: 1.4: Explain five common myths regarding entrepreneurship.

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40) According to Chapter 1, a sentiment that venture capitalists often express is 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 Diff: 3 Page Ref: 17 LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Analytical Thinking 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 to not 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 Diff: 2 Page Ref: 17 LO: 1.4: Explain five common myths regarding entrepreneurship.

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

Answer: FALSE Diff: 2 Page Ref: 15 LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Analytical Thinking 43) Entrepreneurs are usually moderate, rather than high, risk-takers.

Answer: TRUE Diff: 3 Page Ref: 15 LO: 1.4: Explain five common myths regarding entrepreneurship.

AACSB: Reflective Thinking 44) Entrepreneurs are motivated primarily by money.

Answer: FALSE Diff: 2 Page Ref: 16 LO: 1.4: Explain five common myths regarding entrepreneurship.

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45) According to the textbook, there are 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 Diff: 2 Page Ref: 18 LO: 1.5: Describe the three types of start-up firms.

AACSB: Reflective 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 Diff: 2 Page Ref: 18 LO: 1.5: Describe the three types of start-up firms.

AACSB: Reflective 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 Diff: 1 Page Ref: 18 LO: 1.5: Describe the three types of start-up firms.

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48) Entrepreneurial firms ________.

A) are small firms that yield a level of income for their owner(s) that is similar to what they would earn when working for an employer B) bring to market new products and services that are not particularly innovative C) offer to customers common products that are not particularly innovative, and provide their owner(s) the opportunity to pursue a particular lifestyle and earn a living while doing so D) provide their owner(s) the opportunity to pursue a particular lifestyle and earn a living while doing so E) bring new products and services to market by creating and seizing opportunities Answer: E Diff: 2 Page Ref: 18 LO: 1.5: Describe the three types of start-up firms.

AACSB: Analytical Thinking 49) According to the textbook, Dropbox, Facebook, and LinkedIn are examples of ________ firms.

A) lifestyle B) salary-substitute C) industry-standard D) entrepreneurial E) standard-of-living Answer: D Diff: 1 Page Ref: 18 LO: 1.5: Describe the three types of start-up firms.

AACSB: Reflective Thinking 50) The Partnering for Success feature in Chapter 1 focuses on start-up incubators and accelerators. According to the feature, participating in a start-up incubator or accelerator is an excellent way to ________.

A) learn how to write a business plan B) prepare to become a franchisor C) gain access to mentors, partners and investors D) learn how to conduct an industry analysis E) prepare for a job in a major corporation Answer: C Diff: 2 Page Ref: 19 LO: 1.5: Describe the three types of start-up firms.

AACSB: Reflective Thinking 51) In terms of the "types" of startup firms, entrepreneurial firms bring new products and services to market.

Answer: TRUE Diff: 1 Page Ref: 18 LO: 1.5: Describe the three types of start-up 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.

Diff: 2 Page Ref: 18 LO: 1.5: Describe the three types of start-up firms.

AACSB: Reflective Thinking 53) Which of the following statements is not true about women-owned businesses in the United States?

A) The number of women-owned businesses is decreasing.

B) A total of 33 percent of women-owned businesses are owned by minorities.

C) In some industries, women own a significant share of the business.

D) The number of groups that support and advocate for women-owned businesses continues to increase.

E) Between 1997 and 2013, the number of women-owned businesses increased at a rate of oneand-a-half times the national average.

Answer: A Diff: 2 Page Ref: 20 LO: 1.6: Discuss the changing demographics of entrepreneurs in the United States.

AACSB: Reflective Thinking 54) There has been ________ in the number of minority entrepreneurs in the United States over the past several years.

A) a moderate increase B) a substantial decrease C) no meaningful change D) a substantial increase E) a moderate decrease Answer: D Diff: 2 Page Ref: 21 LO: 1.6: Discuss the changing demographics of entrepreneurs in the United States.

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55) Which of the following was not given in the textbook as a reason for the increase in the number of senior entrepreneurs?

A) Seniors tend to be more passionate about new business ideas than middle-aged or younger prospective entrepreneurs.

B) Many seniors have extensive business experience and other qualities that equip them for an entrepreneurial career.

C) Growing worries among seniors that they need to earn additional income to pay for future health care services and other expenses D) An increasing desire among older workers for more personal fulfillment in their lives E) Corporate downsizing Answer: A Diff: 2 Page Ref: 21 LO: 1.6: Discuss the changing demographics of entrepreneurs in the United States.

AACSB: Reflective Thinking 56) According to a recent Gallop survey, about ________ percent of kids in grades 5-12 say they plan to start their own business.

A) 10 B) 20 C) 30 D) 40 E) 50 Answer: D Diff: 3 Page Ref: 21 LO: 1.6: Discuss the changing demographics of entrepreneurs in the United States.

AACSB: Reflective Thinking 57) Over the past 10 years, the demographic makeup of entrepreneurial firms has remained fairly stable in the United States and around the world.

Answer: FALSE Diff: 2 Page Ref: 20 LO: 1.6: Discuss the changing demographics of entrepreneurs in the United States.

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

Answer: FALSE Diff: 2 Page Ref: 20 LO: 1.6: Discuss the changing demographics of entrepreneurs in the United States.

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

Answer: FALSE Diff: 2 Page Ref: 21 LO: 1.6: Discuss the changing demographics of entrepreneurs in the United States.

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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, which is called ________, stimulates economic activity, which is a good thing for the economy.

A) creative destruction B) repetitive destruction C) iterative replacement D) inventive replacement E) iterative destruction Answer: A Diff: 2 Page Ref: 22 LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

AACSB: Analytical Thinking 61) In the book The Theory of Economic Development, ________ argued that entrepreneurs develop new products and technologies that, over time, make current products and technologies obsolete. This process is called creative destruction.

A) Malcolm Gladwell B) Seth Godin C) Joseph Schumpeter D) Thomas Friedman E) Jim Collins Answer: C Diff: 2 Page Ref: 22 LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

AACSB: Reflective Thinking 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 Diff: 1 Page Ref: 22 LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

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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 Diff: 1 Page Ref: 24 LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

AACSB: Reflective Thinking 64) In regard to patent activity (issuance), which of the following statements is correct?

A) Small businesses outperform their larger counterparts.

B) Small businesses underperform their larger counterparts.

C) Small businesses and large businesses are relatively equal.

D) Small businesses are not active in patent activity.

E) Large businesses are not active in patent activity.

Answer: A Diff: 2 Page Ref: 24 LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

AACSB: Reflective Thinking 65) 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 Diff: 2 Page Ref: 22 LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

AACSB: Reflective Thinking 66) Innovation is the process of creating something new, which is central to the entrepreneurial process.

Answer: TRUE Diff: 1 Page Ref: 24 LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

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67) Small businesses outperform their larger counterparts in terms of patent activity (issuance).

Answer: TRUE Diff: 3 Page Ref: 24 LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

AACSB: Reflective Thinking 68) Identify and discuss the three 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 as follows: innovation and job creation. Innovation is the process of creating something new, which is central to the entrepreneurial process. According to the Small Business Administration (SBA) Office of Advocacy, small innovative firms are 16 times more productive than large innovative firms in terms of patents per employee. In regard to job creation, according to the SBA, small businesses create a substantial number of new jobs in the United States. Firms with 500 or fewer employees create 65 percent of new jobs on an annual basis.

Diff: 3 Page Ref: 24 LO: 1.7: Discuss the positive effects of entrepreneurship and entrepreneurial firms on economies and societies.

AACSB: Reflective Thinking 69) 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 the growing 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 Diff: 3 Page Ref: 25 LO: 1.8: Explain the entrepreneurial process.

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70) 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 Diff: 1 Page Ref: 25 LO: 1.8: Explain the entrepreneurial process.

AACSB: Reflective Thinking 71) 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 Diff: 1 Page Ref: 25 LO: 1.8: Explain the entrepreneurial process.

AACSB: Reflective Thinking 72) Jan Berry recently received a $500,000 inheritance from her maternal grandmother. Jan decided to use the money to start a business. According to the textbook, 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 Diff: 1 Page Ref: 25 LO: 1.8: Explain the entrepreneurial process.

AACSB: Reflective Thinking 73) 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 Diff: 1 Page Ref: 25 LO: 1.8: Explain the entrepreneurial process.

AACSB: Reflective Thinking 20 .

74) 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 Diff: 2 Page Ref: 25 LO: 1.8: Explain the entrepreneurial process.

AACSB: Reflective Thinking 75) The entrepreneurial process consists of four steps: deciding to become an entrepreneur, developing successful business ideas, moving from an idea to an entrepreneurial firm, and divesting or selling the entrepreneurial firm.

Answer: FALSE Diff: 2 Page Ref: 23 LO: 1.8: Explain the entrepreneurial process.

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Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 2 Recognizing Opportunities and Generating Ideas 1) iCracked, the company profiled in the opening feature of Chapter 2, was started by AJ Forsythe and Anthony Martin, two California college students. Through personal experiences, the two discovered that an opportunity existed to start a company that would ________.

A) repair computer printers inexpensively and conveniently B) repair used automobiles inexpensively and conveniently C) repair broken items (e.g., furniture and appliances) in college dorm rooms and apartments inexpensively and conveniently D) repair laptop computers inexpensively and conveniently E) repair iPhones inexpensively and conveniently Answer: E Diff: 2 Page Ref: 41 LO: 2.1: Explain the difference between opportunities and ideas.

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

A) idea B) scheme C) design D) proposal E) opportunity Answer: E Diff: 1 Page Ref: 43 LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective Thinking 3) According to the textbook, opportunities are ________.

A) easy to spot B) easy to spot in fast growing industries, but tough to spot in slow growing industries C) easy to spot in the manufacturing sector, but tough to spot in the service sector D) tough to spot E) neither easy nor tough to spot Answer: D Diff: 2 Page Ref: 43 LO: 2.1: Explain the difference between opportunities and ideas.

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4) An opportunity has the following four essential qualities ________.

A) attractive; timely; durable; and anchored in a product, service, or business that creates or adds value for its buyer or end user B) practical; opportune; appropriate; and anchored in a product, service, or business that is efficient and effective C) realistic; striking; timely; and anchored in a product, service, or business that is timely D) attention-getting; attractive; timely; and anchored in a product, service, or business that creates or adds value for its buyer or end user E) attractive, durable, resilient, and opportune Answer: A Diff: 2 Page Ref: 43 LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective Thinking 5) Brad Johnson is starting an 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) doorway of opportunity E) safety zone Answer: B Diff: 2 Page Ref: 43 LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective 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 Diff: 2 Page Ref: 43 LO: 2.1: Explain the difference between opportunities and ideas.

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7) Which of the following is correct regarding opportunities and ideas?

A) An opportunity and an idea are essentially the same thing.

B) An idea almost always meets the criteria of an opportunity.

C) An opportunity is a thought, an impression, or a notion.

D) An idea is a favorable set of circumstances that creates a need for a new product, service, or business.

E) It's important to discern whether a particular idea meets the criteria for an opportunity.

Answer: E Diff: 2 Page Ref: 44 LO: 2.1: Explain the difference between opportunities and ideas.

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

A) scheme, notion B) opportunity, idea C) idea, design D) idea, opportunity E) notion, scheme Answer: B Diff: 1 Page Ref: 44 LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective Thinking 9) Jessica Smith is thinking about starting a chain of fitness centers for young adults ages 18-30.

Which of the following is not an appropriate criterion for Jessica to test her idea against?

A) Determine whether the "window of opportunity" is open.

B) Determine whether a fitness center for young adults ages 18-30 meets the threshold of being a good idea.

C) Determine the extent to which the notion takes advantage of an environmental trend, solves a problem, or fills a gap in the marketplace.

D) Determine whether opening a fitness center for young adults ages 18-30 is timely.

E) Determine whether opening a fitness center for young adults ages 18-30 is a concept that creates value for its buyer or end user.

Answer: B Diff: 2 Page Ref: 44 LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective Thinking 10) An idea is a favorable set of circumstances that creates a need for a new product, service, or business.

Answer: FALSE Diff: 1 Page Ref: 43 LO: 2.1: Explain the difference between opportunities and ideas.

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11) An opportunity has four essential qualities. It is (1) rare, (2) attractive, (3) timely, and (4) anchored in a product, service, or business that creates or adds value for its buyer or end user.

Answer: TRUE Diff: 2 Page Ref: 43 LO: 2.1: Explain the difference between opportunities and ideas.

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

Answer: FALSE Diff: 2 Page Ref: 43 LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective Thinking 13) An idea is a thought, impression, or notion. It may or may not meet the criteria of an opportunity.

Answer: TRUE Diff: 1 Page Ref: 43 LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Reflective 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.

Diff: 1 Page Ref: 43 LO: 2.1: Explain the difference between opportunities and ideas.

AACSB: Analytical Thinking 15) The three ways 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 solving a problem C) observing trends, conducting brainstorming sessions, and studying industry trade journals D) observing trends, talking to consumers, and finding gaps in the marketplace E) reading books, solving a problem, and findings gaps in the marketplace Answer: A Diff: 2 Page Ref: 44 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

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16) GasBuddy and GasPriceWatch.com are companies started to help consumers save money on gas. Which environmental trend is most likely to have provided the impetus for the creation of these companies?

A) Regulatory changes B) Political changes C) Economic forces D) Technological advances E) Social forces Answer: C Diff: 2 Page Ref: 46 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Analytical Thinking 17) Economic forces impact the opportunities available to entrepreneurs. Which of the following alternatives reflects a set of economic forces that would 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) Interest rates, consumer spending patterns, and level of disposable income 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 Diff: 2 Page Ref: 46 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking 18) Which of the following is not an example of a social force?

A) Changes in interest rates B) Increasing participation in social networks C) Increasing diversity of the workplace D) Aging of the population E) Continual migration of people from small towns and rural areas to cities Answer: A Diff: 2 Page Ref: 47 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

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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. An increased focus on health and wellness is an important ________ that is creating opportunities in many areas for entrepreneurial firms.

A) economic force B) regulatory force C) legal force D) technological advances E) social force Answer: E Diff: 2 Page Ref: 47 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking 20) The increasing number of social networks on the Internet is attributed to a jump in the number of people who are wanting to connect with one another online. The increasing number of social networks is an important ________ trend.

A) political B) economic C) legal D) social E) demographic Answer: D Diff: 2 Page Ref: 47 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective 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 Diff: 2 Page Ref: 47 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

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22) If 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 actions and regulatory changes Answer: E Diff: 2 Page Ref: 48 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking 23) SafetyWeb is a Web-based service that helps parents protect their children's online reputation, privacy, and safety. 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) Talking to consumers E) Solving a problem Answer: E Diff: 2 Page Ref: 50 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking 24) The Savvy Entrepreneurial Firm feature in Chapter 2 focuses on a technique through which entrepreneurs can learn about emerging trends. The technique focused on in the chapter is ________.

A) online databases B) newspapers and magazines C) targeted Internet searches D) social media E) radio and television Answer: D Diff: 2 Page Ref: 50 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

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25) Casey Griggs is a very capable computer engineer. Recently, he noticed a problem that computer engineers have, and thought of a solution to the problem that might represent an opportunity for a new software product. Casey's idea for a new software product is an example of a(n) ________ discovery.

A) chance B) serendipitous C) traditional D) conventional E) opportune Answer: B Diff: 2 Page Ref: 50 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking 26) Clothing boutiques and specialty shops often start because there is a need for a particular product, but large retailers like Wal-Mart 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 Diff: 3 Page Ref: 53 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking 27) In 2000, Tish Cirovolo realized that there were no guitars on the market made specifically for women. As a result, she started Daisy Rock Guitars, a company that makes guitars just for women. Daisy Rock Guitars are stylish and come in feminine colors, and incorporate design features that accommodate a woman's smaller hand and build. The best way to describe how Cirovolo's business idea was recognized is ________.

A) brainstorming B) talking to consumers C) reading industry reports D) observing trends E) finding a gap in the marketplace Answer: E Diff: 3 Page Ref: 53 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

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28) A common way that gaps in the marketplace are recognized is ________.

A) by observing changing environmental trends B) by recognizing problems that need to be solved C) via studying industry reports D) when people become frustrated because they can't find a product or service that they need and recognize that other people feel the same way E) via combined focus groups and brainstorming sessions Answer: D Diff: 1 Page Ref: 53 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking 29) The three ways to identify an opportunity include observing trends, solving a problem, and finding gaps in the marketplace.

Answer: TRUE Diff: 2 Page Ref: 44 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking 30) Economic factors, social factors, technological advances, and political action and regulatory changes are the most important trends to follow in trying to identify opportunities.

Answer: TRUE Diff: 2 Page Ref: 44 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking 31) Many new businesses are successful by taking advantage of fads.

Answer: FALSE Diff: 2 Page Ref: 44 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking 32) Aging of the population, the increasing diversity of the workplace, and the continual migration of people from small towns and rural areas to cities are important economic trends.

Answer: FALSE Diff: 1 Page Ref: 45 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

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33) Describe the three separate ways that entrepreneurs 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 to identifying opportunities 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 to identifying opportunities is solving a problem. Sometimes identifying opportunities simply involves noticing a problem and finding a way to solve it. These problems can be pinpointed through observing trends and through more simple means (e.g., intuition, serendipity, or chance). 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. Large retailers like Wal-Mart, Costco, and Home Depot compete primarily on price by serving large groups of customers with similar needs. They do this by offering the most popular items targeted towards mainstream consumers. While this approach allows the large retailers to achieve economies of scale, it leaves gaps in the marketplace.

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.

Diff: 2 Page Ref: 44 LO: 2.2: Describe the three general approaches entrepreneurs use to identify opportunities.

AACSB: Reflective Thinking 34) The What Wrong feature in Chapter 2 focuses on Everpix, a company that enabled users to organize and store photos online in an innovative manner. Regrettably, Everpix failed.

According to the feature, Everpix's failure resulted from that fact that it's founders ________.

A) spent too much time and energy perfecting their service at the expense of building a business B) spent too much time and energy raising money at the expense of perfecting their service C) spent too much time networking at the expense of building a business D) spent too much time marketing their product at the expense of perfecting their service E) spent too much time analyzing their market at the expense of networking Answer: A Diff: 2 Page Ref: 55 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

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35) Which of the following statements is incorrect 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) Several studies show that prior experience in an industry actually blinds an entrepreneur to the recognition of new opportunities in the same industry.

D) Creativity is the process of generating novel or useful ideas.

E) The corridor principle states that once an entrepreneur starts a firm, he or she begins a journey down a path where "corridors" leading to new venture opportunities become apparent.

Answer: C Diff: 3 Page Ref: 55 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Analytical Thinking 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 Diff: 2 Page Ref: 56 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective 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 Diff: 2 Page Ref: 56 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 incorrect in regard to entrepreneurial alertness?

A) The research findings on entrepreneurial alertness are conclusive.

B) Alertness is largely a learned skill.

C) People who have more knowledge of an area tend to be more alert to opportunities in that area than others.

D) The term "entrepreneurial alertness" is often associated with a "sixth sense" that seems to allow some people to see opportunities that others miss.

E) Entrepreneurial alertness is defined as the ability to notice things without engaging in deliberate search.

Answer: A Diff: 3 Page Ref: 56 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking 39) According to the textbook, research results over time consistently suggest 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 Diff: 3 Page Ref: 57 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

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

A) separate B) functional C) lone D) individual E) solo Answer: E Diff: 2 Page Ref: 57 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

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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 one or more partners E) through a business incubator program Answer: C Diff: 2 Page Ref: 57 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking 42) A solo entrepreneur is an individual who identified his or her business idea ________. A network entrepreneur is an individual who identified his or her business idea ________.

A) through social contacts; on their own B) through a business incubator program; through social contacts C) on their own; through social contacts D) through the assistance of a paid consultant; through social contacts E) with one or more partners; on their own Answer: C Diff: 3 Page Ref: 57 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking 43) ________ relationships are characterized by frequent interactions that form between coworkers, friends, and spouses.

A) Balanced B) Weak-tie C) Lateral-tie D) Moderate-tie E) Strong-tie Answer: E Diff: 2 Page Ref: 57 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 ________ relationships.

A) weak-tie B) horizontal-tie C) strong-tie D) multiple-tie E) vertical-tie Answer: C Diff: 2 Page Ref: 57 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking 45) Alex has a number of casual acquaintances that he interacts with infrequently. The relationships that Alex has with these people are referred to as ________ relationships.

A) strong-tie B) moderate-tie C) lateral-tie D) weak-tie E) multiple-tie Answer: D Diff: 2 Page Ref: 57 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking 46) According to research in this area, it is more likely that an entrepreneur will get a new business idea through a ________ relationship than the alternatives.

A) weak-tie B) moderate-tie C) vertical-tie D) lateral-tie E) strong-tie Answer: A Diff: 2 Page Ref: 57 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 Diff: 1 Page Ref: 57 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective 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 Diff: 3 Page Ref: 57 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective 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, which is her way of thinking it through, at both the conscious and unconscious level. The stage of the creative process that Macy is in while she is mulling over an idea is referred to as ________.

A) preparation B) insight C) evaluation D) elaboration E) incubation Answer: E Diff: 2 Page Ref: 58 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

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50) In the five-stage creative process, the flash of recognition, or what is sometimes referred to as the "eureka" experience, occurs in the ________ stage.

A) insight B) preparation C) incubation D) elaboration E) evaluation Answer: A Diff: 2 Page Ref: 58 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking 51) In the five-stage creative process, the stage in which the creative idea is put into final form is referred to as the ________ stage.

A) insight B) preparation C) incubation D) elaboration E) evaluation Answer: D Diff: 2 Page Ref: 58 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking 52) Several studies have shown that prior experience in an industry helps entrepreneurs recognize business opportunities.

Answer: TRUE Diff: 2 Page Ref: 56 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking 53) Opportunity recognition may be an innate skill or cognitive process.

Answer: TRUE Diff: 2 Page Ref: 56 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

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54) Weak-tie relationships are characterized by infrequent interaction and ties between casual acquaintances.

Answer: TRUE Diff: 2 Page Ref: 57 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective 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 Diff: 3 Page Ref: 57 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking 56) The five stages of the creative process include preparation, incubation, insight, evaluation, and elaboration.

Answer: TRUE Diff: 3 Page Ref: 57 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking 57) Incubation is the stage of the creative process during which an idea is subjected to scrutiny and analyzed for its viability.

Answer: FALSE Diff: 2 Page Ref: 58 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking 58) Evaluation is the stage of the creative process during which the idea is put into its final form.

Answer: FALSE Diff: 2 Page Ref: 58 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, on the other hand, which form between casual acquaintances, are not as apt to be between like-minded individuals, so one person may say something to another that sparks a completely new idea.

Diff: 3 Page Ref: 57 LO: 2.3: Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.

AACSB: Reflective Thinking 60) ________ is (are) used to generate a number of ideas quickly.

A) Insight groups B) Competitive intelligence gatherings C) Examination groups D) Survey groups E) Brainstorming Answer: E Diff: 1 Page Ref: 59 LO: 2.4: Identity and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective 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 encouraged.

D) Leapfrogging is encouraged.

E) The session is used for decision making.

Answer: E Diff: 2 Page Ref: 59 LO: 2.4: Identity 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 Diff: 2 Page Ref: 59 LO: 2.4: Identity and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking 63) According to the textbook, 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 Diff: 2 Page Ref: 60 LO: 2.4: Identity and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective 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 Diff: 2 Page Ref: 61 LO: 2.4: Identity and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking 65) An example of a valuable library resource is IBISWorld, which is a(n) ________.

A) business publication B) academic journal C) Census Bureau publication D) trade journal E) database of industry-related information Answer: E Diff: 2 Page Ref: 61 LO: 2.4: Identity and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking

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66) To make sure that its customers are satisfied and to probe for new product ideas, Intuit routinely sends employees to the facilities of their customers. This technique for generating new business ideas is called ________.

A) brainstorming B) day-in-the-life research C) focus group D) survey E) customer advisory board Answer: B Diff: 2 Page Ref: 62 LO: 2.4: Identity and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking 67) Brainstorming is used to generate a number of ideas quickly.

Answer: TRUE Diff: 2 Page Ref: 59 LO: 2.4: Identity and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking 68) Brainstorming sessions are designed to move slowly, so ideas can be presented and evaluated.

Answer: FALSE Diff: 3 Page Ref: 59 LO: 2.4: Identity and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking 69) Focus groups typically involve a group of people who are unfamiliar with a topic and are brought together to respond to questions.

Answer: FALSE Diff: 2 Page Ref: 60 LO: 2.4: Identity and describe techniques entrepreneurs use to generate ideas.

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70) 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. Among the purposes a brainstorming session could be used for include the generation of new business, product, or service ideas. 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 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.

Diff: 2 Page Ref: 59 LO: 2.4: Identity and describe techniques entrepreneurs use to generate ideas.

AACSB: Reflective Thinking 71) 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, like creating casual electronic games for adults, is merged with extensive library and Internet research, which might provide insights into the best types of casual games to create. 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.

Diff: 2 Page Ref: 61 LO: 2.4: Identity and describe techniques entrepreneurs use to generate ideas.

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72) A(n) ________ is a physical or digital repository for storing ideas.

A) suggestion bank B) idea depository C) suggestion pool D) idea bank E) proposition pool Answer: D Diff: 1 Page Ref: 62 LO: 2.5: Discuss actions to take to encourage continuous development of new ideas in entrepreneurial firms.

AACSB: Reflective Thinking 73) Which of the following is an example of how to encourage creativity at the organizational level?

A) Maintain a "stiff" organizational culture with no room for different behaviors.

B) Elevate creativity's importance throughout the organization.

C) Pigeonhole employees; keep them in the same job for years.

D) Make no attempt to hire creative people.

E) Promote a mentality suggesting that the best solutions to all problems have already been found.

Answer: B Diff: 2 Page Ref: 62 LO: 2.5: Discuss actions to take to encourage continuous development of new ideas in entrepreneurial firms.

AACSB: Reflective Thinking 74) An idea bank is a physical or digital repository for storing ideas.

Answer: TRUE Diff: 1 Page Ref: 63 LO: 2.5: Discuss actions to take to encourage continuous development of new ideas in entrepreneurial firms.

AACSB: Reflective Thinking 75) Creativity and innovation are almost identical concepts.

Answer: FALSE Diff: 2 Page Ref: 63 LO: 2.5: Discuss actions to take to encourage continuous development of new ideas in entrepreneurial firms.

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Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 3 Feasibility Analysis 1) LuminAid, the company profiled in the opening feature of Chapter 3, was started to produce solar pillows, which are solar powered devices that are simple and can be easily and affordably shipped to disaster locations. The feature describes how LuminAid sought to validate its business idea. According to the feature ________.

A) LuminAid was unable to validate its business idea and the idea was dropped B) LuminAid's feasibility analysis was incomplete, and the company has struggled ever since it was launched C) LuminAid's feasibility analysis was flawed, and the company failed D) LuminAid did an exemplary job validating its business idea, and its solar pillow is now available via the company's Web site, Amazon.com, LL Bean and several similar outlets E) LuminAid's feasibility analysis was well done, and the company was acquired by Coleman before it could launch its solar pillow as an independent company Answer: D Diff: 1 Page Ref: 75 LO: 3.1: Explain what a feasibility analysis is and why it's important.

AACSB: An7.3alytical Thinking 2) ________ is the process of determining whether a business idea is viable.

A) Feasibility analysis B) Opportunity recognition C) Viability analysis D) Achievability analysis E) Scenario analysis Answer: A Diff: 1 Page Ref: 77 LO: 3.1: Explain what a feasibility analysis is and why it's important.

AACSB: Reflective Thinking 3) ________ research is research that is collected by the person or persons completing the analysis. ________ research probes data that is already collected.

A) Primary, Derivative B) Secondary, Primary C) Primary, Secondary D) Indirect, Direct E) Direct, Indirect Answer: C Diff: 1 Page Ref: 78 LO: 3.1: Explain what a feasibility analysis is and why it's important.

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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. Collecting data via a survey you administer yourself is referred to as ________ research.

A) direct B) derivative C) primary D) secondary E) initial Answer: C Diff: 2 Page Ref: 78 LO: 3.1: Explain what a feasibility analysis is and why it's important.

AACSB: Reflective 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 Diff: 1 Page Ref: 78 LO: 3.1: Explain what a feasibility analysis is and why it's important.

AACSB: Reflective Thinking 6) Trade journals, industry-related publications, government statistics, and competitors' Web sites are examples of ________ research.

A) secondary B) action C) principal D) legacy E) vertical Answer: A Diff: 2 Page Ref: 78 LO: 3.1: Explain what a feasibility analysis is and why it's important.

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

To get a full appreciation of the competitive nature of the industry, and how she might position her products, Jennifer has spent considerable time looking at industry-related publications, Hoover's Online, and ABI-Inform, which is a database that provides access to articles covering a wide-variety of business and industry related issues. Jennifer is conducting ________ research.

A) primary B) secondary C) action D) temporary E) purposeful Answer: B Diff: 2 Page Ref: 78 LO: 3.1: Explain what a feasibility analysis is and why it's important.

AACSB: Reflective Thinking 8) Which of the following is not one of the four areas of feasibility analysis discussed in the textbook?

A) Product/service feasibility B) Financial feasibility C) Societal feasibility D) Organizational feasibility E) Industry/market feasibility Answer: C Diff: 2 Page Ref: 78 LO: 3.1: Explain what a feasibility analysis is and why it's important.

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

Answer: TRUE Diff: 1 Page Ref: 77 LO: 3.1: Explain what a feasibility analysis is and why it's important.

AACSB: Reflective Thinking 10) A feasibility analysis is an assessment of a potential product or service idea rather than a potential business.

Answer: FALSE Diff: 2 Page Ref: 77 LO: 3.1: Explain what a feasibility analysis is and why it's important.

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

Answer: TRUE Diff: 2 Page Ref: 77 LO: 3.1: Explain what a feasibility analysis is and why it's important.

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12) Primary research probes data that is already collected.

Answer: FALSE Diff: 2 Page Ref: 78 LO: 3.1: Explain what a feasibility analysis is and why it's important.

AACSB: Reflective Thinking 13) Census Bureau data, analyst forecasts, and other pertinent information gleaned through library and Internet research are examples of primary research.

Answer: FALSE Diff: 2 Page Ref: 78 LO: 3.1: Explain what a feasibility analysis is and why it's important.

AACSB: Reflective 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.

Diff: 1 Page Ref: 77 LO: 3.1: Explain what a feasibility analysis is and why it's important.

AACSB: Reflective Thinking 15) ________ feasibility 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 Diff: 1 Page Ref: 78 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.

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16) The two components of product/service feasibility analysis are ________ and ________.

A) product/service value; product/service affordability B) product/service demand; product/service timeliness C) product/service timeliness; product/service value D) product/service durability; product/service value E) product/service desirability; product/service demand Answer: E Diff: 2 Page Ref: 78 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 17) Does it make sense? Is it reasonable? Is it something consumers will get excited about? Does it take advantage of an environmental trend, solve a problem, or fill a gap in the marketplace?

These are the types of questions asked during the ________ feasibility component of a complete feasibility analysis.

A) financial B) industry/target market C) organizational D) concept E) product/service Answer: E Diff: 2 Page Ref: 79 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 18) Which of the following is not a part of assessing the product/service feasibility of a business idea?

A) "Get out of the building" and talk to potential customers B) Surveying potential customers C) Library research D) Analyzing industry attractiveness E) Concept test Answer: D Diff: 2 Page Ref: 79 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.

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19) A(n) ________ involves showing a preliminary description of a product or service idea to prospective customers to gauge customer interest, desirability, and purchase intent.

A) concept test B) product/service statement C) impression test D) idea prospectus E) idea test Answer: A Diff: 1 Page Ref: 79 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 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 how the product or service will be sold and distributed 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 Diff: 3 Page Ref: 79 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 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 Diff: 2 Page Ref: 79 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.

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22) Which of the following is an incorrect approach to administering a concept test?

A) The concept statement shouldn't exceed one page.

B) After the concept statement is developed, it should be shown to at least 10 people.

C) The best candidates to distribute a concept statement to are family and friends.

D) If time permits, a concept statement should be used in an iterative manner and distributed to several groups of people.

E) A short survey should be attached to the concept statement to solicit feedback.

Answer: C Diff: 2 Page Ref: 79 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 23) A/B split testing, landing pages, prototyping services, and Web site usability testing are all online tools available to assist in the ________ stage of developing a business idea.

A) opportunity recognition B) feasibility analysis C) business model D) business plan E) growth plan Answer: B Diff: 2 Page Ref: 81 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 24) PickFu and Ubounce are Web sites 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 Diff: 3 Page Ref: 81 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.

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25) Foundersuite, Quirky and Unassumer are Web sites that provide access to ________.

A) feedback on business ideas B) landing pages C) surveys D) prototyping services E) market research Answer: A Diff: 3 Page Ref: 82 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 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 Diff: 3 Page Ref: 83 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 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 Diff: 2 Page Ref: 83 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.

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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 Diff: 2 Page Ref: 83 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 29) According to the textbook, the only way to know if your product or service is what people want 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 Diff: 2 Page Ref: 83 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 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 Diff: 2 Page Ref: 84 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.

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31) Product/service feasibility analysis is an assessment of the overall appeal of the product or service being proposed.

Answer: TRUE Diff: 1 Page Ref: 78 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 32) The two components to product/service feasibility analysis are product/service desirability and total startup funds needed.

Answer: FALSE Diff: 2 Page Ref: 78 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 33) A concept statement should be two to three pages long.

Answer: FALSE Diff: 2 Page Ref: 79 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 34) 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 Diff: 2 Page Ref: 79 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 35) Quirky is a Web site that allows you to submit product ideas to a community that vets and provides feedback on the ideas.

Answer: TRUE Diff: 2 Page Ref: 82 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.

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36) Describe what a concept statement is, and what it should include.

Answer: A concept statement is a preliminary description of a business. It 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 description of how the product or service will be sold and distributed.

The concept statement is administered as part of product/market feasibility analysis and should be used to get initial feedback and input regarding a business idea.

Diff: 2 Page Ref: 79 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 37) What is gumshoe research and why is it important?

Answer: Gumshoe research is simply doing what it takes to collect sufficient information to assess the target market feasibility of a product idea. 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. For example, if your idea is to sell educational toys, you might spend a week volunteering at a day care center and watch how children interact with toys. Similarly, you might spend some time browsing through a toy store and observing the types of toys that get the most attention. 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.

Diff: 2 Page Ref: 85 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 38) A(n) ________ is a group of firms producing a similar product or service. A firm's ________ is the limited portion of the industry that it goes after or to which it wants to appeal.

A) target market; industry B) trade group; industry C) industry; trade group D) competitive group; target market E) industry; target market Answer: E Diff: 1 Page Ref: 85 LO: 3.3: Describe an industry/market feasibility analysis, explain its purpose, and discuss the two primary issues to consider when completing this analysis.

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39) The two components of industry/target market feasibility analysis are ________.

A) industry status and target market status B) industry attractiveness and target market attractiveness C) industry sufficiency and target market demand D) industry attractiveness and product/service demand E) industry evolution and target market attractiveness Answer: B Diff: 2 Page Ref: 85 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 40) ________ feasibility analysis is an assessment of the overall appeal of the industry and market for the product or service being proposed.

A) Institutional B) Financial C) Organizational D) Product/service E) Industry/target market Answer: E Diff: 1 Page Ref: 85 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 41) 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 Diff: 2 Page Ref: 85 LO: 3.3: Describe an industry/market feasibility analysis, explain its purpose, and discuss the two primary issues to consider when completing this analysis.

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42) The Savvy Entrepreneurial Firm feature in Chapter 3 focuses on Bill Gross, and how a company he was leading, Knowledge Adventure, made a 180-degree turn on the positioning of a product. According to the feature, Gross and his team made the change as a result of ________.

A) observing how customers acted when buying their product B) studying industry trends C) conducting Internet research D) administering a concept test and a buying intentions survey E) hiring consultants to provide them advice Answer: A Diff: 2 Page Ref: 85 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 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 Diff: 2 Page Ref: 87 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 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 Diff: 3 Page Ref: 88 LO: 3.3: Describe an industry/market feasibility analysis, explain its purpose, and discuss the two primary issues to consider when completing this analysis.

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45) Which of the following statements about target markets is incorrect?

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 and can focus on serving a specialized market very well.

D) A target market is a place within a larger market segment that represents a narrower group of customers with similar needs.

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

Answer: E Diff: 2 Page Ref: 88 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 46) ________ 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 Diff: 1 Page Ref: 88 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 47) Industry/target market feasibility is an assessment of the overall appeal of the industry and the target market for the product or service being proposed.

Answer: TRUE Diff: 1 Page Ref: 85 LO: 3.3: Describe an industry/market feasibility analysis, explain its purpose, and discuss the two primary issues to consider when completing this analysis.

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48) Describe the purpose of industry/target market feasibility analysis, and identify the two primary issues that should be considered. What is the difference between a firm's industry and its target market?

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. 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.

Diff: 2 Page Ref: 85 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 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 Diff: 2 Page Ref: 88 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 50) The two primary issues to consider in organizational feasibility analysis are management prowess and ________.

A) market timeliness B) concept testing C) resource sufficiency D) target market attractiveness E) total startup cash needed Answer: C Diff: 2 Page Ref: 89 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.

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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 Diff: 1 Page Ref: 89 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 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 participate B) whether the members of the management team have worked successfully together before and the passion the sole entrepreneur or 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 or sole entrepreneur understands the markets in which the firm will participate 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 the sole entrepreneur or the management team has for the business idea Answer: A Diff: 3 Page Ref: 89 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 53) The focus in organizational feasibility analysis is on ________.

A) financial resources for manufacturing firms and nonfinancial resources for service firms B) financial resources for service firms and nonfinancial resources for manufacturing firms C) nonfinancial and financial resources equally D) nonfinancial resources E) financial resources Answer: D Diff: 2 Page Ref: 89 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.

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54) The What Went Wrong? Feature in Chapter 3 focuses on Standout Jobs. Although the company was acquired by a larger firm in 2010, it was not considered to be a financial success.

According to the case, Standout Jobs failed to meet expectations for the following three reasons: ________.

A) First, the company's timing was bad; second, prior to launch, the company's management team didn't have a strong enough understanding of the HR/recruitment market; and third, the company's leaders found that you can't shove a solution down your customer's throats B) First, the company's product had flaws; second, the company's management team didn't have a strong enough understanding of the HR/recruitment market; and third, the company's marketing plan was ineffective C) First, the company's management team was inexperienced; second, the company's timing was bad; and third, the company was poorly financed D) First, the company's product had flaws; second, the company management team was inexperienced; and third, the company found that you can't shove a solution down your customer's throats E) First, the company's feasibility analysis was poor; second, the company's management team didn't have a strong enough understanding of the HR/recruitment market; and third, the company was poorly financed Answer: A Diff: 1 Page Ref: 90 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 55) The Partnering for Success feature in Chapter 3 focuses on the task of finding the right business partner. According to the feature, which of the following is an incorrect rule-of-thumb in finding 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 negotiate the partnership agreement.

Answer: D Diff: 2 Page Ref: 92 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

17 .

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) Affordable office space D) Key equipment needed to operate the business E) Key support personnel Answer: B Diff: 2 Page Ref: 92 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 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 Diff: 2 Page Ref: 92 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 58) Organizational feasibility analysis is conducted to determine whether a proposed business venture has sufficient management expertise, organizational competence, and resources to successfully launch its business.

Answer: TRUE Diff: 2 Page Ref: 89 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 59) The focus in organizational feasibility analysis is on financial resources.

Answer: FALSE Diff: 2 Page Ref: 89 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

18 .

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

Answer: TRUE Diff: 2 Page Ref: 89 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 61) A new venture team is the group of founders, key employees, and advisers that either manage or help manage a new business in its startup years.

Answer: TRUE Diff: 2 Page Ref: 89 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 62) In regard to management prowess, two of the most important factors in this area are the passion that the solo entrepreneur or the management team has for the business idea and the extent to which the management team or solo entrepreneur understands the markets in which the firm will participate.

Answer: TRUE Diff: 3 Page Ref: 89 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 63) ________ feasibility analysis is a quick financial assessment of the viability of a business idea.

A) Organizational B) Institutional C) Product/service D) Financial E) Industry/market Answer: D Diff: 1 Page Ref: 92 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

19 .

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 Diff: 2 Page Ref: 92 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 65) The most important issues to consider in financial feasibility analysis are: financial performance of similar businesses, total cash needed, and ________.

A) the projected internal rate of return of the proposed venture B) the projected years to an IPO or an acquisition for the proposed venture C) management prowess D) overall attractiveness of the proposed venture E) the projected borrowing power of the proposed business Answer: D Diff: 2 Page Ref: 92 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 66) Which of the following is incorrect 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 Diff: 2 Page Ref: 92 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

20 .

67) Which of the following factors is a negative as it pertains to the financial feasibility of a business venture?

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—meaning that once a firm wins a client, the client will provide recurring sources of revenue C) Inability to forecast income and expenses with a reasonable degree of accuracy D) Internally generated funds to finance and sustain growth E) Availability of an exit opportunity for investors to convert equity into cash Answer: C Diff: 3 Page Ref: 92 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 68) Which of the following factors is a positive as it pertains to the financial feasibility of a business venture?

A) Inconsistent and slow growth in sales during the first five to seven years in a clearly defined market niche B) High percentage of recurring revenue C) Inability to forecast income and expenses with a reasonable degree of accuracy D) Reliance on externally generated funds to finance and sustain growth E) Absence of an existing opportunity for investors to convert equity into cash Answer: B Diff: 3 Page Ref: 92 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 69) For financial feasibility analysis, a very detailed and comprehensive financial analysis is required.

Answer: FALSE Diff: 1 Page Ref: 92 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 70) 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.

Answer: TRUE Diff: 2 Page Ref: 92 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

21 .

71) The template for completing a feasibility analysis included in Appendix 3.1 of the book is called the ________ analysis.

A) First Evaluation B) Initial Screen C) First Pass D) First Screen E) Flash Screen Answer: D Diff: 3 Page Ref: 94 LO: 3.6: Describe a financial feasibility analysis template and explain why it is important for entrepreneurs to use this template.

AACSB: Reflective Thinking 72) The First Screen feasibility analysis template included in Chapter 3 is called "First Screen" because ________.

A) it is the first feasibility analysis template created B) it is the first and most important step in the opportunity recognition process C) it is the first step in a sequence of several steps that must be completed before a business idea is deemed to be feasible D) feasibility analysis is an entrepreneur's initial or first pass at determining the feasibility of a business idea E) it is the first of several "screens" that a business idea must pass through before it is considered to be feasible Answer: D Diff: 2 Page Ref: 95 LO: 3.6: Describe a financial feasibility analysis template and explain why it is important for entrepreneurs to use this template.

AACSB: Reflective Thinking 73) The mechanics for filling out a First Screen worksheet are complicated.

Answer: FALSE Diff: 2 Page Ref: 94 LO: 3.6: Describe a financial feasibility analysis template and explain why it is important for entrepreneurs to use this template.

AACSB: Reflective Thinking 74) First Screen is a template for completing industry analysis Answer: FALSE Diff: 2 Page Ref: 94 LO: 3.6: Describe a financial feasibility analysis template and explain why it is important for entrepreneurs to use this template.

AACSB: Reflective Thinking

22 .

75) Briefly describe the purpose of the First Screen and how it's 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. The fact that an issue, such as total startup cash needed, is low potential does not necessarily mean that the business idea is not feasible. By drawing attention to this issue, an entrepreneur may think through less expensive ways to launch the venture.

Diff: 3 Page Ref: 94 LO: 3.6: Describe a financial feasibility analysis template and explain why it is important for entrepreneurs to use this template.

AACSB: Reflective Thinking

23 .

Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 4 Developing an Effective Business Model 1) Her Campus Media, the focus of the opening feature of Chapter 4, features a vibrant online magazine, with feature articles targeted toward all aspects of college life and survival. According to the feature, Her Campus's business model focuses on connecting companies with college females. The key to making this work is ________.

A) the strength of Her Campus Media's management team B) the strength of Her Campus Media's brand C) the quality of the online content that Her Campus Media produces D) the functionality and vibrancy of the company's Web site E) Her Campus's unparalleled access to college females Answer: E Diff: 2 Page Ref: 112 LO: 4.1: Describe business models and discuss their importance.

AACSB: Reflective 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 Diff: 1 Page Ref: 112 LO: 4.1: Describe business models and discuss their importance.

AACSB: Reflective Thinking 3) The Savvy Entrepreneurial Firm feature in Chapter 4 focuses on the ways in which Quirky creates, delivers and captures value for its stakeholders. According to the feature, Quirky would be a business that would be difficult to copy. According to the feature, it would be difficult to copy because ________.

A) it has raised over $91 million and has over 550,000 people in its network B) it has a highly-functional Web site and has a talented management team C) it has a savvy marketing plan and has over 550,000 people in its network D) it has raised over $91 million and has a talented management team E) it has an excellent Internet domain name and has a first-mover advantage Answer: A Diff: 2 Page Ref: 113 LO: 4.1: Describe business models and discuss their importance.

AACSB: Reflective Thinking

1 .

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 Diff: 2 Page Ref: 114 LO: 4.1: Describe business models and discuss their importance.

AACSB: Reflective Thinking 5) In regard to business models, which of the following statements is incorrect?

A) There is a standard business model that most firms follow.

B) A firm's business model is inherently dependent on the collection of resources it controls and the capabilities it possesses.

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 is its plan or diagram for how it competes.

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

Answer: A Diff: 2 Page Ref: 114 LO: 4.1: Describe business models and discuss their importance.

AACSB: Reflective Thinking 6) The Partnering for Success feature in Chapter 4 focused on Web-based platforms, including Odesk, Elance, and Guru, that make it easy to identify and hire experienced ________.

A) part time employees B) freelancers C) interns D) virtual assistants E) full-time employees Answer: B Diff: 1 Page Ref: 132 LO: 4.1: Describe business models and discuss their importance.

AACSB: Reflective Thinking

2 .

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

Answer: TRUE Diff: 1 Page Ref: 112 LO: 4.1: Describe business models and discuss their importance.

AACSB: Reflective 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.

Diff: 1 Page Ref: 112 LO: 4.1: Describe business models and discuss their importance.

AACSB: Reflective 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 Diff: 2 Page Ref: 115 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking 10) ________ business models depict existing plans or recipes firms can use to determine how they will create, deliver, and capture value for their stakeholders.

A) Revolutionary B) Normal C) Customary D) Disruptive E) Standard Answer: E Diff: 2 Page Ref: 115 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking

3 .

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 Diff: 2 Page Ref: 115 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking 12) Which of the following statements about business models is incorrect?

A) There are two general types of business models.

B) There is no perfect business model.

C) Most of the standard business models have been in place for some time.

D) A firm's business model is confined to its own boundaries.

E) Firms should guard themselves against thinking that one particular business model is a "home run" regardless of circumstances.

Answer: D Diff: 2 Page Ref: 115 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking 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 Diff: 2 Page Ref: 115 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking

4 .

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 Diff: 2 Page Ref: 115 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking 15) Which of the following firms has a peer-to-peer business model?

A) Dell B) Dropbox C) Airbnb D) Salesforce.com E) Google Answer: C Diff: 2 Page Ref: 118 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking 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 Diff: 2 Page Ref: 118 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking

5 .

17) Google and its AdWords program is an example of a ________ disruptive business model.

A) low-end B) new-market C) high-quality D) low-price E) new-channel Answer: B Diff: 2 Page Ref: 118 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking 18) Southwest Airlines is an example of a ________ disruptive business model.

A) low-end B) new-market C) high-quality D) new-product E) new-channel Answer: A Diff: 2 Page Ref: 118 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking 19) There are two types of disruptive business models — ________ and ________.

A) low-end; high-end B) new-product; new-market C) new-market; low-end D) new-channel; high-quality E) standard; unique Answer: C Diff: 2 Page Ref: 118 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking 20) Which of the following firms introduced a disruptive business model?

A) Salesforce.com B) eBay C) Panera Bread D) Barnes & Nobel E) J. Crew Answer: A Diff: 2 Page Ref: 119 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Analytical Thinking 6 .

21) Standard business models depict existing plans or recipes firms can use to determine how they will create, deliver, and capture value for their stakeholders.

Answer: TRUE Diff: 1 Page Ref: 115 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking 22) It is important to understand that there are several perfect business models.

Answer: FALSE Diff: 2 Page Ref: 115 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

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

Answer: TRUE Diff: 2 Page Ref: 118 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking 24) According to the textbook, Southwest Airlines introduced a new market disruption type of disruptive business model.

Answer: FALSE Diff: 3 Page Ref: 118 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking 25) The Barringer/Ireland Business Model Template has five major categories and 14 individual parts.

Answer: FALSE Diff: 2 Page Ref: 120 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking

7 .

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).

Diff: 2 Page Ref: 115 LO: 4.2: Identify and describe the two general types of business models—standard and disruptive business models.

AACSB: Reflective Thinking 27) The Barringer/Ireland Business Model Canvas consists of ________ major category(ies) and ________ parts.

A) 1; 12 B) 3; 9 C) 6; 18 D) 4; 12 E) 2; 6 Answer: D Diff: 2 Page Ref: 120 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 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 Diff: 2 Page Ref: 121 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

8 .

29) Which of the following is not one of the four major categories in the Barringer/Ireland Business Model Template?

A) Operations B) Resources C) Channels D) Core strategy E) Financials Answer: C Diff: 2 Page Ref: 121 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 30) In the Barringer/Ireland Business Model Template, ________ 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 Diff: 2 Page Ref: 120 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 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 Diff: 2 Page Ref: 120 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

9 .

32) Which of the following is not one of the four elements of the core strategy section of the Barringer/Ireland Business Model Template?

A) Business mission B) Key assets C) Basis of differentiation D) Target market E) Product/market scope Answer: B Diff: 2 Page Ref: 121 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 33) A business's ________ describes why it exists and what its business model is supposed to accomplish.

A) values statement B) importance statement C) differentiation statement D) mission statement E) significance statement Answer: D Diff: 2 Page Ref: 121 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 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. In the terminology used in the Barringer/Ireland Business Model Template, Nathan's statement is referred to as his ________ statement.

A) values B) uniqueness C) differentiation D) mission E) task Answer: D Diff: 2 Page Ref: 121 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

10 .

35) The first box in the Barringer/Ireland Business Model Template is ________.

A) product/market scope B) revenue streams C) business mission D) target market E) channels Answer: C Diff: 2 Page Ref: 121 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 36) When completing the basis of differentiation box in the Barringer/Ireland Business Model Template, it is best to limit the description to ________.

A) two to three points B) one point C) five to10 points D) two to three points for manufacturing firms and five to 10 points for service firms E) five to 10 points for manufacturing firms and two to three points for service firms Answer: A Diff: 2 Page Ref: 122 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 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 Diff: 2 Page Ref: 122 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

11 .

38) Kaitlyn Harris is opening up a women's fashion boutique that will focus on professional women that are 18-30 years old. The age range of women that Kaitlyn plans to focus on is referred to as her ________ market.

A) controlled B) ambitious C) identifiable D) target E) aspirational Answer: D Diff: 2 Page Ref: 122 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 39) A company's ________ scope defines the products and markets on which it will concentrate.

A) product/market B) offering/industry C) business/market D) business/industry E) offering/market Answer: A Diff: 2 Page Ref: 123 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 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 Diff: 2 Page Ref: 123 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

12 .

41) The Resources section of the Barringer/Ireland Business Model Template consists of the ________ and ________ boxes.

A) business mission; core competency B) core competency; product/market scope C) channels; key partners D) core competency; key assets E) revenue streams; key assets Answer: D Diff: 2 Page Ref: 124 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 42) In the Barringer/Ireland Business Model Template, 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) staple proficiency E) key aptitude Answer: B Diff: 2 Page Ref: 124 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 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. In the terminology of the Barringer/Ireland Business Model Template, 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 Diff: 2 Page Ref: 124 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

13 .

44) In the terminology of the Barringer/Ireland Business Model Template, ________ assets are the assets that a firms owns that enable its business model to work.

A) key B) tactical C) fundamental D) primary E) strategic Answer: A Diff: 2 Page Ref: 125 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 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 Diff: 2 Page Ref: 125 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 46) The Financials section of the Barringer/Ireland Business Model Template consists of three boxes. The boxes are titled ________.

A) economics of the business, startup-costs, and break-even B) revenue streams, cost structure, and financing/funding C) profit margins, revenue streams, and break-even D) startup-costs, operating leverage, and financing/funding E) fixed vs variables costs, financing/funding, and break-even Answer: B Diff: 2 Page Ref: 126 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

14 .

47) Which section of the Barringer/Ireland Business Model Template is the only section that describes how it makes money?

A) Core strategy B) Resources C) Financials D) Operations E) Value proposition Answer: C Diff: 2 Page Ref: 126 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 48) A firm's ________ describe(s) the ways in which it makes money.

A) proceeds account B) break-even analysis C) revenue streams D) cash flow E) income statement Answer: C Diff: 2 Page Ref: 126 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 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 Diff: 2 Page Ref: 127 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

15 .

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 Diff: 2 Page Ref: 127 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 51) Jenna Franklin is completing the portion of the Barringer/Ireland Business Model Template that describes the most important costs that will be incurred to support her business model. Jenna is completing the ________ structure box in the business model template.

A) expense B) outlay C) payment D) overhead E) cost Answer: E Diff: 2 Page Ref: 127 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 52) ________ costs are costs that remain the same despite the volume of goods or services produced. ________ costs vary proportionally with the volume of goods or services provided.

A) Expense; Non-standard B) Standard; Non-Standard C) Fixed; Variable D) Non-Standard; Standard E) Variable; Fixed Answer: C Diff: 2 Page Ref: 127 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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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: E Diff: 2 Page Ref: 128 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 54) The operations quadrant in the Barringer/Ireland Business Model Template includes three sections. These are ________.

A) product (or service) production, channels, and key partners B) product/market scope, cost structure, and key partners C) key assets, cost structure, and channels D) key partners, financing/funding, and target market E) channels, core competency, and key partners Answer: A Diff: 2 Page Ref: 129 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 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 Diff: 2 Page Ref: 129 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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56) Brad Jones is in the process of opening an electronics supply company and is working on the portion of his business plan template that describes how he will deliver his products and services to his customers. The portion of the business plan template that Brad is working on is referred to as ________.

A) channels B) network C) linkages D) grids E) conduits Answer: A Diff: 2 Page Ref: 130 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 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. In the terminology of the Barringer/Ireland Business Model Template, these partners are called ________.

A) dealers B) suppliers C) merchants D) traders E) brokers Answer: B Diff: 2 Page Ref: 130 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 58) An entity created by two or more firms pooling a portion of their resources to create a separate, jointly-owned organization is called a ________.

A) trade association B) network C) joint venture D) consortia E) strategic alliance Answer: C Diff: 2 Page Ref: 131 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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59) The four major categories in the Barringer/Ireland Business Model Template are: core strategy, resources, financials, and operations.

Answer: TRUE Diff: 2 Page Ref: 121 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 60) Core strategy describes what causes consumers to pick one company's products over another.

Answer: FALSE Diff: 2 Page Ref: 120 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 61) A business's mission or mission statement describes why it exists and what its business model is supposed to accomplish.

Answer: TRUE Diff: 2 Page Ref: 122 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 62) When competing the basis for differentiation portion of the Barringer/Ireland Business Model template, it is important to emphasize as many points of differentiation as possible.

Answer: FALSE Diff: 2 Page Ref: 122 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 63) A company's target market is a place within a larger market segment that represents a narrower group of customers with similar interests.

Answer: TRUE Diff: 2 Page Ref: 122 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 64) A company's product/market scope defines the products and markets on which it will concentrate.

Answer: TRUE Diff: 2 Page Ref: 123 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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65) The resources section of the Barringer/Ireland Business Model Template includes three parts: core competency, key assets, and revenue streams.

Answer: FALSE Diff: 2 Page Ref: 123 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 66) In the terminology of the Barringer/Ireland Business Model Template, a key asset is a specific factor or capability that support a firm's business model and sets it apart from its rivals.

Answer: FALSE Diff: 2 Page Ref: 124 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 67) A firm's revenue streams describe the ways in which it makes money.

Answer: TRUE Diff: 2 Page Ref: 126 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 68) Value-driven businesses focus on minimizing costs wherever possible.

Answer: FALSE Diff: 2 Page Ref: 127 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 69) In the financing/funding section of the Barringer/Ireland Business Model Template, there are three categories of costs to consider: capital costs, one-time expenses, and provisions for rampup expenses.

Answer: TRUE Diff: 2 Page Ref: 128 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 70) The operations section of the Barringer/Ireland Business Model Template includes three sections: product (or service) production, channels, and key partners.

Answer: TRUE Diff: 2 Page Ref: 129 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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71) A company's channels describe how it delivers its product or service to its customers.

Answer: TRUE Diff: 2 Page Ref: 130 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 72) A strategic alliance is an entity created by two or more firms pooling a portion of their resources to create a separate, jointly-owned organization.

Answer: FALSE Diff: 2 Page Ref: 131 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 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).

Diff: 2 Page Ref: 119 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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74) Briefly describe the four main components of the Barringer/Ireland Business Model Template. Identify the subcomponents of each the four main components of a business model.

Answer: The four main components of a business model are as follows: • Core Strategy. The first component of the Barringer/Ireland Business Model Template is core strategy. 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. The second component is resources. 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. Resources are developed and accumulated over time. The primary elements of resources are core competencies and key assets.

• Financials. The third component of the Barringer/Ireland Business Model Template focuses on financials. 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. The final quadrant in a firm's business model is operations. 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.

Diff: 3 Page Ref: 120 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 75) What are core competencies? Provide an example of the core competencies that are utilized by an entrepreneurial firm.

Answer: A core competency is a specific factor or capability that support's 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, expertise in product design, and so forth. For example, Her Campus Media has three core competencies: (1) creating content of interest to active college-aged girls, (2) recruiting and managing a volunteer network, and (3) connecting active college-aged females with major brands.

Diff: 2 Page Ref: 124 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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Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 5 Industry and Competitor Analysis 1) Greenvelope, the company profiled in the opening feature of Chapter 5, believes it has created sufficient barriers to entry to enable it to maintain a leadership position in the invitation industry.

Its barriers to entry include ________.

A) the price-point of its products, the amount of its funding, the strength of its management team, and its partnership with a major player in the invitations industry B) its intellectual property, the strength of its brand, its international presence, and its access to distribution channels C) the strength of its brand, its network of freelance designers, its social mission, and the functionality of its Web site.

D) the innovative nature of its products, its network of freelance designers, the strength of its management team, and economies of scale E) its international presence, the price-point of its products, its social mission, and the innovative nature of its products Answer: E Diff: 2 Page Ref: 149 LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Analytical Thinking 2) Terry Washington recently started a new firm in the financial services industry. Prior to starting his firm, he spent considerable time doing research on the potential of the industry. The research that Terry was doing is called ________ analysis.

A) industry B) sector C) commercial D) business E) target market Answer: A Diff: 1 Page Ref: 150 LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking 3) A(n) ________ is a group of firms producing a similar product or service, such as soft drinks, airlines, or smartphone apps.

A) cluster B) division C) sector D) industry E) network Answer: D Diff: 1 Page Ref: 150 LO: 5.1: Explain the purpose of an industry analysis.

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4) 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 Diff: 1 Page Ref: 151 LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking 5) 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 Diff: 2 Page Ref: 151 LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking 6) 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 Diff: 3 Page Ref: 151 LO: 5.1: Explain the purpose of an industry analysis.

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7) 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) environmental B) business C) commerce D) statutory E) competitive Answer: A Diff: 2 Page Ref: 152 LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking 8) Many firms benefit from an increasing ability to outsource manufacturing or service functions to lower-cost foreign countries. This trend is referred to in the textbook as a(n) ________ trend.

A) business B) environmental C) commerce D) statutory E) economic Answer: A Diff: 2 Page Ref: 152 LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Analytical Thinking 9) The Partnering for Success feature in Chapter 5 focuses on three things that are important for startups to become active in to learn the ins and outs of their industries. The three items focused on in the feature 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, city or university-sponsored incubators, and trade associations Answer: C Diff: 2 Page Ref: 153 LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking 10) Industry analysis is business research that focuses on the potential of an industry.

Answer: TRUE Diff: 1 Page Ref: 150 LO: 5.1: Explain the purpose of an industry analysis.

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11) A comparison analysis is a detailed evaluation of a firm's competitors.

Answer: FALSE Diff: 1 Page Ref: 150 LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking 12) An industry is a group of firms producing a similar product or service, such as tires, life insurance, or smartphone apps.

Answer: TRUE Diff: 2 Page Ref: 150 LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking 13) The two trends that are most important to focus on in an industry analysis are business trends and environmental trends.

Answer: TRUE Diff: 2 Page Ref: 152 LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking 14) Business trends include economic trends, social trends, technological advances, and political and regulatory changes.

Answer: FALSE Diff: 2 Page Ref: 152 LO: 5.1: Explain the purpose of an industry analysis.

AACSB: Reflective Thinking 15) 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. An industry is a group of firms producing a similar product, such as tires, fitness drinks, or electronic games. Once it is determined that a new venture is feasible in regard to the industry and market in which it will compete, a more in-depth analysis is needed to learn the ins and outs of the industry the firm plans to enter. This analysis helps a firm determine if the target market(s) it identified during its feasibility analysis are accessible and which ones represent the best point of entry for a new firm.

Diff: 1 Page Ref: 150 LO: 5.1: Explain the purpose of an industry analysis.

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16) According to the textbook, 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 Diff: 3 Page Ref: 154 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking 17) According to the textbook, how do well-managed firms respond to the five forces that determine industry profitability?

A) They switch industries if the forces are too compelling.

B) They focus on one force intently and excel by overcoming that force.

C) They overcome each of the forces.

D) They ignore the forces.

E) They try to position their firms in a way that avoids or diminishes the forces.

Answer: E Diff: 3 Page Ref: 154 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Analytical Thinking 18) 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 Diff: 2 Page Ref: 154 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking 19) Generally, industries are more attractive when the threat of substitutes is ________.

A) high B) low C) neutral (neither high or low) D) high for manufacturing firms and low for service firms E) high for service firms and low for manufacturing firms Answer: B Diff: 2 Page Ref: 155 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

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20) The price of prescription medicine is high, partly because when someone is sick there is no real alternative to buying medicine if they want to get better. 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 Diff: 2 Page Ref: 155 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking 21) Which of Porter's five forces is most closely associated with the concept "barrier to entry"?

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 Diff: 2 Page Ref: 156 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking 22) 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 Diff: 2 Page Ref: 157 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

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23) 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 his 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 Diff: 2 Page Ref: 157 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Analytical Thinking 24) Some industries, like the athletic shoe industry, are dominated by a small number of firms with strong brands. These industries are difficult to break into without spending heavily on advertising. The barrier to entry that the firms in these types of industries have erected is referred to as ________.

A) government and legal barriers B) capital requirements C) product differentiation D) cost advantages independent of size E) access to distribution channels Answer: C Diff: 2 Page Ref: 157 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking 25) 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 Diff: 3 Page Ref: 157 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

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26) 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) aggressive supremacy C) competitive superiority D) first-mover advantage E) aggressive tactical advantage Answer: D Diff: 2 Page Ref: 158 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking 27) According to the example provided in Chapter 5, www.1800contacts.com possesses a nontraditional barrier to entry referred to as ________.

A) unique business model B) strength of management team C) access to distribution channels D) Internet domain name E) first-mover advantage Answer: D Diff: 2 Page Ref: 158 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking 28) Which of the following was not identified in the textbook as a 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: D Diff: 2 Page Ref: 158 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking 29) Supplier concentration, switching costs, attractiveness of substitutes, and threat of forward integration are factors that have a direct impact on ________.

A) threat of new entrants B) bargaining power of buyers C) rivalry among existing firms D) threat of substitutes E) bargaining power of suppliers Answer: E Diff: 3 Page Ref: 158 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

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30) 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 Diff: 2 Page Ref: 159 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Analytical Thinking 31) The five competitive forces model is a framework for understanding the structure of an industry.

Answer: TRUE Diff: 2 Page Ref: 152 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking 32) The best industry to enter is an industry where the threat of each of Porter's five forces is high.

Answer: FALSE Diff: 2 Page Ref: 154 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking 33) 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 Diff: 2 Page Ref: 156 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking 34) In most industries, the major determinant of industry profitability is the level of competition among the firms already competing in the industry.

Answer: TRUE Diff: 2 Page Ref: 157 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

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35) If the buyers are concentrated and they buy from a large number of suppliers, then the bargaining power of buyers is increased.

Answer: TRUE Diff: 2 Page Ref: 159 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking 36) 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. The five competitive forces model is a framework for understanding the structure of an industry and was developed by Harvard professor Michael Porter. 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.

Diff: 2 Page Ref: 154 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

AACSB: Reflective Thinking 37) Discuss the nontraditional barriers to entry identified in the chapter. 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. It is difficult for startups to erect expensive barriers to entry because money is usually tight.

Diff: 3 Page Ref: 158 LO: 5.2: Identify and discuss the five competitive forces that determine industry profitability.

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38) According to the textbook, the Five Forces model can be used in the following two ways: ________.

A) first, to help a firm determine whether it should enter an industry in an aggressive or a conservative manner, and second, to help a firm determine whether to compete in international markets in that industry.

B) first, to help a firm determine if it should enter a single or multiple niches in an industry, and second, to help a firm determine whether it can be competitive in that industry C) first, to help a firm determine what industry it is best equipped to compete in, and second, to help a firm determine whether to compete in international markets in that industry D) first, to help a firm determine what niche to enter within an industry, and second, to help a firm determine whether it can be competitive in that industry E) first, to help a firm determine whether it should enter a particular industry, and second, to help a firm discern whether it can carve out an attractive position in that industry Answer: E Diff: 3 Page Ref: 160 LO: 5.3: Explain the value that entrepreneurial firms create by successfully using the five forces model.

AACSB: Analytical Thinking 39) 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 Diff: 2 Page Ref: 163 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking 40) The primary opportunity existing for startups in emerging industries is to ________.

A) consolidate the industry and establish industry leadership as a result of doing so B) win customers by placing an emphasis on service and process innovation C) pursue a niche strategy, which focuses on a narrow segment of the industry that might be encouraged to grow through product or process innovation D) capture a first-mover advantage E) pursue a cost reduction strategy, which is accomplished through achieving lower costs than industry incumbents through process innovation Answer: D Diff: 2 Page Ref: 163 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

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41) 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 Diff: 2 Page Ref: 163 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking 42) The primary opportunity existing for startups in fragmented industries is to ________.

A) pursue a niche strategy, which focuses on a narrow segment of the industry that might be encouraged to grow through product or process innovation B) win customers by placing an emphasis on service and process innovation C) capture a first-mover advantage D) pursue a cost reduction strategy, which is accomplished through achieving lower costs than industry incumbents through process innovation E) consolidate the industry and establish industry leadership as a result of doing so Answer: E Diff: 2 Page Ref: 163 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking 43) A(n) ________ industry is an industry that is experiencing slow or no increase in demand.

A) declining B) global C) mature D) emerging E) fragmented Answer: C Diff: 2 Page Ref: 163 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

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44) According to the textbook, Justin's in peanut butter, Pure Fix Cycles in bicycles, and Flings Bins in trash bags are examples of entrepreneurial firms who are exploiting opportunities in ________ industries.

A) emerging B) fragmented C) declining D) mature E) consolidated Answer: D Diff: 3 Page Ref: 163 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking 45) According to the textbook, Chipotle Mexican Grill in fast-casual restaurants and 1-800GOT_JUNK? in junk removal are examples of entrepreneurial firms who are exploiting opportunities in ________ industries.

A) global B) declining C) mature D) emerging E) fragmented Answer: E Diff: 2 Page Ref: 163 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking 46) According to the textbook, Nucor in steel, JetBlue in airlines, and Cirque du Soleil in circuses are examples of entrepreneurial firms who are exploiting opportunities in ________ industries.

A) fragmented B) emerging C) declining D) global E) mature Answer: C Diff: 3 Page Ref: 163 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

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47) Opportunities for leadership, niche, harvest and divestment are associated with ________ industries.

A) mature B) emerging C) declining D) fragmented E) global Answer: C Diff: 2 Page Ref: 165 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking 48) A(n) ________ industry is an industry that is experiencing significant international sales.

A) global B) mature C) fragmented D) declining E) emerging Answer: A Diff: 2 Page Ref: 165 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking 49) The two most common strategies pursued by firms in global industries are the ________ strategy and the ________ strategy.

A) inclusive, multidomestic B) multidomestic, global C) multidomestic, worldwide D) inclusive, global E) home, worldwide Answer: B Diff: 2 Page Ref: 165 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking 50) 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 Diff: 2 Page Ref: 165 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

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51) Kellen West recently launched a firm in the fruit drink industry, and has already exported his fruit drinks to 11 different countries. One thing that Kellen's firm is doing is that it 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 Diff: 2 Page Ref: 165 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking 52) Katherine Chapman recently launched a firm in the clothing industry, targeting 13-17 year olds. One thing Katherine thinks she has accomplished is producing products that have universal appeal, so she will not vary her approach from country to country. Katherine is pursuing a ________ strategy.

A) universal B) multidomestic C) contemporary D) global E) home Answer: D Diff: 2 Page Ref: 165 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking 53) A fragmented industry is a new industry in which standard operating procedures have yet to be developed.

Answer: FALSE Diff: 1 Page Ref: 163 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking 54) An emerging industry is one that is characterized by a large number of firms of approximately equal size.

Answer: FALSE Diff: 2 Page Ref: 163 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

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55) The primary opportunity available to firms in fragmented industries is consolidation. The most common way to do this is through a geographic roll-up strategy, in which one firm starts acquiring similar firms that are located in different geographic areas.

Answer: TRUE Diff: 2 Page Ref: 163 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking 56) A fragmented industry is an industry that is experiencing slow increases in demand, numerous repeat customers, and limited product innovation.

Answer: FALSE Diff: 2 Page Ref: 163 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking 57) Firms that pursue a multidomestic strategy use the same basic approach in all foreign markets.

Answer: FALSE Diff: 2 Page Ref: 165 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking 58) What is an emerging industry? What is the primary opportunity available to entrepreneurial firms in emerging industries? Name three examples of 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. Examples of firms in emerging industries include Apple with its iTunes music store, Brain Sentry in devices that detect concussions, and Buzzy in procedures that help relieve pain when shots are administered.

Diff: 2 Page Ref: 163 LO: 5.4: Identify the five primary industry types and the opportunities they offer.

AACSB: Reflective Thinking 59) According to the textbook, 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 Diff: 1 Page Ref: 165 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

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60) 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 Diff: 2 Page Ref: 165 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking 61) In the context of competitor analysis, businesses that offer identical or similar products are referred to as ________ competitors.

A) immediate B) direct C) indirect D) straight E) urgent Answer: B Diff: 2 Page Ref: 165 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking 62) Aquafina operates in the bottled water industry. The companies that offer identical or similar products and go after the same customers that Aquafina does are Dasani and Zephyrhills. Dasani and Zephyrhills are Aquafina's ________ competitors.

A) direct B) indirect C) future D) impending E) potential Answer: A Diff: 2 Page Ref: 165 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

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63) 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 Diff: 2 Page Ref: 166 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking 64) 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 Diff: 2 Page Ref: 166 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking 65) In the context of competitor analysis, ________ competitors are companies that are not yet direct or indirect competitors but could move into one of these roles at any time.

A) stable B) roundabout C) impending D) approximate E) future Answer: E Diff: 2 Page Ref: 166 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking 66) 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 Diff: 2 Page Ref: 166 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking 18 .

67) The Savvy Entrepreneurial Firm feature in Chapter 5 focuses on three firms that are 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 Diff: 3 Page Ref: 167 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Analytical Thinking 68) Amy has just launched a firm in the sports drink industry. She has decided to complete a grid to see how she stacks up against her competitors. Along the horizontal axis of the grid she lists her firm along with her major competitors. Along the vertical axis of the grid 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 Diff: 2 Page Ref: 168 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking 69) The What Went Wrong? feature in Chapter 5 focused on Digg, a Web site that was once one of the hottest sites on the Internet but eventually failed. According to the feature, through a series of missteps Digg ________.

A) failed to conduct sufficient competitor analysis B) succumb to the bargaining power of suppliers C) lost its way and its place in its industry D) was unable to erect sufficient barriers to entry E) succumb to the bargaining power of buyers Answer: C Diff: 2 Page Ref: 170 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Analytical Thinking 70) The first step in a competitor analysis is to determine who the competition is.

Answer: TRUE Diff: 1 Page Ref: 165 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking 19 .

71) A firm's future competitors are its most important ones.

Answer: FALSE Diff: 2 Page Ref: 165 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking 72) The three types of competitors a business will face are direct competitors, indirect competitors, and future competitors.

Answer: TRUE Diff: 2 Page Ref: 165 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking 73) The information that is gathered by a firm to learn about its competitors is referred to as tactical intelligence.

Answer: FALSE Diff: 2 Page Ref: 168 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective Thinking 74) A competitive analysis grid is a tool for organizing the information a firm collects about its competitors.

Answer: TRUE Diff: 1 Page Ref: 168 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

AACSB: Reflective 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.

Diff: 2 Page Ref: 166 LO: 5.5 Explain the purpose of a competitor analysis and a competitive analysis grid.

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Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 6 Writing a Business Plan 1) TempoRun, the company profiled in the opening feature of Chapter 4, makes an iPhone app that syncs the songs on a user's phone with his or her running pace. In 2013, the founders won a business plan competition that they later characterized as Shark Tank times 10. The judges were executives and well-known entrepreneurs from companies like Google, Square, and TechStars.

The competition was ________.

A) Student Startup Madness held at the South by Southwest Festival in Austin, Texas B) CES Student Pitch Day held at the Consumer Electronics Show in Las Vegas, Nevada C) Student Startup Weekend held in Portland, Oregon D) World Student Pitch Event held at the United Nations in New York, New York E) California Cup Student Pitch Event sponsored by the City of Los Angeles, California Answer: A Diff: 1 Page Ref: 181 LO: 6.1: Explain the purpose of a business plan.

AACSB: Reflective Thinking 2) Peter Watson is thinking about launching a small business consulting company. To get advice on how to proceed, he stopped by his local Small Business Administration (SBA) office. The SBA advisor told Peter that one of the first things he needs to do is to sit down and write a 25 to 35 page narrative that describes what his new business plans to accomplish and how it plans 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 Diff: 1 Page Ref: 183 LO: 6.1: Explain the purpose of a business plan.

AACSB: Reflective Thinking 3) Which of the following is the main purpose for writing a business plan?

A) The plan helps the company develop a "road map" to follow.

B) The plan introduces potential investors and other stakeholders to the business opportunity.

C) Both A and B are equally important.

D) Neither A nor B captures the true purpose of a business plan.

E) Reason A is the most important for experienced entrepreneurs and reason B is the most important for inexperienced entrepreneurs.

Answer: C Diff: 2 Page Ref: 183 LO: 6.1: Explain the purpose of a business plan.

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4) According to the textbook, 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 Diff: 2 Page Ref: 183 LO: 6.1: Explain the purpose of a business plan.

AACSB: Reflective Thinking 5) According to the textbook, a 2010-2012 study of 350 entrepreneurs found that of those that had successful exist, only about ________ started with a business plan A) 10 percent B) 15 percent C) 20 percent D) 30 percent E) 40 percent Answer: D Diff: 3 Page Ref: 183 LO: 6.1: Explain the purpose of a business plan.

AACSB: Reflective Thinking 6) A business plan is important as it forces the founding team to systematically think through every aspect of their new venture and ________.

A) it is a budget B) it is a public relations document that can be used to promote the firm C) it is a contract that is signed by the founders of the firm D) it is a financial analysis E) it communicates the merits of a new venture to outsiders, such as investors and bankers Answer: E Diff: 2 Page Ref: 183 LO: 6.1: Explain the purpose of a business plan.

AACSB: Reflective Thinking 7) A commercialization plan is a written narrative that describes what a new business plans to accomplish and how it plans to accomplish it.

Answer: FALSE Diff: 1 Page Ref: 182 LO: 6.1: Explain the purpose of a business plan.

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8) According to studies citied in the book, a large percentage of entrepreneurs write business plans for their ventures.

Answer: FALSE Diff: 2 Page Ref: 183 LO: 6.1: Explain the purpose of a business plan.

AACSB: Reflective Thinking 9) For most new ventures, the business plan is a dual-purpose document used both inside and outside the firm.

Answer: TRUE Diff: 2 Page Ref: 183 LO: 6.1: Explain the purpose of a business plan.

AACSB: Reflective Thinking 10) A business plan can usually be completed in one to three days.

Answer: FALSE Diff: 2 Page Ref: 183 LO: 6.1: Explain the purpose of a business plan.

AACSB: Reflective Thinking 11) Which of the following statements is incorrect 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 Diff: 2 Page Ref: 183 LO: 6.2: Describe who reads a business plan and what they're looking for.

AACSB: Reflective Thinking 12) The document that does the best job of introducing potential investors and other stakeholders with the business opportunity the firm is pursuing and how it plans to pursue it is the ________.

A) business plan B) feasibility analysis C) opportunity analysis D) industry analysis E) marketing plan Answer: A Diff: 1 Page Ref: 183 LO: 6.2: Describe who reads a business plan and what they're looking for.

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13) 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; other external stakeholders and public relations firms D) officials with the SEC; public relations firms E) a firm's employees and investors; other external stakeholders Answer: E Diff: 2 Page Ref: 185 LO: 6.2: Describe who reads a business plan and what they're looking for.

AACSB: Reflective Thinking 14) The two primary audiences for a business plan are investors and other external stakeholders and ________.

A) officials with the SEC B) a firm's employees C) a firm's competitors D) a firm's customers E) public relations firms Answer: B Diff: 2 Page Ref: 185 LO: 6.2: Describe who reads a business plan and what they're looking for.

AACSB: Reflective Thinking 15) Which of the following is not an individual, group or institution that normally reads a company's business plan?

A) Board of directors B) Potential alliance partners and major customers C) State and local government officials D) Key recruits for jobs with the new firm E) Rank-and-file employees Answer: C Diff: 2 Page Ref: 185 LO: 6.2: Describe who reads a business plan and what they're looking for.

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16) 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 project a sense of anticipation and excitement about the possibilities that surround a new venture.

C) For most plans, 25 to 35 pages is sufficient.

D) A business plan should look sharp, but not a lot of money should be spent on the physical appearance of the plan.

E) Shy away from using a lot of boldfaced type, italics, clip art, and different font sizes and colors when preparing a business plan.

Answer: A Diff: 2 Page Ref: 185 LO: 6.2: Describe who reads a business plan and what they're looking for.

AACSB: Reflective Thinking 17) The two primary audiences for a firm's business plan are a firm's employees and investors and other external stakeholders.

Answer: TRUE Diff: 2 Page Ref: 185 LO: 6.2: Describe who reads a business plan and what they're looking for.

AACSB: Reflective Thinking 18) What are the two main reasons for writing a business plan?

Answer: First, writing a business plan forces a firm's founders to systematically think through each aspect of their new venture. Second, writing a business plan creates a selling document for a company. It provides a mechanism for a young company to present itself to potential investors, suppliers, business partners, key job candidates, and others.

Diff: 2 Page Ref: 183 LO: 6.2: Describe who reads a business plan and what they're looking for.

AACSB: Reflective Thinking 19) Which of the following is not one of the "red flags" listed in the textbook that raises questions about one of 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 Diff: 2 Page Ref: 187 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

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20) Which of the following is one of the "red flags" listed in the textbook that raises questions about one or more aspects of a company's business plan?

A) Takes several days or weeks to complete B) Founders that have their own money at risk C) Defining the market size too broadly D) Less than 50 pages long E) Directed towards both an external and an internal audience Answer: C Diff: 2 Page Ref: 187 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 21) To make the best impression, a business plan should follow a ________.

A) conventional structure for companies with standard business models and a nonconventional structure for firms with disruptive business models B) conventional structure for manufacturing firms and a nonconventional structure for service firms C) conventional structure D) nonconventional structure E) nonconventional structure for manufacturing firms and a conventional structure for service firms Answer: B Diff: 2 Page Ref: 187 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 22) For most business plans ________ pages are sufficient.

A) 40 to 50 B) 30 to 40 C) 15 to 20 D) 25 to 35 E) 5 to 10 Answer: D Diff: 2 Page Ref: 187 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 23) The three types of business plans are ________.

A) functional business plan, full business plan, feasibility plan B) summary business plan, contingency plan, full business plan C) functional business plan, contingency plan, full business plan D) opportunity plan, feasibility plan, full business plan E) summary business plan, full business plan, operational business plan Answer: E Diff: 2 Page Ref: 188 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 6 .

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 Diff: 2 Page Ref: 188 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 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 Diff: 2 Page Ref: 188 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 26) A(n) ________ business plan, which is intended to be a blueprint for a company's operations, is 40-100 pages long and is meant primarily for an internal audience.

A) operational B) full C) deliberate D) summary E) tactical Answer: A Diff: 2 Page Ref: 188 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

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27) Kevin Andrews has decided to write a business plan that is intended to be read primarily by his staff, which will present a blueprint for his company's entire operation and will provide guidance to operational managers. Kevin should write a(n) ________ business plan.

A) operational B) tactical C) strategic D) summary E) functional Answer: A Diff: 2 Page Ref: 188 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 28) Which of the following business plans matches with its appropriate length?

A) Operational business plan - 10-15 pages B) Full business plan - 25-35 pages C) Summary business plan - 25-35 pages D) Full business plan - 40-100 pages E) Operational business plan - 25-35 pages Answer: B Diff: 3 Page Ref: 188 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 29) Which of the following business plans matches with its appropriate emphasis?

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) 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) 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) Summary business plan is meant primarily for an internal audience - works best as a tool for creating a blueprint for a company's operations and providing guidance to operational managers E) 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 Diff: 2 Page Ref: 188 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Analytical Thinking 30) To make the best impression, a business plan should follow a conventional structure.

Answer: TRUE Diff: 2 Page Ref: 186 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

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31) For most business plans, 25 to 35 pages are sufficient.

Answer: TRUE Diff: 2 Page Ref: 187 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 32) According to the textbook, the executive summary is arguably the most important section of the business plan.

Answer: TRUE Diff: 2 Page Ref: 192 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 33) The executive summary is a lengthy overview of the entire business plan.

Answer: FALSE Diff: 2 Page Ref: 192 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 34) A company's industry analysis and target market analysis are usually included in the same section of its business plan.

Answer: FALSE Diff: 2 Page Ref: 192 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 35) Fragmented industries are more receptive to new entrants than industries that are dominated by a handful of large firms.

Answer: TRUE Diff: 2 Page Ref: 192 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 36) A tagline is a phrase that a business uses to reinforce its position in the marketplace.

Answer: TRUE Diff: 2 Page Ref: 194 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 37) A competitor analysis, which is a detailed analysis of a firm's competitors, should be included in the market analysis section of its business plan.

Answer: TRUE Diff: 2 Page Ref: 196 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

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38) The major revenue drivers, which are the ways a business earns money, should be first identified in "The Economics of the Business" section of the business plan.

Answer: TRUE Diff: 2 Page Ref: 196 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 39) A firm's operating leverage is an analysis of its debt versus its equity.

Answer: FALSE Diff: 2 Page Ref: 197 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 40) The management team and company structure section of a business plan is one of the lesserread sections.

Answer: FALSE Diff: 2 Page Ref: 200 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 41) An organizational chart is a graphic representation of how authority and responsibility are distributed within a company.

Answer: TRUE Diff: 2 Page Ref: 200 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 42) A sources and uses of funds statement is a document that lays out specifically how much money a firm needs, where the money will come from, and what the money will be used for.

Answer: TRUE Diff: 2 Page Ref: 201 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Analytical Thinking 43) The pro forma financial statements are the heart of the operations section of a business plan.

Answer: FALSE Diff: 2 Page Ref: 201 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

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44) 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 this book differ from this philosophy? How does trial-and-error learning figure into the approach to writing a business plan advocated in this book?

Answer: This book takes the opposite approach, arguing 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.

Diff: 3 Page Ref: 189 LO: 6.3: Discuss the guidelines to follow to write an effective business plan.

AACSB: Reflective Thinking 45) The ________ is a short overview of the entire business plan.

A) summary statement B) executive summary C) managerial review D) founder's introduction E) abstract Answer: B Diff: 2 Page Ref: 190 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 46) 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 Diff: 3 Page Ref: 190 LO: 6.4: Identify and describe a suggested outline of a business plan.

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47) 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 Diff: 2 Page Ref: 190 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 48) According to the textbook, in many instances an investor will first ask for a copy of a firm's ________ and will request a copy of the full business plan only if that portion of the plan is sufficiently convincing.

A) appendix B) industry analysis C) operations plan D) financial plan E) executive summary Answer: E Diff: 2 Page Ref: 190 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 49) The Savvy Entrepreneurial Firm feature in Chapter 6 focuses on three companies: Songkick, GrubHub, and Instagram. The overarching point of the feature is ________.

A) most business plans require major changes after the business is launched and the founders start getting customer feedback 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 and the founders start getting customer feedback D) the most effective business plans take four to eight weeks to complete E) most business plans are quickly discarded after the business is launched Answer: B Diff: 2 Page Ref: 191 LO: 6.4: Identify and describe a suggested outline of a business plan.

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12 .

50) Which of the following statements is incorrect regarding the industry analysis portion of a firm's business plan?

A) It is important to focus simultaneously on a business's industry and its target market.

B) Industry structure refers to how concentrated or fragmented an industry is.

C) Most industries have 6 to 10 key success factors that should be reported in the industry analysis.

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 Diff: 2 Page Ref: 192 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 51) A company's mission statement should be placed 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 Diff: 2 Page Ref: 193 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 52) Industry structure refers to how ________ an industry is.

A) concentrated or fragmented B) traditional or progressive C) innovative or conservative D) hierarchical or flat E) large or small Answer: A Diff: 2 Page Ref: 194 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 53) A(n) ________ statement describes why a company exists and what it aspires to become.

A) tactical B) values C) mission D) operations E) strategic Answer: C Diff: 2 Page Ref: 194 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 13 .

54) A(n) ________, in a business plan context, is a noteworthy event in the past or future development of a business.

A) aspiration B) intention C) signpost D) milestone E) target Answer: D Diff: 2 Page Ref: 194 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 55) The ________ section of a business plan breaks the industry into segments and zeroes in on the specific segment (or target market) to which the firm will try to appeal.

A) competitive analysis B) current status C) market analysis D) marketing plan E) operations plan Answer: C Diff: 2 Page Ref: 194 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 56) 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 Diff: 2 Page Ref: 194 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 57) The Partnering for Success feature in Chapter 4 focuses on the types of partnerships that are common in business plans. According to the feature, businesses often make partnering an essential part of their business plans because they ________.

A) want to obtain a key customer B) want to increase their visibility C) want to reduce risk D) want to appear legitimate E) have limited resources Answer: E Diff: 2 Page Ref: 195 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 14 .

58) The ________ section of the business plan addresses the basic logic of how profits are earned in the business.

A) economics of the business B) operations plan C) executive summary D) design and development plan E) market analysis Answer: A Diff: 2 Page Ref: 196 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 59) 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 Diff: 2 Page Ref: 197 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Analytical Thinking 60) Which of the following statements is incorrect regarding the marketing plan section of a business plan?

A) The marketing plan focuses on how the business will market and sell its product or service.

B) The two most important items to include in a marketing plan are (1) overall marketing strategy and (2) the nuts and bolts of marketing a firm's product in terms of product, price, promotion, and place.

C) The best way to describe a company's marketing plan is to begin by talking about its competitors.

D) A firm's marketing strategy refers to its overall approach for marketing its products and services.

E) A firm's overall approach to marketing typically boils down to how it positions itself in its market and how it differentiates itself from its competitors.

Answer: C Diff: 2 Page Ref: 197 LO: 6.4: Identify and describe a suggested outline of a business plan.

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61) A computer-generated image of an invention that displays the invention as a 3D model that can be viewed from all sides and rotated 360 degrees is called a(n) ________.

A) virtual prototype B) concept visualization C) abstract prototype D) virtual design E) usability test Answer: A Diff: 2 Page Ref: 198 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 62) A 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 Diff: 2 Page Ref: 198 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 63) What section of the business plan deals with the day-to-day operations of a company?

A) Financial plan B) Marketing plan C) Operations plan D) Industry analysis E) Executive summary Answer: C Diff: 2 Page Ref: 199 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 64) The facilities and equipment that a business needs should be described in the ________ section of its business plan.

A) marketing plan B) management team and company structure C) company description D) market analysis E) operations plan Answer: E Diff: 2 Page Ref: 199 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking

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65) According to the textbook, 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 Diff: 2 Page Ref: 200 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 66) 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 Diff: 2 Page Ref: 200 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 67) The document that lays out specifically how much money a firm needs, where the money will come from, and what the money will be used for is referred to as a(n) ________.

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: A Diff: 2 Page Ref: 201 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Analytical Thinking

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68) Kate Payne was reading the business plan for New Venture Fitness Drinks, and noticed that prior to its financial statements, New Venture Fitness Drinks placed an explanation of the sources of the numbers for the statements and the assumptions used to generate them. This explanation is called a(n) ________.

A) estimate sheet B) hypothesis sheet C) assumptions sheet D) forecast sheet E) forecast hypothesis Answer: C Diff: 2 Page Ref: 201 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 69) According to the textbook, the ________ are the heart of the financial section of a business plan.

A) financial ratios B) pro forma financial statements C) budgets D) sources and uses of funds statements E) break-even analyses Answer: B Diff: 2 Page Ref: 201 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Analytical Thinking 70) Most business plan writers interpret or make sense of a firm's historical and/or pro forma financial statements through ________ analysis.

A) ratio B) assumptions C) scenario D) proportion E) relative Answer: A Diff: 2 Page Ref: 201 LO: 6.4: Identify and describe a suggested outline of a business plan.

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71) What is an "executive summary?" Why is the executive summary often called the most important part of a business plan?

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.

Diff: 2 Page Ref: 190 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 72) Why is the "management team and company structure" section of the business plan often given disproportionate weight among investors?

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.

Diff: 2 Page Ref: 200 LO: 6.4: Identify and describe a suggested outline of a business plan.

AACSB: Reflective Thinking 73) According to the textbook, the first rule in making an oral presentation is to ________.

A) follow instructions B) be creative C) emphasize all the positive aspects of a business venture D) appear confident E) do something out of the ordinary Answer: A Diff: 2 Page Ref: 203 LO: 6.5: Explain how to effectively present a business plan to potential investors.

AACSB: Reflective Thinking 74) The first rule in making oral presentations is to follow instructions.

Answer: TRUE Diff: 2 Page Ref: 203 LO: 6.5: Explain how to effectively present a business plan to potential investors.

AACSB: Reflective Thinking 75) What is a business plan?

Answer: A business plan is a written narrative, typically 25 to 35 pages long, that describes what a new business plans to accomplish and how it plans to accomplish it.

Diff: 1 Page Ref: 182 LO: 6.5: Explain how to effectively present a business plan to potential investors.

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19 .

Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 7 Preparing the Proper Ethical and Legal Foundation 1) Tempered Mind, the company profiled in the opening feature in Chapter 7, has created an iPhone app that teaches users' a foreign language as they progress through the stages of a game.

To get Tempered Mind off to a strong ethical start, the company was careful to avoid a temptation that mobile app developers have. That temptation, mentioned in the profile, is to ________.

A) pay people to write positive reviews B) misrepresent the quality of the app C) copy material and action sequences that appear in other apps without obtaining permission from the owners D) withhold payment from freelancers who worked on the project E) ask employees to work unreasonable hours to get the project done Answer: A Diff: 3 Page Ref: 219 LO: 7.1: Discuss the action founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning 2) According to the textbook, the single most important thing the founders of an entrepreneurial venture can do is ________.

A) start a board of advisors B) establish business partnerships C) make money D) select a limited liability corporation as opposed to an S-corporation E) establish a strong ethical culture for their firms Answer: E Diff: 2 Page Ref: 221 LO: 7.1: Discuss the action founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning 3) According to the 2013 National Business Ethics Survey, a total of ________ percent of the employees surveyed said they had observed misconduct or unethical behavior in the past year.

A) 7 B) 15 C) 24 D) 33 E) 41 Answer: E Diff: 3 Page Ref: 221 LO: 7.1: Discuss the action founders can take to establish a strong ethical culture in their entrepreneurial ventures.

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4) According to the 2013 National Business Ethics Survey, which of the following forms of misconduct or unethical behavior was observed by the highest percentage of the U.S. workforce?

A) Discriminating against employees B) Violating company policies related to Internet use C) Abusive behavior that creates a hostile work environment D) Lying to employees E) Stealing or theft Answer: C Diff: 3 Page Ref: 222 LO: 7.1: Discuss the action founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning 5) Which of the following is the most important thing that an entrepreneur, or team of entrepreneurs, can do to build a strong ethical culture in their organization?

A) Implement an ethics training program B) Write a mission statement C) Lead by example D) Hire an ethics compliance officer E) Write a code of conduct Answer: C Diff: 3 Page Ref: 222 LO: 7.1: Discuss the action founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning 6) A code of ________ is a formal statement of an organization's values on certain ethical and social issues.

A) conduct B) behavior C) performance D) principles E) morals Answer: A Diff: 2 Page Ref: 223 LO: 7.1: Discuss the action founders can take to establish a strong ethical culture in their entrepreneurial ventures.

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7) "Don't be evil" is the corporate motto for ________.

A) Facebook B) Google C) Apple D) Microsoft E) Amazon.com Answer: B Diff: 2 Page Ref: 223 LO: 7.1: Discuss the action founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning 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) just dilemma Answer: C Diff: 2 Page Ref: 224 LO: 7.1: Discuss the action founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning 9) The What Went Wrong? feature in Chapter 7 focuses on Fitbit. Fitbit makes wearable activity trackers that measure data such as number of steps walked, quality of sleep, and other personal metrics. The feature centered on a product that Fitbit made (the Fitbit Force) that caused some users to develop skin rashes. The ethical issue at stake was whether Fitbit ________.

A) cut corners and used inferior material in producing the product B) acted quickly enough in stopping production of the product C) misrepresented the nature of the problem to the people affected D) placed unfair blame on a supplier E) placed unfair blame on a small number of employees Answer: B Diff: 2 Page Ref: 226 LO: 7.1: Discuss the action founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning 10) The single most important thing the founders of an entrepreneurial venture can do to avoid ethical misconduct is to establish a strong ethical culture for their firms.

Answer: TRUE Diff: 1 Page Ref: 221 LO: 7.1: Discuss the action founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning 3 .

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 Diff: 2 Page Ref: 222 LO: 7.1: Discuss the action founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning 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 Diff: 2 Page Ref: 214 LO: 7.1: Discuss the action founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Ethical Understanding and Reasoning 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, or team of entrepreneurs, 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. Firms also use ethics training programs to promote ethical behavior. Ethics training programs teach business ethics to help employees deal with ethical dilemmas and improve their overall ethical conduct.

Diff: 2 Page Ref: 217 LO: 7.1: Discuss the action founders can take to establish a strong ethical culture in their entrepreneurial ventures.

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14) What is a founders' agreement? Describe the purpose of a buyback clause and why it's important?

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.

Diff: 2 Page Ref: 228 LO: 7.1: Discuss the action founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Reflective Thinking 15) Describe the purpose of a nondisclosure agreement. Provide an example of when a nondisclosure agreement kicks in.

Answer: A nondisclosure agreement is a promise made by an employee or other party (e.g., a supplier) to not disclose the company's trade secrets. An example would be an employee who is privy to a company's marketing strategy. If the employee quit her job and went to work for a competitor, it would be a violation of her nondisclosure agreement to tell her new employer the details of her previous employer's marketing strategy.

Diff: 2 Page Ref: 231 LO: 7.1: Discuss the action founders can take to establish a strong ethical culture in their entrepreneurial ventures.

AACSB: Reflective Thinking 16) A(n) ________ 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 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 Diff: 2 Page Ref: 228 LO: 7.2: Describe actions taken in new firms to effectively deal with legal issues.

AACSB: Reflective Thinking

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17) Most founders' agreements include a ________ clause, which legally obligates the departing founder to sell to the remaining founders his or her interest in the firm if the remaining founders are interested.

A) redemption B) buyback C) statutory purchase D) voluntary recoup E) shareholder surrender Answer: B Diff: 2 Page Ref: 228 LO: 7.2: Describe actions taken in new firms to effectively deal with legal issues.

AACSB: Reflective Thinking 18) Which of the following is typically not included in the founders' agreement for a firm?

A) Marketing plan B) Legal form of business ownership C) Buyback clause D) Apportionment of stock E) Identity and proposed titles of the founders Answer: A Diff: 2 Page Ref: 228 LO: 7.2: Describe actions taken in new firms to effectively deal with legal issues.

AACSB: Reflective Thinking 19) The Savvy Entrepreneurial Firm 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 months to 24 months C) 24 months to 36 months D) 36 months to 48 months E) 48 months to 60 months Answer: D Diff: 3 Page Ref: 229 LO: 7.2: Describe actions taken in new firms to effectively deal with legal issues.

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20) A(n) ________ agreement binds an employee or another party to not disclose a company's trade secret. A ________ agreement prevents an individual from competing against a former employer for a specific period of time.

A) nondisclosure; noncompete B) non breach-of-trust; nonchallenge C) voluntary truth; nonparticipate D) binding confidentiality; noncompete E) ethics; nonparticipate Answer: A Diff: 2 Page Ref: 231 LO: 7.2: Describe actions taken in new firms to effectively deal with legal issues.

AACSB: Reflective Thinking 21) Jessica Marsh just took a job with Instagram. As part of her employment contract, Jessica signed an agreement that states that he will not disclose any of Instagram's trade secrets. The agreement that Jessica signed is called a(n) ________ agreement.

A) nondisclosure B) non breach-of-trust C) ethics D) binding confidentiality E) legitimacy Answer: A Diff: 2 Page Ref: 231 LO: 7.2: Describe actions taken in new firms to effectively deal with legal issues.

AACSB: Reflective Thinking 22) 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 competes against 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 Diff: 2 Page Ref: 231 LO: 7.2: Describe actions taken in new firms to effectively deal with legal issues.

AACSB: Reflective Thinking

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23) ________ 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 Diff: 2 Page Ref: 231 LO: 7.2: Describe actions taken in new firms to effectively deal with legal issues.

AACSB: Reflective Thinking 24) It is important for an entrepreneur to select an attorney as late as possible when developing a business venture.

Answer: FALSE Diff: 2 Page Ref: 225 LO: 7.2: Describe actions taken in new firms to effectively deal with legal issues.

AACSB: Reflective Thinking 25) 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 Diff: 2 Page Ref: 228 LO: 7.2: Describe actions taken in new firms to effectively deal with legal issues.

AACSB: Reflective Thinking 26) The idea that it's important to get "everything in writing" in regard to business agreements causes unnecessary work and can lead to an erosion of trust between business partners.

Answer: FALSE Diff: 2 Page Ref: 230 LO: 7.2: Describe actions taken in new firms to effectively deal with legal issues.

AACSB: Reflective Thinking 27) A noncompete agreement prevents an individual from competing against a former employer for a specific period of time.

Answer: TRUE Diff: 2 Page Ref: 231 LO: 7.2: Describe actions taken in new firms to effectively deal with legal issues.

AACSB: Reflective Thinking 28) Mediation is the process in which an impartial third party helps those involved in a dispute reach an agreement.

Answer: TRUE Diff: 2 Page Ref: 231 LO: 7.2: Describe actions taken in new firms to effectively deal with legal issues.

AACSB: Reflective Thinking 8 .

29) Which of the following statements regarding business licenses and permits is incorrect?

A) Most business licenses and permits can wait until after a business is launched to be obtained.

B) A business license can typically be obtained at the city clerk's office in the community where the business will be located.

C) If a business will be run out of a home, a home occupation business license is often required.

D) Some business licenses are hard to get.

E) The business licenses and permits that are needed vary by city, county, and state.

Answer: A Diff: 1 Page Ref: 233 LO: 7.3: Provide an overview of the business licenses and permits that a start-up must obtain before it begins operating.

AACSB: Reflective Thinking 30) Most businesses that plan to use a fictitious name, which is any 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 Diff: 2 Page Ref: 233 LO: 7.3: Provide an overview of the business licenses and permits that a start-up must obtain before it begins operating.

AACSB: Reflective Thinking 31) Very few businesses require licenses and permits to operate.

Answer: FALSE Diff: 3 Page Ref: 233 LO: 7.3: Provide an overview of the business licenses and permits that a start-up must obtain before it begins operating.

AACSB: Reflective Thinking 32) Which form of business ownership is a particularly poor choice for an aggressive entrepreneurial firm?

A) C corporation B) Sole proprietorship C) Subchapter S corporation D) Limited partnership E) Limited liability corporation Answer: B Diff: 2 Page Ref: 236 LO: 7.4: Identify and describe the different forms of organization available to new firms.

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9 .

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) Accounting considerations D) Tax considerations E) The extent to which personal assets can be shielded from the liabilities of the business Answer: C Diff: 2 Page Ref: 236 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 34) The simplest and most common form of business entity is the ________.

A) sole proprietorship B) general partnership C) C Corporation D) limited liability company E) subchapter S corporation Answer: A Diff: 2 Page Ref: 236 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 35) All of the following are advantages of a sole proprietorship except ________.

A) creating one is easy and inexpensive B) unlimited liability C) it is not subject to double taxation D) the owner maintains complete control of the business E) business losses can be deducted against the sole proprietor's other sources of income Answer: B Diff: 2 Page Ref: 236 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 36) Which of the following statements is incorrect regarding sole proprietorships?

A) There is one owner.

B) Sole proprietor is in full control.

C) Business ends at the owner's death or loss of interest in the business.

D) Liquidity of the investment is high.

E) Money must be raised by the sole proprietor.

Answer: D Diff: 2 Page Ref: 236 LO: 7.4: Identify and describe the different forms of organization available to new firms.

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10 .

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 Diff: 2 Page Ref: 238 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 38) A(n) ________ details the responsibilities and the ownership shares of the partners involved with an organization.

A) partnership agreement B) industry contract C) business pledge D) business agreement E) partnership pledge Answer: A Diff: 2 Page Ref: 238 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective 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 Diff: 2 Page Ref: 238 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 40) A ________ partnership is a modified form of a general partnership.

A) restricted B) limited C) partial D) constrained E) fractional Answer: B Diff: 2 Page Ref: 239 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking

11 .

41) Which of the following statements about limited partnerships is incorrect?

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 responsible for the debts and obligations of the partnership.

E) A limited partnership contains two classes of owners-general and limited partners.

Answer: D Diff: 2 Page Ref: 239 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective 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) partnership accord B) restricted partnership agreement C) business partnership agreement D) limited partnership concurrence E) limited partnership agreement Answer: E Diff: 2 Page Ref: 239 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 43) According to the textbook, ________ 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 Diff: 3 Page Ref: 239 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 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 Diff: 2 Page Ref: 239 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 12 .

45) Corporations are organized as either ________ corporations or ________ corporations.

A) permanent; temporary B) general; limited C) voluntary; statutory D) C; subchapter S E) regular; limited liability Answer: D Diff: 2 Page Ref: 239 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 46) Large firms like Apple, Facebook, General Electric, and Microsoft, that trade on organized stock exchanges, are ________.

A) limited partnerships B) limited liability companies C) subchapter S corporations D) C corporations E) general partnerships Answer: D Diff: 1 Page Ref: 239 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 47) Most C corporations have two classes of stock— ________ and ________.

A) premium; normal B) common; preferred C) standard; substandard D) regular; special E) ordinary; distinct Answer: B Diff: 2 Page Ref: 239 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 48) Which of the following is true regarding common and preferred stock?

A) Preferred stock is rarely issued.

B) Common stock is rarely issued.

C) Common stock is issued more broadly than preferred stock.

D) Preferred stock is issued more broadly than common stock.

E) Common stock and preferred stock are issued in the same amount.

Answer: C Diff: 2 Page Ref: 239 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking

13 .

49) ________ stock is typically issued to conservative investors who have preferential rights over common stockholders 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 Diff: 2 Page Ref: 239 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 50) Which of the following statements is incorrect regarding common stock?

A) Common stock is issued more narrowly than preferred stock.

B) The common stockholders have voting rights.

C) The 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) The common stockholders elect the board of directors.

Answer: A Diff: 2 Page Ref: 239 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 51) A corporation is formed by filing ________ with the Secretary of State's office in the state of incorporation.

A) a certificate of intent to incorporate B) articles of business C) corporate credentials D) a corporation permit E) articles of incorporation Answer: E Diff: 2 Page Ref: 240 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking

14 .

52) A disadvantage of C corporations is that they are subject to ________, which 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 Diff: 2 Page Ref: 240 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective 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 Diff: 2 Page Ref: 240 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 54) In a ________ corporation, the voting stock is held 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 Diff: 2 Page Ref: 240 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking

15 .

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 Diff: 3 Page Ref: 240 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 56) ________ are a special form of incentive compensation. These plans provide 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.

A) Corporate options B) Collective plans C) Share plans D) Stock options E) Dividends Answer: D Diff: 2 Page Ref: 240 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 57) Which of the following is a disadvantage of a C Corporation?

A) Income is subject to double taxation.

B) 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 Diff: 2 Page Ref: 241 LO: 7.4: Identify and describe the different forms of organization available to new firms.

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16 .

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 if 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 Diff: 2 Page Ref: 241 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 59) A ________ combines the advantages of a partnership and a C corporation.

A) subchapter S corporation B) limited partnership C) general partnership D) sole proprietorship E) subchapter K corporation Answer: A Diff: 2 Page Ref: 241 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 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 members (husbands and wives count as one member).

D) It can have only one class of stock issued and outstanding.

E) The shareholders must be U.S. citizens.

Answer: A Diff: 3 Page Ref: 241 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 61) The ________ is a form of business organization that is rapidly gaining popularity in the United States. The concept originated in Germany and was first introduced in the United States in the state of Wyoming.

A) limited partnership B) general partnership C) limited liability company D) subchapter S corporation E) C corporation Answer: C Diff: 2 Page Ref: 242 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 17 .

62) In which form of business ownership are the owners called "members"?

A) general partnership B) limited partnership C) limited liability company D) subchapter C corporation E) C corporation Answer: C Diff: 2 Page Ref: 242 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 63) Choosing a legal entity for a firm is a one-time event. Once a form of legal entity has been chosen, it cannot be changed.

Answer: FALSE Diff: 2 Page Ref: 235 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 64) A disadvantage of a sole proprietorship is that it is subject to double taxation.

Answer: FALSE Diff: 2 Page Ref: 236 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 65) A disadvantage of a general partnership is that the liquidity of each partner's investment is low.

Answer: TRUE Diff: 2 Page Ref: 238 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 66) The major difference between a general and a limited partnership is that a limited partnership includes two classes of owners-general and limited partners.

Answer: TRUE Diff: 2 Page Ref: 239 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 67) Corporations are organized as either C corporations, T corporations, or subchapter S corporations.

Answer: FALSE Diff: 2 Page Ref: 239 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking

18 .

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 Diff: 2 Page Ref: 240 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 69) The vast majority of corporations in the United States are public corporations.

Answer: FALSE Diff: 2 Page Ref: 240 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 70) Stock options are a special form of incentive compensation.

Answer: TRUE Diff: 2 Page Ref: 240 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 71) A subchapter S corporation combines the advantages of a partnership and a C corporation.

Answer: TRUE Diff: 2 Page Ref: 241 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 72) Few entrepreneurial firms start as subchapter S corporations.

Answer: FALSE Diff: 2 Page Ref: 241 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 73) The limited liability corporation is a form of business organization that is rapidly losing popularity in the United States.

Answer: FALSE Diff: 2 Page Ref: 242 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking

19 .

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.

Diff: 2 Page Ref: 238 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking 75) What is meant by the term "piercing the corporate veil"? How can the corporate veil be pierced?

Answer: In most states, corporations must file papers annually, to maintain their status as a corporation and to comply with state regulations. It is important that a corporation's owners fully comply with these 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."

Diff: 3 Page Ref: 240 LO: 7.4: Identify and describe the different forms of organization available to new firms.

AACSB: Reflective Thinking

20 .

Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 8 Assessing a New Venture's Financial Strength and Viability 1) GymFlow, the company profiled in the opening feature in Chapter 8, created a mobile app that shows how busy a gym is at any given point in time. According to the case, in regard to financial management, the cofounders of GymFlow found that ________ was one of their most difficult challenges.

A) managing accounts payable B) managing accounts receivable C) projecting future income D) projecting future expenses E) completing financial statements Answer: C Diff: 1 Page Ref: 259 LO: 8.1: Learn about the importance of understanding the financial management of an entrepreneurial firm.

AACSB: Reflective Thinking 2) Financial management deals with two things-managing a company's finances and ________.

A) operations management B) inventory control C) raising money D) production management E) supply chain management Answer: C Diff: 1 Page Ref: 261 LO: 8.1: Learn about the importance of understanding the financial management of an entrepreneurial firm.

AACSB: Reflective Thinking 3) Financial management deals with raising money and managing a company's finances in a way that achieves the highest rate of return.

Answer: TRUE Diff: 1 Page Ref: 261 LO: 8.1: Learn about the importance of understanding the financial management of an entrepreneurial firm.

AACSB: Reflective Thinking

1 .

4) Which of the following was not identified as one of the four main financial objectives of a firm?

A) Stability B) Efficiency C) Timeliness D) Liquidity E) Profitability Answer: C Diff: 1 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB: Reflective Thinking 5) The four main financial objectives of a firm are _________.

A) efficiency, effectiveness, strength, and flexibility B) power, success, efficiency, and effectiveness C) control, effectiveness, liquidity, and power D) success, strength, liquidity, and profitability E) profitability, liquidity, efficiency, and stability Answer: E Diff: 1 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB: Reflective Thinking 6) Match the financial objective with its correct definition.

A) stability — the overall health of the financial structure of the firm, particularly as it relates to its debt-to-equity ratio B) profitability — how productively a firm utilizes its assets C) liquidity — a company's ability to make a profit D) efficiency — a company's ability to meet its short-term obligations E) profitability — the overall health of the financial structure of the firm, particularly as it relates to its debt-to-equity ratio Answer: A Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB: Analytical Thinking 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 Diff: 1 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB: Reflective Thinking 2 .

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 Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB: Reflective 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 Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB: Reflective Thinking 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 Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB: Reflective Thinking 11) A company's merchandise, raw materials, and products waiting to be sold are called its ________.

A) set aside B) accumulation C) reserve D) inventory E) stock Answer: D Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB: Reflective Thinking 3 .

12) Peggy Owens 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, Peggy is taking account of her store's ________.

A) long-term assets B) owners' equity C) accounts payable D) accounts receivable E) inventory Answer: E Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB: Reflective Thinking 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 attribute is a measure of Southwest's ________.

A) efficiency B) effectiveness C) stability D) liquidity E) profitability Answer: A Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB: Analytical Thinking 14) The strength and vigor of a firm's overall financial posture is referred to as ________.

A) liquidity B) effectiveness C) stability D) profitability E) efficiency Answer: C Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB: Reflective Thinking 15) Efficiency is the ability to earn a profit.

Answer: FALSE Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB: Reflective Thinking

4 .

16) Stability is a company's ability to meet its short-term financial obligations.

Answer: FALSE Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB: Reflective Thinking 17) A company's accounts receivable is money owed to it by its customers.

Answer: TRUE Diff: 1 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB: Reflective Thinking 18) 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 Diff: 2 Page Ref: 262 LO: 8.2: Identify the four main financial objectives of entrepreneurial ventures.

AACSB: Reflective Thinking 19) 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 Diff: 2 Page Ref: 262 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB: Reflective Thinking 20) ________ are an estimate of a firm's future income and expenses, based on its past performance, its current circumstances, and its future plans.

A) Calculation statements B) Forecasts C) Statements of cash flow D) Financial statements E) Prediction statements Answer: B Diff: 2 Page Ref: 263 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB: Reflective Thinking

5 .

21) ________ are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control.

A) Profitability statements B) Financial statements C) Owners' equity statements D) Budgets E) Statements of cash flows Answer: D Diff: 2 Page Ref: 263 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB: Reflective Thinking 22) Match the financial term with its proper definition.

A) Forecasts — depict relationships between items on a firm's financial statements B) Forecasts — written reports that quantitatively describe a firm's financial health C) Budget — itemized forecasts of a company's income, expenses, and capital needs D) Financial ratios — written report that quantitatively describes a firm's financial health E) Financial statements — an estimate of a firm's future income and expenses Answer: C Diff: 2 Page Ref: 263 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB: Reflective Thinking 23) In regard to budgets, which of the following statements is not true?

A) Budgets include an itemized forecast of a company's expenses.

B) Budgets are a poor tool for financial control.

C) Budgets are an important tool for financial planning.

D) Budgets include an itemized forecast of a company's capital needs.

E) Budgets include an itemized forecast of a company's income.

Answer: B Diff: 3 Page Ref: 263 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB: Reflective Thinking

6 .

24) 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?

A) A partnership that bands small businesses together to attain volume discounts on common products and services that they buy B) A partnership that bands small businesses together to collectively make the commitment to "buy local" at every available opportunity C) A partnership that bands small businesses together to get the best prices possible from foreign importers and manufacturers D) A partnership that bands small businesses together to get the best possible terms from finance companies E) A partnership that bands small businesses together to get the best possible rates on property and liability insurance Answer: A Diff: 2 Page Ref: 263 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB: Reflective Thinking 25) ________ depict relationships between items on a firm's financial statements.

A) Financial proportions B) Fiscal relations C) Fiscal projections D) Monetary balances E) Financial ratios Answer: E Diff: 2 Page Ref: 264 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB: Reflective 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 Diff: 2 Page Ref: 263 LO: 8.3: Describe the process of financial management as used in entrepreneurial firms.

AACSB: Reflective 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 Diff: 2 Page Ref: 265 LO: 8.4: Explain the difference between historical and pro forma financial statements.

AACSB: Reflective Thinking 7 .

28) ________ financial statements are projections for future periods based on forecasts and are typically completed for two to three years into the future.

A) Chronological B) Pro forma C) Ad-hoc D) Concurrent E) Historical Answer: B Diff: 2 Page Ref: 265 LO: 8.4: Explain the difference between historical and pro forma financial statements.

AACSB: Reflective Thinking 29) Which of the following statements about pro forma financial statements is incorrect?

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 Diff: 3 Page Ref: 265 LO: 8.4: Explain the difference between historical and pro forma financial statements.

AACSB: Reflective Thinking 30) Historical financial statements reflect past performance and are usually prepared on a quarterly and annual basis.

Answer: TRUE Diff: 1 Page Ref: 265 LO: 8.4: Explain the difference between historical and pro forma financial statements.

AACSB: Reflective Thinking 31) Pro forma financial statements are projections for future periods based on forecasts and are typically completed for 2 to 3 years into the future.

Answer: TRUE Diff: 2 Page Ref: 265 LO: 8.4: Explain the difference between historical and pro forma financial statements.

AACSB: Reflective Thinking

8 .

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.

Diff: 1 Page Ref: 265 LO: 8.4: Explain the difference between historical and pro forma financial statements.

AACSB: Reflective Thinking 33) Which of the following selections correctly matches the financial statement with its description?

A) Income statement — tells how much a firm is making or losing B) Income statement — depicts the structure of a firm's assets and liabilities C) Balance sheet — shows where a firm's cash is coming from D) Balance sheet — tells how much a firm is making or losing E) Statement of cash flows — depicts the structure of a firm's assets and liabilities Answer: A Diff: 3 Page Ref: 266 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 34) A firm's ________ reflects the results of its operations over a specified 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 Diff: 2 Page Ref: 266 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 35) Which financial statement records all of a firm's revenues and expenses for a given period and shows whether the firm is making a profit or experiencing a loss?

A) Balance sheet B) Owner's equity statement C) Statement of cash flows D) Forecast E) Income statement Answer: E Diff: 2 Page Ref: 266 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking

9 .

36) On a firm's income statement, net sales consists 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 Diff: 2 Page Ref: 266 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 37) According to the textbook, 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 incomes tax expense E) gross profit, other income, and net income Answer: C Diff: 3 Page Ref: 267 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 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 Diff: 3 Page Ref: 267 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Analytical Thinking 39) A(n) ________ is a snapshot of a company's assets, liabilities, and owners' equity at a specific point in time.

A) income statement B) statement of cash flows C) effectiveness statement D) balance sheet E) efficiency statement Answer: D Diff: 2 Page Ref: 267 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking

10 .

40) Which of the following statement is incorrect regarding how balance sheets are prepared?

A) The left-hand side of a balance sheet shows a firm's assets.

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) The right-hand side of a balance sheet shows a firm's liabilities and its owners' equity.

E) Intellectual property receives value in some cases and in some cases it does not.

Answer: C Diff: 2 Page Ref: 267 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 41) Real estate, buildings, equipment and furniture are classified as ________ assets on a company's balance sheet.

A) intermediate term B) fixed C) other D) permanent E) current Answer: B Diff: 2 Page Ref: 267 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective 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 E) look at multiple years of an income statement rather than a single year to fairly assess how well a firm is performing financially Answer: E Diff: 3 Page Ref: 268 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Analytical Thinking

11 .

43) Cash plus items that are readily convertible to cash, such as accounts receivable, marketable securities, and inventories are classified as ________ assets on a firm's balance sheet.

A) other B) intermediate term C) temporary D) current E) fixed Answer: D Diff: 2 Page Ref: 268 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Analytical Thinking 44) Which of the following is an example of a long-term liability?

A) Accounts payable B) Real estate mortgage C) Accrued expenses D) Current portion of real estate mortgage E) Owners' equity Answer: B Diff: 2 Page Ref: 269 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective 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 Diff: 3 Page Ref: 269 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Analytical Thinking

12 .

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 Diff: 2 Page Ref: 269 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 47) A firm's ________ is its current assets divided by its current debt.

A) working share B) present share C) working capital D) owners' equity E) current ratio Answer: E Diff: 2 Page Ref: 269 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 48) Which of the financial statements used by businesses to keep track of their financial affairs is the most similar to an ordinary person's end-of-the month 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 Diff: 2 Page Ref: 270 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 49) The statement of cash flows is divided into three separate activities ________.

A) profitability activities, stability activities, and investing activities B) stability activities, earning activities, and financing activities C) operating activities, capital activities, and liquidity activities D) spending activities, earning activities, and capital activities E) operating activities, investing activities, and financing activities Answer: E Diff: 2 Page Ref: 271 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking

13 .

50) In the context of a firm's statement of cash flows, ________ activities include the purchase, sale, or investment in fixed assets (e.g., real estate, equipment, and buildings).

A) operating B) investing C) capital D) financing E) liquidity Answer: B Diff: 2 Page Ref: 271 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective 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 Diff: 2 Page Ref: 271 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 52) According to the textbook, the most practical way to interpret or make sense of a firm's historical financial statements is through ________.

A) profit analysis B) regression analysis C) the preparation of pro forma financial statements D) ratio analysis E) percentage analysis Answer: D Diff: 2 Page Ref: 271 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 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 Diff: 1 Page Ref: 266 LO: 8.5: Describe the different historical financial statements and their purposes.

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54) The balance sheet reflects the results of the operations of a firm over a specified period of time.

Answer: FALSE Diff: 2 Page Ref: 267 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 55) A firm's profit margin, or return on sales, is computed by dividing net income by net sales.

Answer: TRUE Diff: 3 Page Ref: 267 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 56) The major categories of assets listed on a balance sheet include current, fixed, and other assets.

Answer: TRUE Diff: 3 Page Ref: 267 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective 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 Diff: 2 Page Ref: 270 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 58) A firm's working capital is defined as its fixed assets minus its long-term liabilities.

Answer: FALSE Diff: 2 Page Ref: 270 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 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 Diff: 2 Page Ref: 271 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 60) In the context of a firm's statement of cash flows, operating activities include the purchase, sale, or investment in fixed assets (e.g., real estate, equipment, and buildings).

Answer: FALSE Diff: 2 Page Ref: 271 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 15 .

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, which covers a specified period of time, 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. The statement of cash flows is 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.

Diff: 2 Page Ref: 266 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective 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 described in the textbook are divided into profitability ratios, liquidity ratios, and overall financially stability ratios. These ratios provide a means of interpreting the historical and pro forma financial ratios for a firm.

Diff: 2 Page Ref: 271 LO: 8.5: Describe the different historical financial statements and their purposes.

AACSB: Reflective Thinking 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) assumption sheet E) hypothesis sheet Answer: D Diff: 2 Page Ref: 273 LO: 8.6: Discuss the role of forecasts in projecting a firm's future income and expenses.

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64) In the context of computing the cost of sales, the common way to do this is to use the percent-of-sales method, which is a method for expressing each expense item as a percentage of ________.

A) net sales B) gross profit C) net income D) operating income E) cost of sales Answer: A Diff: 2 Page Ref: 275 LO: 8.6: Discuss the role of forecasts in projecting a firm's future income and expenses.

AACSB: Reflective 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 Diff: 3 Page Ref: 275 LO: 8.6: Discuss the role of forecasts in projecting a firm's future income and expenses.

AACSB: Reflective Thinking 66) The break-even point for a new restaurant or product is the point where the total revenue received equals total costs associated with the output of the restaurant or the sale of the product.

Answer: TRUE Diff: 2 Page Ref: 275 LO: 8.6: Discuss the role of forecasts in projecting a firm's future income and expenses.

AACSB: Analytical Thinking 67) What are forecasts? What role do they play in the preparation of pro forma financial statements?

Answer: Forecasts are projections of a firm's future sales, expenses, income, and capital expenditures. A firm's forecasts provide the basis for its pro forma financial statements. A welldeveloped set of pro forma financial statements helps a firm create accurate budgets, build financial plans, and manage its finances in a proactive rather than a reactive manner.

Diff: 2 Page Ref: 273 LO: 8.6: Discuss the role of forecasts in projecting a firm's future income and expenses.

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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 Diff: 1 Page Ref: 277 LO: 8.7: Explain the purpose of pro forma financial statements.

AACSB: Reflective Thinking 69) The What Went Wrong? feature for Chapter 8 focuses on Wise Acre Frozen Treats, a company that made organic popsicles from unrefined sweeteners. According to the feature, Wise Acre Frozen Treats 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) spent too much money on marketing E) did not compare its financial ratios to industry peers Answer: A Diff: 1 Page Ref: 279 LO: 8.7: Explain the purpose of pro forma financial statements.

AACSB: Analytical Thinking 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 Diff: 2 Page Ref: 279 LO: 8.7: Explain the purpose of pro forma financial statements.

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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 Diff: 2 Page Ref: 280 LO: 8.7: Explain the purpose of pro forma financial statements.

AACSB: Reflective Thinking 72) The pro forma balance sheet 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.

Answer: TRUE Diff: 2 Page Ref: 277 LO: 8.7: Explain the purpose of pro forma financial statements.

AACSB: Reflective Thinking 73) The pro forma income statement shows the projected flow of cash into and out of the company during a specified period.

Answer: FALSE Diff: 2 Page Ref: 278 LO: 8.7: Explain the purpose of pro forma financial statements.

AACSB: Reflective Thinking 74) The same financial ratios used to evaluate a firm's historical financial statement should be used to evaluate the pro forma financial statements.

Answer: TRUE Diff: 2 Page Ref: 283 LO: 8.7: Explain the purpose of pro forma financial statements.

AACSB: Reflective Thinking 75) Describe each of the four primary financial objectives of firms.

Answer: The four primary financial objectives of most firms are: profitability, liquidity, efficiency, and stability. Profitability is the ability to earn a profit. Liquidity is a company's ability to meet its short-term financial obligations. Efficiency is how productively a firm utilizes its assets relative to its revenue and its profits. Stability is the strength and vigor of the firm's overall financial posture.

Diff: 2 Page Ref: 262 LO: 8.7: Explain the purpose of pro forma financial statements.

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Entrepreneurship: Successfully Launching New Ventures, 5e (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 Diff: 2 Page Ref: 296 LO: 9.1: Explain the concept called liability of newness.

AACSB: Refl7.3ective 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 facts 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 Diff: 2 Page Ref: 297 LO: 9.1: Explain the concept called liability of newness.

AACSB: Reflective Thinking 3) The high failure rate among new ventures is due, in part, to the liability of newness, which refers to the fact that new companies often falter because ________.

A) they are underfunded and the founders of the firms don't move quickly enough to put together boards of directors and boards of advisors that can provide them direction and advice B) the founders of the firms underestimate the complexities involved with starting a new business and the firms lack a "track record" with outside buyers and sellers C) the people who start the firms can't adjust quickly enough to their new roles and the firms lack a "track record" with outside buyers and sellers D) the people who start the firms can't adjust quickly enough to their new roles and they are underfunded E) the founders of the firms underestimate the complexities involved with starting a new business and they don't move quickly enough to establish business partnerships Answer: C Diff: 2 Page Ref: 297 LO: 9.1: Explain the concept called liability of newness.

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4) The Partnering for Success feature in Chapter 9 focuses on a technique that entrepreneurs use to overcome the liabilities of newness. The suggestion made by the feature is to overcome the liabilities of newness by considering ________.

A) interviewing a minimum of 20 startup founders to get a sense of what made them successful B) working in the new product development or corporate innovation division of a major corporation C) working for a startup for a minimum of two years before starting one D) earning an MBA E) joining a startup accelerator Answer: E Diff: 3 Page Ref: 298 LO: 9.1: Explain the concept called liability of newness.

AACSB: Analytical Thinking 5) The term "liability of newness" refers to 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 firms lack "track records" with outside buyers and suppliers.

Answer: TRUE Diff: 2 Page Ref: 296 LO: 9.1: Explain the concept called liability of newness.

AACSB: Reflective Thinking 6) Describe the term "liability of newness" and suggest several ways that a new venture can overcome this handicap.

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 these limitations. In addition, firms able to persuade high-quality individuals to join them as directors or advisers quickly gain legitimacy with a variety of individuals, such as some of those working inside the venture as well as some people outside the venture (e.g., suppliers, customers, and investors). In turn, legitimacy opens doors that otherwise would be closed.

Diff: 2 Page Ref: 297 LO: 9.1: Explain the concept called liability of newness.

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7) Next Big Sound, the company profiled in the opening feature of Chapter 9, is a music analytics company. Which of the following statements in incorrect regarding Next Big Sound's co-founders, its personnel policies or the company itself?

A) Next Big Sound has three co-founders.

B) The co-founders have healthy debates, but are able to come to consensus and get along and trust one another.

C) Because the co-founders could not agree who would be the company's CEO, the three share the title of co-CEOs. D) The idea for Next Big Sound was created at a Startup Weekend event in San Francisco.

E) The firm is in located in New York, New York.

Answer: D Diff: 2 Page Ref: 296 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 8) A ________ is the group of founders, key employees, and advisers that move a new venture from an idea to a fully functioning firm.

A) new venture panel B) startup team C) new venture team D) new project team E) startup cadre Answer: C Diff: 2 Page Ref: 296 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 9) Kathy Denver is preparing to launch a home security firm. The team of people that will launch Kathy's firm are as follows: Kathy (CEO), Trevor (VP-Finance), Shelia (VP-Sales), a fourperson Board of Directors, a five-person Board of Advisors, and Kathy's primary investor, who will assume an advisory role. The group of people that will launch Kathy's firm is called its ________.

A) startup squad B) new venture panel C) new venture team D) startup cadre E) startup troop Answer: C Diff: 1 Page Ref: 296 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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10) Which of the following was not identified in the textbook as 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 Diff: 2 Page Ref: 297 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 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 Diff: 3 Page Ref: 300 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 12) Which of the following statements is untrue 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) It is generally believed that new ventures started by an individual have an advantage over new ventures started by a team.

Answer: E Diff: 2 Page Ref: 300 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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13) Which of the following statements is incorrect regarding founding teams?

A) The members of heterogeneous teams are diverse in terms of their abilities and experiences.

B) Teams that are working together for the first time have an advantage over teams that have worked together before.

C) The psychological support that cofounders of a new business can offer one another is an important element of a firm's success.

D) The members of homogeneous teams are very similar in terms of their abilities and experiences.

E) Studies show that more than one individual starts 50 to 70 percent of all new teams.

Answer: B Diff: 2 Page Ref: 300 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 14) The members of heterogeneous teams are ________.

A) diverse in terms of their abilities and experiences B) diverse in terms of their abilities, but very similar in terms of their experiences C) similar in terms of their abilities and experiences D) diverse in terms of their experiences, but very similar in terms of their abilities E) sometimes diverse in terms of their abilities and experiences and sometimes similar along the same dimensions Answer: A Diff: 2 Page Ref: 300 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 15) The members of homogeneous teams are ________ in terms of their ________.

A) diverse; abilities and experiences B) diverse; abilities, but very similar in terms of their experiences C) similar; abilities and experiences D) diverse; experiences, but very similar in terms of their abilities E) sometimes diverse; abilities and experiences and sometimes similar along the same dimensions Answer: C Diff: 2 Page Ref: 300 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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16) According to the textbook, which of the following statements is inaccurate 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 potential for conflict.

Answer: A Diff: 2 Page Ref: 300 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 17) According to the textbook, prior entrepreneurial experience ________.

A) is one of the poorest predictors of future entrepreneurial performance B) is one of the most consistent predictors of future entrepreneurial performance for entrepreneurs under 50 years of age, but not for entrepreneurs over 50 years of age C) is one of the most consistent predictors of future entrepreneurial performance D) is one of the most consistent predictors of future entrepreneurial performance in service firms, but not in manufacturing firms E) has no relationship to future entrepreneurial performance Answer: C Diff: 2 Page Ref: 301 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 18) Which of the following statements is not true regarding the attributes of the founder(s) of a 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 experience in the same industry as their new ventures will typically have "blinders" on and are typically not as effective as founders new to the industry.

D) Founders with broad social and professional networks have an advantage.

E) New ventures that are started by a team rather than an individual have an advantage.

Answer: C Diff: 2 Page Ref: 301 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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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 Diff: 2 Page Ref: 301 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 20) The What Went Wrong feature in Chapter 9 focuses on Deever, a 2008 startup that helped software developers use cloud-based services to "test" their code in an expedient manner.

According to the feature, one of the primary reasons Deever failed was ________.

A) it lacked a cofounder who loved the business side of running a startup B) the cofounders couldn't get along C) it didn't build a robust partnership network D) it didn't solicit advice from attorneys, bankers or business consultants E) it didn't have a Board of Advisors Answer: A Diff: 2 Page Ref: 302 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 21) The process of building and maintaining relationships with people whose interests are similar or whose relationship could bring advantages to the firm is called ________.

A) linking B) socializing C) networking D) associating E) connecting Answer: C Diff: 2 Page Ref: 303 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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22) Sam Simpson is a four time business owner. One thing that has served Sam 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, Sam is a good ________.

A) networker B) socializer C) linker D) assembler E) connector Answer: A Diff: 2 Page Ref: 303 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 23) A(n) ________ is a chart that depicts the most important skills that are needed in a new venture and where skills gaps exist.

A) expertise report B) talent profile C) abilities summary D) skills profile E) talent summary Answer: D Diff: 2 Page Ref: 304 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 24) Jason Andersen just finished writing a business plan for a new type of office supply store.

One thing Jason included in the "Management Team & Company Structure" section of his business plan is 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) talent report C) abilities profile D) expertise report E) talent summary Answer: A Diff: 2 Page Ref: 304 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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25) A skills profile is a chart that depicts the ________.

A) preferable skills and abilities of the members of a firm's board of advisors B) preferable skills and abilities of the members of a firm's board of directors C) most important skills that are needed in a business startup and where skills gaps exist D) skills and abilities that will be needed for a firm to maintain an aggressive growth strategy E) skills of a company's customers and how those skills impact the products and services a company provides Answer: C Diff: 2 Page Ref: 304 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 26) The Savvy Entrepreneurial Firm feature in Chapter 9 focuses on how business founders overcome a lack of business experience. Which of the following was not mentioned as a practical way for a new business founder to overcome a lack of business experience?

A) Hiring consultants from a major consulting firm (e.g., Bain & Company or McKinsey & Company) B) Taking on a partner that has business experience C) Getting help from a Small Business Development Center D) Joining a Meetup group E) Participating in online forums Answer: A Diff: 2 Page Ref: 305 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Analytical Thinking 27) A(n) ________ is a person who works for a business as an apprentice or trainee for the purpose of obtaining actual experience.

A) freelancer B) consultant C) intern D) virtual assistant E) novice Answer: C Diff: 2 Page Ref: 306 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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28) A(n) ________ is a person who is in business for themselves, works on their own time with their own tools and equipment, and performs services for a number of different clients.

A) employee B) virtual assistant C) intern D) trainee E) freelancer Answer: E Diff: 2 Page Ref: 306 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 29) Calvin Tucker is in the process of launching an educational services firm. He plans to incorporate the firm. Because the firm will be incorporated, Calvin is legally required to have a ________.

A) board of investors B) board of advisors C) customer advisory board D) board of directors E) panel of advisors and peers Answer: D Diff: 2 Page Ref: 307 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 30) A board of directors is typically made up of both ________ and ________ directors.

A) junior; senior B) inside; outside C) experienced; inexperienced D) novice; expert E) paid; unpaid Answer: B Diff: 2 Page Ref: 307 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective 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 Diff: 2 Page Ref: 307 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 10 .

32) In the context of boards of directors, a(n) ________ director is someone who is not employed by the firm.

A) outside B) inside C) external D) impartial E) peripheral Answer: A Diff: 2 Page Ref: 307 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 33) James Williams is the Chief Operating Officer of a startup in the health food industry. He is also a member of his firm's board of directors. In board of directors terminology, James is a(n) ________ director.

A) inside B) outside C) expert D) junior E) senior Answer: A Diff: 2 Page Ref: 307 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 34) Adam Miller is a general partner in a venture capital firm that just funded Gold Coast Software, a software firm in Santa Barbara, California. Gold Coast Software is incorporated, and Adam has taken a seat on the firm's board of directors. In board of directors terminology, Keith is a(n) ________ director.

A) subordinate B) senior C) distant D) inside E) outside Answer: E Diff: 2 Page Ref: 307 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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35) A board of directors' three formal responsibilities are to ________.

A) periodically update the firm's business plan, declare dividends, and write the firm's marketing plan B) appoint the officers of the firm, declare dividends, and oversee the affairs of the corporation C) write the firm's strategic plan, declare dividends, and conduct the annual meeting D) appoint the officers of the firm, conduct the annual meeting, and submit the firm's annual report to the Securities & Exchange Commission E) provide funding to the firm, write the firm's strategic plan, and submit the firm's annual report to the Securities & Exchange Commission Answer: B Diff: 2 Page Ref: 307 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective 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 Diff: 2 Page Ref: 307 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Analytical Thinking 37) A board of directors' three formal responsibilities are to appoint the officers of the firm, declare dividends, and ________.

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) oversee the affairs of the corporation Answer: E Diff: 2 Page Ref: 307 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 incorrect regarding boards of directors?

A) If a new venture organizes as a corporation, it is not legally required to have a board of directors, but it is strongly recommended.

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) The boards for publicly-traded companies are required by law to have audit and compensation committees.

Answer: A Diff: 2 Page Ref: 307 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 39) According to the textbook, although a board of directors has formal governance responsibilities, its most useful role is to ________.

A) provide guidance and support to the firm's managers B) submit papers on behalf of the firm to the SEC C) represent the firm in public relations activities D) conduct the firm's annual meeting E) provide funding to the firm Answer: A Diff: 2 Page Ref: 308 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 40) Liz Zackery just launched a firm in the sporting goods industry. On the day the company was launched, Liz 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. Liz 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) trumping Answer: B Diff: 2 Page Ref: 308 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

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41) Melissa Jones just launched a firm in the wireless communications industry. Shortly after the company was launched, Melissa announced that a prominent Silicon Valley venture capitalist had agreed to serve on her board of directors. Melissa knows that such a high quality appointment will send an important message to her potential business partners and clientele. This phenomenon is referred to as ________.

A) trumping B) championing C) profiling D) signaling E) indicating Answer: D Diff: 2 Page Ref: 308 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 42) Which of the following was not identified in the textbook as an attribute of an effective board of directors?

A) Homogeneous set of experiences and talents B) Customer-focused point of view C) Ability and willingness to stand up to the CEO and top managers of the firm D) Strong communication with the CEO E) Decisiveness Answer: A Diff: 2 Page Ref: 308 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 43) Which of the following was not identified in the textbook as an attribute of an effective board member?

A) Strong personal and professional networks B) Unknown in their field C) Investment and/or operating experience D) Ability and willingness to mentor the CEO and the top managers of the firm E) Pattern recognition skills Answer: B Diff: 2 Page Ref: 308 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 44) A new venture team is the group of founders, key employees, and advisers that move a new venture from an idea to a fully functioning firm.

Answer: TRUE Diff: 1 Page Ref: 296 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking

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45) Studies show that more than one individual starts 50 to 70 percent of all new firms.

Answer: TRUE Diff: 3 Page Ref: 300 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 46) It is generally believed that new ventures started by an individual have an advantage over those started by a team.

Answer: FALSE Diff: 2 Page Ref: 300 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective 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 Diff: 2 Page Ref: 300 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 48) Homogeneous teams are diverse in terms of their abilities and experiences.

Answer: FALSE Diff: 2 Page Ref: 300 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 49) Prior entrepreneurial experience, relevant industry experience, and networking are attributes that strengthen the chances of a founder's success.

Answer: TRUE Diff: 2 Page Ref: 301 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 50) Prior entrepreneurial experience is a poor predictor of future entrepreneurial performance.

Answer: FALSE Diff: 2 Page Ref: 301 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 51) Networking is building and maintaining relationships with people whose interests are similar or whose relationship could bring advantages to a firm.

Answer: TRUE Diff: 2 Page Ref: 303 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking

15 .

52) A skills profile is a chart that depicts the most important skills that are needed and where skills gaps exist.

Answer: TRUE Diff: 2 Page Ref: 304 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 53) A virtual assistant is a freelancer who provides administrative, technical, or creative assistance to clients remotely from a home office.

Answer: TRUE Diff: 2 Page Ref: 306 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 54) Although a board of directors has formal governance responsibilities, its most useful role is to provide guidance and support to the firm's managers.

Answer: TRUE Diff: 2 Page Ref: 308 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 55) Are more firms started by individuals or founding teams? 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.

Diff: 2 Page Ref: 300 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 56) What is the difference between a heterogeneous and a homogeneous founding team? Which type of team has the advantage?

Answer: Heterogeneous founding teams are diverse in terms of their abilities and experiences.

Homogeneous founding teams are very similar on the same dimensions. Heterogeneous teams typically have the advantage. The members of heterogeneous teams are likely to have different points of view about technology, hiring, decisions, competitive tactics, and other important activities. These different points of view are likely to generate debate and constructive conflict among the founders, reducing the likelihood that decisions will be made in haste or without the airing of alternative points of view.

Diff: 2 Page Ref: 300 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking

16 .

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.

Diff: 2 Page Ref: 304 LO: 9.2: Describe a new-venture team and discuss the primary elements that form such a team.

AACSB: Reflective Thinking 58) A(n) ________ is a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis.

A) consultation board B) idea panel C) counseling panel D) advisory board E) suggestion panel Answer: D Diff: 2 Page Ref: 310 LO: 9.3: Identify professional advisers and explain their role with a new-venture team.

AACSB: Reflective Thinking 59) Shelly Cook recently launched a social network for chefs. One thing Shelly is thinking about is creating is a panel of experts who can provide her ongoing direction and advice regarding the future of her business. Shelly is thinking about creating a(n) ________.

A) analysis panel B) discussion board C) advisory board D) suggestion panel E) accountability panel Answer: C Diff: 2 Page Ref: 310 LO: 9.3: Identify professional advisers and explain their role with a new-venture team.

AACSB: Reflective Thinking

17 .

60) Kelly Andersen founded a technology consulting firm several years ago. Her firm has grown rapidly and is financially successful. One thing that Kelly attributes her success to is that early on she assembled a panel of experts who provided her ongoing direction and advice about her business. What Kelly created is called a(n) ________.

A) consultation panel B) suggestion panel C) idea board D) accountability panel E) advisory board Answer: E Diff: 2 Page Ref: 310 LO: 9.3: Identify professional advisers and explain their role with a new-venture team.

AACSB: Reflective Thinking 61) Which of the following statements about advisory boards is incorrect?

A) The fact that a corporation has a board of directors does not preclude it from establishing one or more advisory boards.

B) An advisory board can be established for general purposes or can be set up to address a specific issue or need.

C) Similar to a board of directors, an advisory board has legal responsibility for the firm in certain areas.

D) 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.

E) A growing number of startups are forming advisory boards.

Answer: C Diff: 2 Page Ref: 310 LO: 9.3: Identify professional advisers and explain their role with a new-venture team.

AACSB: Reflective Thinking 62) Which of the following statements about advisory boards is incorrect?

A) If a firm has a board of directors, it is not permitted to have an advisory board.

B) Many people are more willing to serve on a company's board of advisors than its board of directors because it requires less time and there is no potential legal liability involved.

C) Most boards of advisers have between 5 and 15 members.

D) A growing number of startups are forming advisory boards.

E) An advisory board can be established for general purposes or can be set up to address a specific issue or need.

Answer: A Diff: 2 Page Ref: 310 LO: 9.3: Identify professional advisers and explain their role with a new-venture team.

AACSB: Reflective Thinking

18 .

63) According to the textbook, most boards of advisers have between ________ and ________ members.

A) 5; 15 B) 2; 4 C) 10; 18 D) 2; 3 E) 4; 7 Answer: A Diff: 3 Page Ref: 310 LO: 9.3: Identify professional advisers and explain their role with a new-venture team.

AACSB: Reflective Thinking 64) 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.

Answer: TRUE Diff: 1 Page Ref: 310 LO: 9.3: Identify professional advisers and explain their role with a new-venture team.

AACSB: Reflective Thinking 65) Similar to a board of directors, an advisory board possesses legal responsibility for the firm.

Answer: FALSE Diff: 2 Page Ref: 310 LO: 9.3: Identify professional advisers and explain their role with a new-venture team.

AACSB: Reflective Thinking 66) An advisory board can be established for general purposes or can be set up to address a specific need.

Answer: TRUE Diff: 2 Page Ref: 310 LO: 9.3: Identify professional advisers and explain their role with a new-venture team.

AACSB: Reflective Thinking 67) The fact that a corporation has a board of directors precludes it from having a board of advisors.

Answer: FALSE Diff: 2 Page Ref: 310 LO: 9.3: Identify professional advisers and explain their role with a new-venture team.

AACSB: Reflective Thinking 68) Most boards of advisers have between 3 and 5 members.

Answer: FALSE Diff: 3 Page Ref: 310 LO: 9.3: Identify professional advisers and explain their role with a new-venture team.

AACSB: Reflective Thinking

19 .

69) More people are willing to serve on a company's board of directors than board of advisors.

Answer: FALSE Diff: 3 Page Ref: 311 LO: 9.3: Identify professional advisers and explain their role with a new-venture team.

AACSB: Reflective Thinking 70) A business ________ is an individual who gives professional or expert advice, on a volunteer or fee basis.

A) consultant B) intern C) employee D) virtual assistant E) mentor Answer: E Diff: 2 Page Ref: 313 LO: 9.4: Explain why a new-venture team might use consultants to obtain advice.

AACSB: Reflective Thinking 71) Which of the following is incorrect regarding the typical role of consultants in business startups?

A) Give professional advice B) International consulting firms (e.g., Accenture and Bearing Point) are financially beyond the reach of most small firms.

C) Consultants fall into two categories—paid consultants and consultants who are made available for free.

D) Give expert advice E) Help manage the day-to-day activities of the firm Answer: E Diff: 2 Page Ref: 313 LO: 9.4: Explain why a new-venture team might use consultants to obtain advice.

AACSB: Reflective Thinking 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 Diff: 2 Page Ref: 313 LO: 9.4: Explain why a new-venture team might use consultants to obtain advice.

AACSB: Reflective Thinking 73) SCORE is a for-profit organization that provides consulting services to small businesses.

Answer: FALSE Diff: 2 Page Ref: 313 LO: 9.4: Explain why a new-venture team might use consultants to obtain advice.

AACSB: Reflective Thinking

20 .

74) What is SCORE? What is its role in helping a firm fill out its new venture team?

Answer: SCORE is a nonprofit organization that provides free consulting services to small businesses. SCORE currently has over 11,000 volunteers who are typically retired business owners and who counsel in areas as diverse as finance, operations, and sales. 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.

Diff: 2 Page Ref: 313 LO: 9.4: Explain why a new-venture team might use consultants to obtain advice.

AACSB: Reflective Thinking

21 .

Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 10 Getting Financing or Funding 1) Roominate, the company profiled in the opening feature of Chapter 10, makes toys that are intended to encourage young girls to enter engineering. The company was co-founded by Alice Brooks and Bettina Chen. Which of the following is not true about Roominate's founding story?

A) In 2013, Brooks and Chen appeared on the Today Show to talk about Roominate.

B) In 2013 and 2014, Brooks and Chen attempted to raise money for angel investors, but were unable to convince any angels to invest.

C) Brooks and Chen raised money for Roominate via a Kickstarter campaign.

D) At the same time Brooks and Chen were conceiving Roominate they were taking a Lean Launchpad class at Stanford taught by Steve Blank.

E) Brooks and Chen met while they were engineering master's students at Stanford University.

Answer: B Diff: 2 Page Ref: 328 LO: 10.1: Describe the importance of financing for entrepreneurial success.

AACSB: Reflective Thinking 2) Why do most firms need funding? Provide a brief explanation of each reason.

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 firm'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.

Diff: 2 Page Ref: 329 LO: 10.1: Describe the importance of financing for entrepreneurial success.

AACSB: Reflective Thinking 3) 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 know much about their choices 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 Diff: 2 Page Ref: 329 LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

AACSB: Analytical Thinking

1 .

4) Courtney Young is the founder of a company in the semiconductor industry. Courtney's 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 Courtney's ________ rate.

A) consumption B) utilization C) burn D) usage E) liquidity Answer: C Diff: 1 Page Ref: 329 LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

AACSB: Reflective Thinking 5) 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 Diff: 2 Page Ref: 329 LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

AACSB: Analytical Thinking 6) In startup firms, inventory must be purchased, employees must be trained and paid, and advertising must be paid for before cash is generated from sales. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example?

A) Cash flow challenges B) Marketing costs C) Personnel costs D) Capital investments E) Lengthy product development cycles Answer: A Diff: 2 Page Ref: 329 LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

AACSB: Reflective Thinking

2 .

7) 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 Diff: 2 Page Ref: 330 LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

AACSB: Reflective Thinking 8) Peter Simmons owns a specialized computer software company. Although Peter's software designers and programmers are very good, it takes 2-3 years to develop a good software product.

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 Diff: 2 Page Ref: 330 LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

AACSB: Reflective Thinking 9) For startup firms, some products are under development for years before they generate earnings. The upfront costs often exceed a firm's ability to fund these activities on its own.

Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example?

A) Cash flow challenges B) Marketing costs C) Capital investments D) Personnel costs E) Lengthy product development cycles Answer: E Diff: 2 Page Ref: 330 LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

AACSB: Reflective Thinking

3 .

10) The Partnering for Success feature in Chapter 10 focuses on Startup Weekend. Startup Weekend is a not-for-profit organization that ________.

A) creates a context in which small groups of people can start a business in 54 hours (usually over a weekend) B) sponsors "weekend" events that connect entrepreneurs with mentors, advisors and potential investors C) provides 54-hour weekend retreats for people to gather and learn as much as possible about the startup process D) sponsors pitch events, usually over a weekend, that allow entrepreneurs to pitch their business ideas to angel investors E) facilitates weekend business plan competitions across the United States Answer: A Diff: 2 Page Ref: 331 LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

AACSB: Analytical Thinking 11) 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 Diff: 1 Page Ref: 329 LO: 10.2: Explain why most entrepreneurial ventures need to raise money during their early life.

AACSB: Reflective Thinking 12) According to our textbook, the seed money that gets a company off the ground typically comes from ________.

A) angel investors B) venture capitalists C) commercial banks D) governmental agencies E) the founders of the firm Answer: E Diff: 1 Page Ref: 332 LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Reflective Thinking

4 .

13) Katy Anderson's startup, which is in the organic fruit and vegetables industry, was launched on January 1, 2015. However, prior to its formal launch, Katy spent many hours working on her business, particularly during the feasibility analysis stage. 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 Diff: 2 Page Ref: 332 LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Analytical Thinking 14) According to the textbook, beyond their own funds, the second source of funds for many new ventures is ________.

A) government grants B) business angels C) friends and family D) banks E) venture capital Answer: C Diff: 2 Page Ref: 332 LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Reflective Thinking 15) Steven and Emily Campbell are planning to open a casual dining restaurant in downtown Akron, Ohio, and need $125,000 to get started. They have $50,000 of their own money, which leaves $75,000. After getting turned down by a couple of banks, they decided to turn to their relatives and acquaintances for help. Fortunately, they were able to raise the money through a gift from Steven's grandfather, a loan from Emily's parents, and a small investment by Steven's best friend in college, Doug. The money that an entrepreneur raises in this manner is referred to as ________.

A) friends and family B) bootstrapping C) networking money D) compassion money E) legacy money Answer: A Diff: 2 Page Ref: 332 LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Reflective Thinking 5 .

16) Amy Clark just opened a soup and salad restaurant near Golden Gate Park in San Francisco, CA. Rather than borrow money or raise funds from investors, Amy used her creativity and ingenuity and figured out how to get her business up and running without the need for external funding. Amy is utilizing a technique referred to as ________.

A) networking B) reaching C) scrounging D) prospecting E) bootstrapping Answer: E Diff: 3 Page Ref: 333 LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Reflective Thinking 17) Typically, the seed money that gets a company off the ground comes from a commercial bank.

Answer: FALSE Diff: 2 Page Ref: 332 LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Reflective Thinking 18) The vast majority of founders contribute personal funds along with sweat equity to their ventures.

Answer: TRUE Diff: 2 Page Ref: 332 LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Reflective Thinking 19) The three common sources of "personal" financing for a startup firm are personal funds, friends and family, and bootstrapping.

Answer: TRUE Diff: 2 Page Ref: 332 LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Reflective Thinking 20) Bootstrapping is the process of combining personal funds, equity investments, and bank financing to launch a business.

Answer: FALSE Diff: 2 Page Ref: 333 LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Reflective Thinking 6 .

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 of the more common 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 Diff: 2 Page Ref: 333 LO: 10.3: Identify and describe the three sources of personal financing available to entrepreneurs.

AACSB: Reflective Thinking 22) Equity financing (or funding) means ________.

A) exchanging partial ownership in a firm, usually in the form of stock, for funding B) getting a grant or outright gift C) getting a loan D) getting a lease E) getting a loan guarantee Answer: A Diff: 2 Page Ref: 334 LO: 10.4: Identify and explain the three steps involved in properly preparing to raise debt or equity financing.

AACSB: Reflective Thinking 23) Which of the following is not a source of equity funding?

A) Initial public offering B) Angel investors C) Private placement D) Venture capital E) Government grants Answer: E Diff: 2 Page Ref: 334 LO: 10.4: Identify and explain the three steps involved in properly preparing to raise debt or equity financing.

AACSB: Reflective Thinking

7 .

24) Equity investors typically have a ________ year investment horizon.

A) 1 to 3 B) 2 to 4 C) 3 to 5 D) 4 to 6 E) 5 to 7 Answer: C Diff: 2 Page Ref: 334 LO: 10.4: Identify and explain the three steps involved in properly preparing to raise debt or equity financing.

AACSB: Reflective Thinking 25) A liquidity event accomplishes which of the following purposes?

A) Provides a business sufficient funding to operate for up to a year without raising additional funding.

B) Provides the founders of a firm a salary.

C) Converts some or all of a company's stock to cash.

D) Allows the founders of a firm to sell stock to the public.

E) Allows a business to liquidate in an ethical and cost-effective manner.

Answer: C Diff: 2 Page Ref: 334 LO: 10.4: Identify and explain the three steps involved in properly preparing to raise debt or equity financing.

AACSB: Reflective Thinking 26) Which of the following statements is incorrect 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 Diff: 3 Page Ref: 334 LO: 10.4: Identify and explain the three steps involved in properly preparing to raise debt or equity financing.

AACSB: Analytical Thinking

8 .

27) Which of the following set of characteristics places a startup in the strongest position to apply for equity funding?

A) Weak cash flow, high leverage, low-to-moderate growth, unproven management B) Strong cash flow, low leverage, audited financials, good management, healthy balance sheet C) Unique business idea, strong cash flow, low-to-moderate growth, broad market D) Strong cash flow, high leverage, low-to-moderate growth, unproven management E) Unique business idea, high growth, niche market, proven management Answer: E Diff: 3 Page Ref: 336 LO: 10.4: Identify and explain the three steps involved in properly preparing to raise debt or equity financing.

AACSB: Reflective Thinking 28) A brief, carefully constructed statement that outlines the merits of a business opportunity is called a(n) ________ speech.

A) subway B) sway C) bootstrap D) teaser E) elevator Answer: E Diff: 2 Page Ref: 337 LO: 10.4: Identify and explain the three steps involved in properly preparing to raise debt or equity financing.

AACSB: Reflective Thinking 29) Debt financing means exchanging partial ownership in a firm in exchange for cash.

Answer: FALSE Diff: 2 Page Ref: 335 LO: 10.4: Identify and explain the three steps involved in properly preparing to raise debt or equity financing.

AACSB: Reflective Thinking 30) The ideal candidate for a bank loan is a firm with weak cash flow, high leverage, low to moderate growth and unproven management.

Answer: FALSE Diff: 2 Page Ref: 336 LO: 10.4: Identify and explain the three steps involved in properly preparing to raise debt or equity financing.

AACSB: Analytical Thinking

9 .

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. In the same fashion, entrepreneurs typically only have a few short minutes to interest any investor in a business opportunity, whether it is in an elevator or any other setting.

Diff: 2 Page Ref: 337 LO: 10.4: Identify and explain the three steps involved in properly preparing to raise debt or equity financing.

AACSB: Reflective 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 the Small Business Administration through its SBA 7(A) Guaranty Loan Program.

Diff: 2 Page Ref: 337 LO: 10.4: Identify and explain the three steps involved in properly preparing to raise debt or equity financing.

AACSB: Reflective Thinking 33) The three most common forms of equity funding are ________.

A) friends and family, venture capital, bank loans B) SBIR grants, SBA guaranteed loans, bank loans C) initial public offerings, business angels, venture capitalists D) friends and family, business angels, bootstrapping E) SBIR grants, venture capital, initial public offerings Answer: C Diff: 1 Page Ref: 337 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking

10 .

34) ________ are individuals who invest their personal capital directly in start-ups.

A) Venture capitals B) Business angels C) Institutional investors D) Investment bankers E) Business capitalists Answer: B Diff: 1 Page Ref: 337 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking 35) Which of the following statements is not correct regarding business angels?

A) Business angels invest in more startups on a yearly basis than venture capitalists.

B) The number of angel investors has decreased dramatically over the past decade.

C) Business angels usually take a seat on the board of directors of the firms in which they invest.

D) Business angels are valuable because of their willingness to make relatively small investments.

E) Business angels are difficult to find.

Answer: B Diff: 2 Page Ref: 337 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Analytical Thinking 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 Diff: 3 Page Ref: 338 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking

11 .

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) Business capitalists Answer: A Diff: 1 Page Ref: 338 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective 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) collations E) strategic partnerships Answer: A Diff: 2 Page Ref: 338 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking 39) In 2013, venture capital firms funded just over ________ deals.

A) 800 B) 2,600 C) 4,000 D) 6,200 E) 8,000 Answer: C Diff: 3 Page Ref: 338 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Application of Knowledge

12 .

40) Once a venture capitalist makes an investment in a firm, subsequent investments are made in rounds and are referred to as ________.

A) later funding B) successive funding C) subsequent backing D) follow-on funding E) ensuing backing Answer: D Diff: 2 Page Ref: 339 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking 41) An important part of obtaining venture capital funding is going through ________ diligence, which refers to the process of investigating the merits of a potential venture and verifying the key claims made by the business plan.

A) appropriate B) fit C) due D) prior E) responsible Answer: C Diff: 2 Page Ref: 339 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking 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 Diff: 3 Page Ref: 340 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

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43) The first sale of stock by a firm to the public is referred to as a(n) ________.

A) original public submission B) first unrestricted offering C) preemptive initial offering D) original open offering E) initial public offering Answer: E Diff: 2 Page Ref: 340 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking 44) The What Went Wrong? feature in Chapter 10 focuses on DrawQuest. DrawQuest captured the attention of venture capitalists, gained 25,000 users, and still failed. According to the feature, the main reason DrawQuest failed is that the founders ________.

A) couldn't work together effectively B) were ineffective in managing their investment capital C) never figured out the business side of the venture D) fell out of favor with their investors E) were ineffective in raising follow-on rounds of funding Answer: C Diff: 2 Page Ref: 341 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Analytical Thinking 45) A(n) ________ bank is an institution, such as Credit Suisse First Boston, that acts as an underwriter or agent for a firm engaged in an initial public offering.

A) venture B) statutory C) fiduciary D) investment E) public Answer: D Diff: 2 Page Ref: 342 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking 46) Angel investors, private placement, venture capital, and initial public offerings are the most common sources of equity funding.

Answer: TRUE Diff: 2 Page Ref: 337 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking 14 .

47) The number of angel investors in the United States has decreased dramatically over the past decade.

Answer: FALSE Diff: 2 Page Ref: 337 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking 48) Most business angels remain fairly anonymous and are matched up with entrepreneurs through referrals.

Answer: TRUE Diff: 2 Page Ref: 337 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Analytical Thinking 49) Venture capitalists are individuals who invest their personal capital directly in startups.

Answer: FALSE Diff: 2 Page Ref: 338 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking 50) Venture capital is money that is invested by venture capital firms in startups and small businesses with exceptional growth potential.

Answer: TRUE Diff: 2 Page Ref: 338 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking 51) The percentage of the profits the venture capitalist gets is called the "carry."

Answer: TRUE Diff: 2 Page Ref: 338 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking 52) Venture capital involves getting a loan or selling corporate bonds.

Answer: FALSE Diff: 2 Page Ref: 338 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

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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 is interested in the startup process. These investors generally invest between $10,000 and $500,000 in a single company. Business angels are hard to find. They are typically located through referrals, by someone like an attorney or an accountant.

Diff: 3 Page Ref: 337 LO: 10.5: Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

AACSB: Reflective Thinking 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 Diff: 1 Page Ref: 343 LO: 10.6: Describe common sources of debt financing entrepreneurial firms use.

AACSB: Reflective Thinking 55) Historically, commercial banks ________.

A) have been a good source of funds for startup firms B) have not funded startup firms at all C) have been a good source of funds for manufacturing firm startups but not for service firm startups D) have been a good source of funds for service firm startups but not for manufacturing firm startups E) have not been a good source of funds for startup firms Answer: E Diff: 2 Page Ref: 344 LO: 10.6: Describe common sources of debt financing entrepreneurial firms use.

AACSB: Reflective Thinking

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56) The two major advantages of getting a loan versus investment capital are ________.

A) the money doesn't have to be paid back and 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 Diff: 3 Page Ref: 344 LO: 10.6: Describe common sources of debt financing entrepreneurial firms use.

AACSB: Analytical Thinking 57) The most notable SBA program available to small businesses is the ________.

A) SBA 1060 Guaranty B) Code 604 Guaranty Program C) 7(A) Guaranty Program D) SBA 101 Program E) Small Business 401 Program Answer: C Diff: 2 Page Ref: 344 LO: 10.6: Describe common sources of debt financing entrepreneurial firms use.

AACSB: Analytical Thinking 58) ________ is a financial transaction whereby a business sells its accounts receivable to a third party at a discount in exchange for cash.

A) Factoring B) Vendor credit C) Peer-to-peer lending D) Crowdfunding E) Leasing Answer: A Diff: 2 Page Ref: 345 LO: 10.6: Describe common sources of debt financing entrepreneurial firms use.

AACSB: Reflective Thinking 59) Historically, commercial banks have been viewed as an excellent source of financing for startup firms.

Answer: FALSE Diff: 2 Page Ref: 343 LO: 10.6: Describe common sources of debt financing entrepreneurial firms use.

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60) Approximately 50 percent of the 9,000 banks in the United States participate in the SBA Guaranteed Loan Program.

Answer: TRUE Diff: 3 Page Ref: 344 LO: 10.6: Describe common sources of debt financing entrepreneurial firms use.

AACSB: Reflective Thinking 61) Kickstarter and Indiegogo are examples of ________ crowdfunding sites.

A) equity-based B) vendor-based C) peer-based D) debt-based E) reward-based Answer: E Diff: 2 Page Ref: 345 LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking 62) The two types of crowdfunding sites are ________-based and ________-based.

A) rewards; equity B) equity; debt C) expectations; performance D) private; nonprivate E) domestic; international Answer: A Diff: 2 Page Ref: 345 LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking 63) FundersClub and Crowdfunder.com are examples of ________-based crowdfunding sites.

A) debt B) reward C) government D) equity E) industry Answer: D Diff: 2 Page Ref: 346 LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective 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 Diff: 1 Page Ref: 346 LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective 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 Diff: 2 Page Ref: 347 LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking 66) The ________ Program is a competitive grant program that provides over $2.5 billion per year to small businesses for early-state and development projects.

A) SBTA B) SBIR C) SBAP D) SAIR E) SBTR Answer: B Diff: 2 Page Ref: 347 LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking

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67) Which "phase" of the SBIR Program is a six-month feasibility study in which the recipient must demonstrate the technical feasibility of the proposed innovation?

A) Phase I B) Phase II C) Phase III D) Phase V E) Phase X Answer: A Diff: 3 Page Ref: 347 LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking 68) The SBIR is a ________-phase program, meaning that firms that qualify have the potential to receive more than one grant to fund a particular proposal.

A) two B) three C) six D) nine E) twelve Answer: B Diff: 2 Page Ref: 347 LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking 69) The main difference between the SBIR and the STTR programs is that the STTR program requires the participation of ________.

A) an attorney B) a venture capitalist C) researchers working at universities or other research institutions D) a certified public accountant E) a government agency in conducting the research Answer: C Diff: 3 Page Ref: 347 LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

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70) Which of the following statements is incorrect about grant programs?

A) Granting agencies are very visible and well-known, so it's normally not hard to find one.

B) The federal government has grant programs beyond the SBIR and STTR programs.

C) It's important to avoid grant-related scams.

D) There are 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 Diff: 3 Page Ref: 348 LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Analytical Thinking 71) The Savvy Entrepreneurial Firm feature in Chapter 10 focuses on the manner in which biotech firms and large drug companies work together to bring pharmaceutical products to market. According to feature, the most compelling partnerships are those that help entrepreneurial firms focus on what they do best, which is typically ________, and that allow them to tap their partners' complementary strengths and resources.

A) innovation B) marketing C) project management D) fundraising E) product distribution Answer: A Diff: 2 Page Ref: 349 LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Analytical Thinking 72) Factoring is a financial transaction whereby a business sells its accounts receivable to a third party at a discount in exchange for cash.

Answer: TRUE Diff: 2 Page Ref: 345 LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking 73) Kickstarter, Indiegogo and RocketHub are examples of equity-based crowdfunding sites.

Answer: FALSE Diff: 2 Page Ref: 345 LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

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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 Diff: 2 Page Ref: 346 LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

AACSB: Reflective Thinking 75) The SBIR and STTR programs provide entrepreneurs access to mentors, advisors and potential investors rather than cash.

Answer: FALSE Diff: 2 Page Ref: 347 LO: 10.7: Describe several creative sources of financing entrepreneurial firms may choose to use.

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Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 11 Unique Marketing Issues 1) Wink Natural Cosmetics, the company profiled in the opening feature in Chapter 11, sells cosmetics products. According to the case, the company's initial marketing efforts were aimed at ________.

A) building the company's brand B) finding strategic partners C) finding the right target market D) building a social media presence E) effectively executing a Google AdWords campaign Answer: A Diff: 1 Page Ref: 366 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 2) Kyle White owns a sporting goods store that appeals to hunters and fishermen. 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 Diff: 1 Page Ref: 367 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 3) The first step in selecting a target market is to study the industry in which the firm intends to compete and determine the different potential target markets in that industry. This process is called ________.

A) market positioning B) market splitting C) market targeting D) market subdividing E) market segmentation Answer: E Diff: 2 Page Ref: 367 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

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4) Which of the following is the correct sequence of events to the process of selecting a target market and position strategy?

A) Create a unique positioning strategy, Select a target market, Segment the market B) Segment the market, Create a unique positioning strategy, Select a target market C) Segment the market, Select a target market, Create a unique positioning strategy D) Select a target market, Create a unique positioning strategy, Segment the market E) Create a unique positioning strategy, Segment the market, Select a target market Answer: C Diff: 3 Page Ref: 367 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 5) Katherine Ford is thinking about starting a computer company. After doing some research, she has decided that the computer industry can be divided into the following product categories — handheld computers, laptops, tablet computers, PCs, work stations, minicomputers, mainframes and super computers. She is now trying to decide which product category she is the most interested in competing in. The process that Katherine is going through is called market ________.

A) splitting B) subdividing C) segmentation D) dividing E) separating Answer: C Diff: 2 Page Ref: 367 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 6) Once a firm has segmented the market, the next step is to ________.

A) decide on a position within the segment B) settle on pricing C) select a target market D) establish the company's brand E) immediately decide on the "4Ps" of the marketing strategy Answer: C Diff: 2 Page Ref: 368 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.

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7) A ________ market is a place within a market segment that represents a narrower group of customers with similar interests.

A) position B) niche C) slot D) spot E) gap Answer: B Diff: 2 Page Ref: 368 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 8) Broadway Dance Center in New York City targets serious dancers who aspire to earn a living dancing in Broadway plays. This specific portion of the overall dance industry is referred to a ________ market.

A) gap B) task C) position D) hole E) niche Answer: E Diff: 2 Page Ref: 368 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 9) Which of the following selections is incorrect regarding a firm's "positioning" strategy?

A) Position is concerned with how the firm is situated relative to its competitors.

B) A firm's decision about how to position itself relative to its competitors starts with a product or service idea that is tested and refined through feasibility analysis and marketing research.

C) Determining which position in a market to occupy and compete in is a strategic call on the part of a company based on its mission, its overall approach to the marketplace, and its competitive landscape.

D) Once a firm positions itself in a certain way, it must be able to follow through with a product or service offering that lives up to the image it has created.

E) After selecting a positioning strategy, the firm's next step is to select a target market.

Answer: E Diff: 3 Page Ref: 369 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.

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10) A ________ illustrates a firm's positioning strategy relative to its major rivals.

A) product attribute map B) positioning analysis grid C) positioning plot D) competitive analysis grid E) positioning diagram Answer: A Diff: 2 Page Ref: 369 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 11) A product attribute map is used to help a firm determine if ________.

A) it is emphasizing benefits rather than features B) its branding strategy is appropriate C) its market segmentation is correct D) its positioning strategy is appropriate E) its target market is appropriate Answer: D Diff: 2 Page Ref: 369 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 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 Diff: 2 Page Ref: 370 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

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13) Birchbox's phrase "The Box is Monthly, the Discoveries are Endless" is an example of a(n) ________.

A) tagline B) grabline C) notice-line D) catchline E) attention-line Answer: A Diff: 2 Page Ref: 370 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 14) A firm's target market is the limited group of individuals or businesses that it goes after or tries to appeal to.

Answer: TRUE Diff: 1 Page Ref: 367 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 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 Diff: 2 Page Ref: 367 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 16) Markets can be segmented in a number of ways, including by geography, demographic variables, psychographic variables, behavioral variables, and product type.

Answer: TRUE Diff: 2 Page Ref: 367 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 17) A niche market is a place within a market segment that represents a narrow group of customers with similar interests.

Answer: TRUE Diff: 2 Page Ref: 368 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.

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18) A firm's "position" is concerned with how it is situated relative to its rivals.

Answer: TRUE Diff: 2 Page Ref: 369 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 19) A product attribute map illustrates the strength of a firm's niche (or target) market relative to competing markets.

Answer: FALSE Diff: 2 Page Ref: 369 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 20) A tagline is a catchy phrase that's used consistently in a company's literature, advertisements, and even invoices and thus becomes associated with a company to reinforce its position in the market.

Answer: TRUE Diff: 2 Page Ref: 370 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 21) What is the purpose of market segmentation? How are markets typically segmented? Can a company segment its market on more than one dimension?

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 potential niche or 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). Sometimes a firm segments its market on more than one dimension to drill down to a specific market that the firm thinks it is uniquely capable of serving. For example, in its market segmentation, GreatCall, the cell phone service provider for older people, probably segmented the cell phone market by age and by benefits sought.

Diff: 2 Page Ref: 367 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.

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22) What is a tagline? Provide an example of a popular tagline, and discuss why you think it has been effective?

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. An example is Nike's familiar tagline, "Just do it." The Nike tagline implies that people don't need to be told they should exercise-they already know that. The challenge is to "Just do it." The beauty of this simple three-word expression is that it applies equally to a 21-year-old triathlete and a 65year-old mall walker. This clever tagline, along with Nike's positioning strategy, helped it expand its product line beyond running shoes to athletic products for all age groups.

Diff: 2 Page Ref: 370 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 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 Diff: 2 Page Ref: 370 LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking 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 usually start with an established brand.

D) A brand can be one of a company's most valuable assets.

E) A brand can denote a negative impression of a company.

Answer: D Diff: 2 Page Ref: 370 LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

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25) Some companies monitor the integrity of their brands through a program of brand ________.

A) administration B) persistence C) determination D) resolution E) management Answer: E Diff: 2 Page Ref: 371 LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking 26) According to the textbook, a brand is all of the following except a(n) ________.

A) firm's reputation B) firm's credentials C) indicator of trust and reduced risk D) description of a company's nature E) written warranty Answer: E Diff: 3 Page Ref: 371 LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Application of Knowledge 27) Creating ________ means creating awareness and a sense of anticipation about a company and its offerings.

A) ruckus B) noise C) clatter D) clamor E) buzz Answer: E Diff: 2 Page Ref: 372 LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

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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 Diff: 2 Page Ref: 372 LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Analytical Thinking 29) Which of the following statements is incorrect regarding the process of building a company's brand, particularly for young firms?

A) A firm's name, logo, Web site design, and even its letterhead are part of its brand.

B) One of the keys to effective branding is to create a strong personality for a firm.

C) Some companies monitor the integrity of their brands through brand management.

D) Startups must build a brand from scratch, which starts with selecting the company's name.

E) Most experts recommend a heavy reliance on advertising in building a firm's brand.

Answer: E Diff: 3 Page Ref: 373 LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking 30) ________ is a term that denotes the set of assets and liabilities that are linked to a brand and enable it to raise a firm's valuation.

A) Trademark equity B) Brand equity C) Logo equity D) Trademark value-added E) Trade name strength Answer: B Diff: 2 Page Ref: 373 LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

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31) According to the textbook, a successful brand can increase the market value of a company by ________ to ________ percent.

A) 5; 10 B) 20; 30 C) 40; 50 D) 50; 75 E) 75; 100 Answer: D Diff: 3 Page Ref: 373 LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking 32) A brand is the set of attributes—positive or negative—that people associate with a company.

Answer: TRUE Diff: 2 Page Ref: 370 LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking 33) Creating buzz means creating awareness and a sense of anticipation about a company and its offerings.

Answer: TRUE Diff: 2 Page Ref: 372 LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking 34) "Brand 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 Diff: 2 Page Ref: 372 LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

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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.

Diff: 2 Page Ref: 370 LO: 11.2: Define a brand and explain why it is important to an entrepreneurial firm's marketing efforts.

AACSB: Reflective Thinking 36) The 4Ps of marketing refer to a company's ________.

A) tactical mix B) promotional blend C) organizational mix D) marketing mix E) selling mix Answer: D Diff: 2 Page Ref: 373 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 37) Which of the following is not one of the four elements that constitute a firm's marketing mix?

A) Price B) Promotion C) Passion D) Place (or distribution) E) Product Answer: C Diff: 1 Page Ref: 373 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

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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) enthusiasm, passion, product, and price E) place, promotion, passion, and product Answer: A Diff: 2 Page Ref: 373 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 39) A firm's ________, in the context of its marketing mix, is the good or service it offers to its target market.

A) conception B) idea C) formation D) product E) invention Answer: D Diff: 1 Page Ref: 373 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Application of Knowledge 40) A ________ is something that takes on a physical form, such as a smartphone or a laptop computer. A ________ is an activity or benefit that is intangible, such as an airplane trip or advice from an accountant.

A) product; service B) service; component C) component; service D) formation; service E) service; product Answer: A Diff: 21 Page Ref: 373 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

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41) The Partnering for Success feature in Chapter 11 focuses on Caribou Coffee and Bruegger's Bagels, two companies that have established a cobranding relationship. Cobranding is when two companies ________.

A) pool their resources to buy advertising space to market their individual brands B) locate their businesses in close proximity to one another because their brands are complementary C) form a partnership to combine their brands D) employ the same advertising agency to promote their brands E) pool their resources to license a brand from a third company Answer: C Diff: 3 Page Ref: 374 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Analytical Thinking 42) A(n) ________ is an early user of a firm's product who is willing to give a testimonial regarding his or her experience with the product.

A) tribute account B) reference account C) approval report D) appreciation account E) acknowledgment report Answer: B Diff: 2 Page Ref: 375 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 43) Before Kimberly Campbell opened her jiffy print store, she 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 of Kimberly's service, and agreed to let Kimberly post the reviews on her company's Web site. The companies that wrote the favorable reviews are referred to as ________.

A) appreciation reports B) acknowledgement accounts C) referent accounts D) tribute reports E) approval reports Answer: C Diff: 2 Page Ref: 375 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

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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 Diff: 1 Page Ref: 376 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 45) Which element of the marketing mix is the only one that produces revenue?

A) Product B) Place (or distribution) C) Advertising D) Price E) Promotion Answer: D Diff: 2 Page Ref: 376 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 46) In ________-based pricing, the list price of an item is determined by adding a markup percentage to a product's cost.

A) cost B) compliance C) value D) competitive E) economic Answer: A Diff: 2 Page Ref: 376 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

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47) Kevin Jackson owns a general contracting company. The way Kevin prices his services is to figure his cost and then add a 33 percent markup. The method that Kevin uses to determine his prices is called ________-based pricing.

A) economic B) value C) competitive D) cost E) conformity Answer: D Diff: 2 Page Ref: 376 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Analytical Thinking 48) In ________ pricing, the list price is determined by estimating what consumers are willing to pay for a product and then backing off a bit to provide a cushion.

A) value-based B) tactical C) strategic D) cost-based E) economic-based Answer: A Diff: 2 Page Ref: 376 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 49) Annie Clarke owns a smartphone app development firm. The way Annie prices her products is to determine what consumers are willing to pay, and then she backs off a bit to provide a cushion. The method that Annie used to determine her prices is called ________ pricing.

A) predatory B) technical C) cost-based D) competitive-based E) value-based Answer: E Diff: 2 Page Ref: 376 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

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50) According to the textbook, most experts recommend ________ pricing because it hinges on the perceived value of a product or service.

A) value-based B) cost-based C) competitive-based D) tactical E) strategic Answer: A Diff: 2 Page Ref: 376 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 51) Karen Simon recently purchased a digital camera. She considered three cameras-a Sony that was priced at $239.00, a Canon priced at $319.00, and a Nikon priced at $399.00. 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 Diff: 3 Page Ref: 377 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Analytical Thinking 52) ________ refers to the activities the firm takes to communicate the merits of its product to its target market.

A) Sponsorship B) Advertising C) Endorsement D) Promotion E) Price Answer: D Diff: 2 Page Ref: 377 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

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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 Diff: 3 Page Ref: 378 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Analytical Thinking 54) The Google program called ________ allows advertisers to buy keywords on the Google Home Page.

A) AdSense B) Adcenter C) AdWords D) Search Marketing E) AdGoogle Answer: C Diff: 2 Page Ref: 379 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 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 Diff: 2 Page Ref: 381 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

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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 Diff: 2 Page Ref: 382 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Application of Knowledge 57) The Savvy Entrepreneurial Firm feature in Chapter 11 focuses on Airbnb, the company that created a marketplace for people to list, discover, and book unique spaces in people's homes or apartments while traveling. According to the feature, Airbnb was able to generate substantial buzz about its service via the use of ________.

A) Facebook B) Google AdSense C) blogs D) newspaper ads E) Twitter Answer: C Diff: 3 Page Ref: 383 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 58) ________ marketing is a low-budget approach to marketing that relies on ingenuity, cleverness, and surprise rather than traditional techniques.

A) Rebel B) Bug C) Catching D) Guerrilla E) Revolutionary Answer: D Diff: 2 Page Ref: 386 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

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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 Diff: 2 Page Ref: 386 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 60) A firm's marketing mix is the assortment of products and services that it sells.

Answer: FALSE Diff: 2 Page Ref: 373 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Analytical Thinking 61) An important distinction should be made between a firm's core product and its actual product. While the core product may be a CD 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 Diff: 2 Page Ref: 375 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Analytical Thinking 62) A referent account is an early user of a firm's product who is willing to give a testimonial regarding his or her experience with the product.

Answer: TRUE Diff: 2 Page Ref: 375 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 63) Price is the only element in the marketing mix that represents a cost—all other elements produce revenue.

Answer: FALSE Diff: 2 Page Ref: 376 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

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64) In cost-based pricing, the list price is determined by estimating what customers are willing to pay for a product and then backing off a bit to provide a cushion.

Answer: FALSE Diff: 2 Page Ref: 376 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 65) Because of the weaknesses associated with advertising, most startups do not advertise their products broadly.

Answer: TRUE Diff: 1 Page Ref: 377 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 66) The Google AdWords program allows advertisers to buy ads that will be shown on other Web sites instead of Google's Home Page.

Answer: FALSE Diff: 2 Page Ref: 380 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 67) Many startups emphasize advertising over public relations primarily because it's cheaper and helps build the firm's credibility.

Answer: FALSE Diff: 2 Page Ref: 381 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 68) Social plugins are tools that Web sites can use to provide users with personalized social experiences.

Answer: TRUE Diff: 2 Page Ref: 384 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

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69) Describe the concept of guerrilla marketing. Why is guerrilla marketing 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.

Diff: 3 Page Ref: 386 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 70) What is an exclusive distribution agreement? Why do firms enter into exclusive distribution agreements with other firms?

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. For example, if Nokia granted AT&T the exclusive rights to sell a new type of cell phone, AT&T would be more motivated to advertise and push the phone than if many or all cell phone companies had access to the same phone.

Diff: 3 Page Ref: 387 LO: 11.3: Identify and explain the 4Ps of marketing activities (product, price, promotion, and place) used by entrepreneurial firms.

AACSB: Reflective Thinking 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) depicts the steps it goes through to identify prospects and close sales D) describes its social media strategy E) depicts the steps it goes through to identify its target market and positioning strategy Answer: C Diff: 2 Page Ref: 387 LO: 11.4: Describe the seven-step sales process an entrepreneurial firm uses to identify prospects and close sales.

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72) The first step in the formal sales process described in the book 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 Diff: 2 Page Ref: 388 LO: 11.4: Describe the seven-step sales process an entrepreneurial firm uses to identify prospects and close sales.

AACSB: Reflective Thinking 73) Which of the following statements is untrue 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 Diff: 2 Page Ref: 388 LO: 11.4: Describe the seven-step sales process an entrepreneurial firm uses to identify prospects and close sales.

AACSB: Reflective Thinking 74) The final step in the formal sales process described in the book is ________.

A) qualify the lead B) make the sales presentation C) follow-up D) closing the sale E) meeting objections and concerns Answer: C Diff: 2 Page Ref: 389 LO: 11.4: Describe the seven-step sales process an entrepreneurial firm uses to identify prospects and close sales.

AACSB: Reflective Thinking 75) A firm's sales process depicts the steps it goes through to identify prospects and close sales.

Answer: TRUE Diff: 2 Page Ref: 387 LO: 11.4: Describe the seven-step sales process an entrepreneurial firm uses to identify prospects and close sales.

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Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 12 The Importance of Intellectual Property 1) The opening feature focuses on DripCatch, a company that makes a device that catches water that drips off of glassware when it comes out of the dishwasher. The central form of intellectual property that DripCatch is hoping to benefit from is a(n) ________.

A) patent B) Internet domain name C) license D) trademark E) copyright Answer: A Diff: 2 Page Ref: 403 LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Analytical Thinking 2) Which of the following is an example of intellectual property?

A) DripCatch's cash reserves B) The computer that you use C) Nike's swoosh logo D) United's fleet of planes E) Google's headquarters in Mountain View, California Answer: C Diff: 1 Page Ref: 405 LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Reflective Thinking 3) Which of the following is not an example of intellectual property?

A) Proactiv's formula for acne medication B) Apple's trademark C) Internet domain name www.dripcatch.com D) Microsoft's Windows operating system E) A computer monitor Answer: E Diff: 2 Page Ref: 405 LO: 12.1: Define the term intellectual property and describe its importance.

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4) Which of the following was not identified in the textbook 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 registering their Internet domain names D) Not using their intellectual property as part of their overall plan for success E) Not taking sufficient steps to protect their intellectual property Answer: C Diff: 2 Page Ref: 406 LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Analytical Thinking 5) There are two primary rules of thumb for deciding if intellectual property protection should be pursued for a particular intellectual asset. First, a firm should determine if the intellectual property has value in the marketplace. Second, a firm should determine if its intellectual property ________.

A) is directly related to its competitive advantage 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 Diff: 2 Page Ref: 407 LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Analytical Thinking 6) Which of the following are the four key forms of intellectual property protection?

A) Patents, copyrights, trademarks, and trade secrets B) Discoveries, covenants, trademarks, patents C) Patents, official documents, copyrights, inventions D) Discoveries, Internet domain names, innovations, trademarks E) Convents, inventions, opportunities, and copyrights Answer: A Diff: 1 Page Ref: 407 LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Reflective Thinking 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 Diff: 1 Page Ref: 407 LO: 12.1: Define the term intellectual property and describe its importance.

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8) Intellectual property is any product of human intellect that is intangible but has value in the marketplace.

Answer: TRUE Diff: 1 Page Ref: 405 LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Reflective Thinking 9) Patents, trademarks, copyrights, and licenses are the four key forms of intellectual property.

Answer: FALSE Diff: 1 Page Ref: 407 LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Analytical Thinking 10) What is intellectual property? Why is it called "intellectual" property? Why is intellectual property such an important issue for entrepreneurial firms?

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. Traditionally, businesses have thought of their physical assets, such as land, buildings, and equipment, as their most important assets.

Increasingly, however, a firm's intellectual assets, which include inventions, trademarks, brands, and methods of doing business, are their most valuable assets. Intellectual property is particularly important to entrepreneurial firms, because many firms begin with an idea (based on an invention or a new method for doing business), and their idea represents their most valuable assets (and source of competitive advantage). It is nearly impossible for an entrepreneurial firm to beat an established firm based on physical assets. Entrepreneurial firms, however, can "outthink" established firms, which involves intellectual assets.

Diff: 1 Page Ref: 405 LO: 12.1: Define the term intellectual property and describe its importance.

AACSB: Reflective 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.

Diff: 2 Page Ref: 407 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 Diff: 1 Page Ref: 408 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Analytical Thinking 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 Diff: 3 Page Ref: 408 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Analytical Thinking 14) The first patent, which was granted for a process of making potash, an ingredient in fertilizer, was signed by ________.

A) John Adams B) Thomas Jefferson C) Abraham Lincoln D) Theodore Roosevelt E) George Washington Answer: E Diff: 3 Page Ref: 408 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Application of Knowledge 15) The sole entity responsible for granting patents in the United States is the ________.

A) U.S. Patent and Trademark Office B) Federal Patent, Copyright and Trademark Office C) Securities and Exchange Commission D) U.S. Department of Patents E) U.S. Treasury Department Answer: A Diff: 2 Page Ref: 409 LO: 12.2: Explain what a patent is and describe different types of patents.

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16) Since the first patent was granted, there have been over ________ patents granted in the United States.

A) 526,000 B) 2.3 million C) 4.6 million D) 8.7 million E) 12.2 million Answer: D Diff: 3 Page Ref: 409 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective Thinking 17) Which of the following selections correctly identifies the three types of patents?

A) Manufacturing; process; plant B) Usefulness; purpose; genetic C) Explicit; implicit; plant D) Utility; design; plant E) Manufacturing; service; other Answer: D Diff: 2 Page Ref: 410 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Analytical Thinking 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 Diff: 2 Page Ref: 410 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective Thinking 19) Amazon.com's one-click ordering system and Priceline.com's "name-your-price" business model are examples of ________ patents.

A) copyright extension B) utility C) business technique D) trademark extension E) business method Answer: E Diff: 2 Page Ref: 410 LO: 12.2: Explain what a patent is and describe different types of patents.

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20) There are three basic requirements for a patent to be granted. The subject of the patent application must be ________.

A) useful, difficult to copy, and novel in relation to prior arts in the field B) based on cutting edge science or technology, not obvious to a person of ordinary skill in the field, and rare C) useful, novel in relation to prior arts in the field, and not obvious to a person of ordinary skill in the field D) rare, difficult to copy, and not obvious to a person of ordinary skill in the field E) useful, scientific, and novel in relation to prior arts in the field Answer: C Diff: 3 Page Ref: 410 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective Thinking 21) The term of a utility patent is ________ years from the date of the ________.

A) 7; patent is granted B) 15; initial application C) 15; patent is granted D) 20; initial application E) 20; patent is granted Answer: D Diff: 2 Page Ref: 411 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective Thinking 22) ________ patents are the second most common type of patent and cover the invention of new, original, and ornamental designs for manufactured products.

A) Aesthetic B) Utility C) Visual D) Blueprint E) Design Answer: E Diff: 2 Page Ref: 411 LO: 12.2: Explain what a patent is and describe different types of patents.

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23) A utility patent is good for ________ years from the date of the original application, a design patent is good for ________ years from the date the patent is granted, and a plant patent is good for ________ years from the date of the original application.

A) 14; 14; 20 B) 20; 20; 14 C) 20; 20; 20 D) 20; 14; 20 E) 14; 20; 14 Answer: D Diff: 3 Page Ref: 411 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Application of Knowledge 24) In terms of priority in filing a patent application, the United States uses a first-to- ________ system.

A) file B) invent C) manufacture D) sell E) validate Answer: A Diff: 3 Page Ref: 413 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective 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 Diff: 2 Page Ref: 414 LO: 12.2: Explain what a patent is and describe different types of patents.

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26) The Savvy Entrepreneurial Firm feature in Chapter 12 focused on provisional patent applications. The main point of the feature is to illustrate that filing a provisional patent application effectively takes ________.

A) substantial financial resources B) a substantial commitment of time and effort C) very little effort D) some finesse E) substantial expertise Answer: D Diff: 3 Page Ref: 415 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Application of Knowledge 27) A patent is a grant from the federal government conferring the rights to exclude others from making, selling, or using an invention for the term of the trademark.

Answer: TRUE Diff: 1 Page Ref: 408 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective Thinking 28) The average time for the approval of a patent is approximately seven months.

Answer: FALSE Diff: 2 Page Ref: 409 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Application of Knowledge 29) Since the first patent was granted in 1790, the USPTO has granted 8.7 million patents.

Answer: TRUE Diff: 2 Page Ref: 409 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Application of Knowledge 30) A utility patent can be obtained for a new product or process or the "idea" for a new product or process.

Answer: FALSE Diff: 2 Page Ref: 410 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Analytical Thinking 31) Design patents are the most common type of patent and cover what we generally think of as new inventions.

Answer: FALSE Diff: 2 Page Ref: 410 LO: 12.2: Explain what a patent is and describe different types of patents.

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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.

Diff: 2 Page Ref: 410 LO: 12.2: Explain what a patent is and describe different types of patents.

AACSB: Reflective Thinking 33) A ________ is any word, name, symbol, or device used to identify the source of 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 Diff: 1 Page Ref: 414 LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking 34) The four types of trademarks 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 Diff: 2 Page Ref: 416 LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

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35) Which of the following is not a type of trademark?

A) Trademark B) Certification mark C) Documentation mark D) Collective mark E) Service mark Answer: C Diff: 2 Page Ref: 416 LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking 36) Dell for computers, Modcloth for vintage and vintage-inspired women's clothing, and Proactiv for acne medication are examples of ________.

A) certifications B) copyrights C) patents D) trade secrets E) trademarks Answer: E Diff: 2 Page Ref: 416 LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking 37) ________ marks are similar to ordinary trademarks, but they are used to identify the services or intangible activities of a business rather than a business's physical product.

A) Creative B) Intangible C) Examination D) Service E) Subtle Answer: D Diff: 2 Page Ref: 417 LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking 38) ________ marks are trademarks or service marks used by the members of a cooperative, association, or other collective group, including marks indicating membership in a union or similar organization.

A) Collective B) Share C) Examination D) Joint E) Certification Answer: A Diff: 2 Page Ref: 417 LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking 10 .

39) The Partnering for Success feature in Chapter 12 starts by talking about Gary Schwartzberg, who, along with a partner, developed a new type of bagel dubbed the "Begeler," which was eventually licensed to Kraft. According to the feature, entrepreneurs and inventors like Gary Schwartzberg are finding that large consumer products companies are ________.

A) ambivalent about what they have to offer B) increasingly interested in what they have to offer for new products, but are ambivalent about services C) increasingly interested in what they have to offer D) increasingly interested in what they have to offer for new services, but are ambivalent about products E) increasingly disinterested in what they have to offer Answer: C Diff: 2 Page Ref: 417 LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective 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 Diff: 3 Page Ref: 419 LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking 41) A trademark is registered with the ________.

A) U.S. Commerce Department B) Federal Trade Commission C) Securities and Exchange Commission D) Federal Patent, Copyright, and Trademark Office E) U.S. Patent and Trademark Office Answer: E Diff: 2 Page Ref: 419 LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Analytical Thinking 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 Diff: 1 Page Ref: 414 LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking

11 .

43) Certification marks are similar to ordinary trademarks, but they are used to identify the services or intangible activities of a business rather than a business's physical product.

Answer: FALSE Diff: 2 Page Ref: 418 LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Application of Knowledge 44) Combinations of numbers and letters, such as 3M and 1-800-CONTACTS, can be trademarked.

Answer: TRUE Diff: 2 Page Ref: 418 LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking 45) Trademark law falls under the Lanham Act, which passed in 1946.

Answer: TRUE Diff: 2 Page Ref: 418 LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking 46) Marks that are merely descriptive of a product or service can be trademarked.

Answer: FALSE Diff: 2 Page Ref: 419 LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Analytical Thinking 47) What is a trademark? Why are trademarks important?

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. All businesses want to be recognized by their potential clientele and use their names and logos to enhance their visibility. Trademarks also provide consumers with information. For example, consumers know what to expect when they see a Starbucks coffee shop. Think of how confusing it would be if any coffee shop could use the name Starbucks.

Diff: 2 Page Ref: 414 LO: 12.3: Describe a trademark and explain the process entrepreneurs use to obtain one.

AACSB: Reflective Thinking

12 .

48) 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 is referred to as a(n) ________.

A) assurance document B) patent C) trade secret D) brand E) copyright Answer: E Diff: 1 Page Ref: 421 LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking 49) Which of the following statements about copyrights is incorrect?

A) Businesses typically possess a treasure trove of copyrightable material.

B) A musical composition that is written down is copyrightable.

C) Copyrightable material may be in tangible or intangible form.

D) The 1976 Copyright Act governs copyright law in the United States.

E) A copyright is a form of intellectual property protection.

Answer: C Diff: 2 Page Ref: 421 LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Application of Knowledge 50) Copyright law is governed by the ________.

A) U.S. Constitution B) 1946 Intellectual Property Act C) 1966 Trademark and Copyright Act D) 1955 Inventors and Writer's Protection Act E) Copyright Revision Act of 1976 Answer: E Diff: 3 Page Ref: 421 LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking 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) imitative B) offshoot C) derivative D) subsequent E) supplemental Answer: C Diff: 2 Page Ref: 421 LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Application of Knowledge 13 .

52) Copyright law protects any work of authorship ________.

A) 90 days after it is approved by the U.S. Copyright Office B) one year after it assumes a tangible form C) the moment it assumes a tangible form D) as soon as it is approved by the U.S. Copyright Office E) 30 days after it assumes a tangible form Answer: C Diff: 2 Page Ref: 422 LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking 53) Which of the following symbols is the copyright bug?

A) ç B) € C) ¢ D) © E) ™ Answer: D Diff: 2 Page Ref: 422 LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Application of Knowledge 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 Diff: 3 Page Ref: 423 LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking 55) The main exclusion from copyright laws is that copyright laws cannot protect ________.

A) ideas B) dramatic works C) computer software D) musical compositions E) literary works Answer: A Diff: 3 Page Ref: 423 LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Analytical Thinking

14 .

56) Copyright ________ occurs when one work derives from another or is an exact copy or shows substantial similarity to the original work.

A) infringement B) violation C) intrusion D) breach E) duplication Answer: A Diff: 2 Page Ref: 423 LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking 57) The What Went Wrong? feature in Chapter 12 focuses on a dispute between GoldieBlox, a toy company, and the Beastie Boys, a musical group. The dispute centered on GoldieBlox's use of a Beastie Boys song in a commercial without the Beastie Boy's permission. To justify their actions, GoldieBlox argued that their use of the song was justified based on the legal principle of ________ use.

A) fair B) trivial C) limited D) inconsequential E) non-restricted Answer: A Diff: 2 Page Ref: 425 LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Analytical Thinking 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 Diff: 1 Page Ref: 421 LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking 59) Computer software is not covered by copyright law.

Answer: FALSE Diff: 2 Page Ref: 421 LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking 60) Pictorial, graphic, and sculptural works can be protected via copyrights.

Answer: TRUE Diff: 3 Page Ref: 422 LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Analytical Thinking 15 .

61) Copyright infringement occurs when one work derives from another or is an exact copy.

Answer: TRUE Diff: 2 Page Ref: 423 LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective Thinking 62) What is a copyright? What is protected by a 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 are as follows: • Literary works • Musical compositions • Computer software • Dramatic works • Pantomimes and choreographic works • Pictorial, graphic, and sculptural works Diff: 3 Page Ref: 421 LO: 12.4: Define a copyright and identify what a copyright can protect.

AACSB: Reflective 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 Diff: 2 Page Ref: 426 LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Reflective Thinking 64) A ________ 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.

A) patent B) copyright C) trademark D) trade secret E) certification mark Answer: D Diff: 2 Page Ref: 426 LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Reflective Thinking 16 .

65) Which of the following items would typically be protected by a form of intellectual property protection other than trade secret statutes?

A) Financial forecast B) Product formula C) A company's logo D) Logs of sales calls E) Employee roster Answer: C Diff: 2 Page Ref: 426 LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Reflective 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 Answer: E Diff: 3 Page Ref: 426 LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Reflective Thinking 67) The ________, which was drafted in 1979 by a special commission, 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 Diff: 3 Page Ref: 426 LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Application of Knowledge 68) According to the textbook, trade secret disputes arise most frequently when ________.

A) one firm alleges that it can legally use another firm's trade secrets because they were "voluntarily" disclosed B) an employee leaves a firm to join a competitor and is accused of taking confidential information with him or her C) one firm claims that another firm outright stole its trade secrets D) one firms claims that what another firm is claiming as a trade secret is common knowledge E) one firm claims that it obtained another firm's trade secrets through legal means Answer: B Diff: 3 Page Ref: 427 LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Reflective Thinking 17 .

69) 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.

Answer: TRUE Diff: 1 Page Ref: 426 LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Reflective Thinking 70) While stealing trade secrets is widely considered to be unethical, it is not a criminal offense.

Answer: FALSE Diff: 2 Page Ref: 426 LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Application of Knowledge 71) Trade secret disputes arise most frequently when one firm alleges that a trade secret claimed by another firm is common knowledge, and can therefore be used by anyone.

Answer: FALSE Diff: 2 Page Ref: 427 LO: 12.5: Describe a trade secret and understand the common causes of trade secret disputes.

AACSB: Reflective Thinking 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 Diff: 1 Page Ref: 429 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 73) Consider the following questions: Are products under development that require patent protection? Are we in compliance with the copyright license agreements into which we have entered? Is anyone infringing on our trademarks? Are company trade secrets leaking out to competitors? These are the types of questions that would be asked when conducting a(n) ________.

A) intangible material examination B) intellectual property inventory C) intangible material inspection D) patent, trademark, copyright, and trade secret review E) intellectual property audit Answer: E Diff: 2 Page Ref: 429 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 18 .

74) There are two primary reasons to conduct an intellectual property audit. First, it is prudent for a company to periodically determine whether its intellectual property is being properly protected. The second reason for a company to conduct an intellectual property audit is 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 Diff: 2 Page Ref: 429 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 75) An intellectual property audit is conducted to determine the intellectual property a company owns.

Answer: TRUE Diff: 1 Page Ref: 429 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

19 .

Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 13 Preparing for and Evaluating the Challenges of Growth 1) Big Fish Presentations, the company profiled in the opening feature of Chapter 13, prepares presentations that help clients present themselves in new and innovative ways. In regard to growth, Big Fish Presentations has opted to ________.

A) pursue a conservative and patient approach to growth based primarily on international expansion B) pursue a liberal and aggressive approach to growth based primarily on mergers and acquisitions C) pursue a conservative and patient approach to growth based primarily on strategic alliances and joint ventures D) pursue a liberal and aggressive approach to growth based primarily on expanding their product lines E) pursue a conservative and patient approach to growth based primarily on expanding their product lines Answer: E Diff: 2 Page Ref: 441 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Analytical Thinking 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 Diff: 1 Page Ref: 443 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking 3) In regard to firm growth, evidence shows that ________.

A) relatively few firms generate sustained growth B) the majority of firms generate sustained growth C) about 50 percent of firms generate sustained growth D) manufacturing firms tend to generate sustained growth while service firms do not E) service firms tend to generate sustained growth while manufacturing firms do not Answer: A Diff: 3 Page Ref: 443 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Application of Knowledge

1 .

4) Which of the following statements regarding firm growth is incorrect?

A) Most entrepreneurial firms want to grow.

B) Growth in sales revenue is a poor indicator of an entrepreneurial firm's potential to survive today and be successful tomorrow.

C) Firm growth is exciting.

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 Diff: 3 Page Ref: 443 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking 5) According to the textbook, most entrepreneurial firms ________.

A) are ambivalent about growth B) want to grow C) do not want to grow D) want to grow if the economy is strong but do not want to grow if the economy is weak E) want to grow if they are a service firm but do not want to grow if they are a manufacturing firm Answer: B Diff: 2 Page Ref: 443 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking 6) According to the textbook, the three important things that a business can do to prepare for growth are ________.

A) plan for growth, adopt a growth-oriented business model, and stay committed to a core strategy B) appreciate the nature of business growth, stay committed to a core strategy, and plan for growth C) develop a viral marketing campaign, stay committed to a core strategy, and adopt a growthoriented business model D) develop business partnerships, diversify beyond the company's core strategy, and appreciate the nature of business growth E) retain or hire one or more business growth consultants, diversify beyond the company's core strategy, and plan for growth Answer: B Diff: 2 Page Ref: 443 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Application of Knowledge

2 .

7) According to the textbook, 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 impact on their customers' lives and sell high quality products D) take advantage of environmental trends and are cost leaders E) solve a significant problem or sell high quality products Answer: A Diff: 2 Page Ref: 444 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective 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 Diff: 2 Page Ref: 444 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Analytical Thinking 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 expenses B) Comfortable operating margins C) Customer complaints are up.

D) Those working with the business's financial structure are starting to worry.

E) E-mail and text messages start going unanswered.

Answer: B Diff: 2 Page Ref: 445 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Analytical Thinking

3 .

10) The Partnering for Success feature in Chapter 13 focuses on Threadless, the popular community-centered T-shirt design site. According to the feature, at one point during its early growth, Threadless almost collapsed under the weight of operational problems. Threadless solved the problem by ________.

A) hiring professional managers B) replacing the founder CEO with a seasoned CEO from an established company C) hiring a consulting firm D) selling a minority interest to a venture capital firm, which provided Threadless operational assistance E) merging with Zappos and folding its operations into Zappos' operations Answer: D Diff: 2 Page Ref: 446 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking 11) Sustained growth is defined as growth in both revenues and profits over an extended period of time.

Answer: TRUE Diff: 1 Page Ref: 443 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Analytical Thinking 12) Most entrepreneurial firms are reluctant to try to grow.

Answer: FALSE Diff: 1 Page Ref: 443 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Analytical Thinking 13) All businesses have the potential to be aggressive growth firms.

Answer: FALSE Diff: 2 Page Ref: 444 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking 14) Business success doesn't always scale.

Answer: TRUE Diff: 2 Page Ref: 445 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking 15) A firm's core strategy is largely determined by its core competencies, or what it does particularly well.

Answer: TRUE Diff: 2 Page Ref: 445 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking 4 .

16) Do most firms want to grow or are they reluctant to grow? What are the advantages of growth?

Answer: Most entrepreneurial firms want to grow. Especially in the short run, growth in sales revenue is an important indicator of an entrepreneurial venture's potential to survive today and be successful in the future.

Diff: 1 Page Ref: 443 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Application of Knowledge 17) According to Chapter 13, business success doesn't always scale. What is meant by this statement?

Answer: Scaling a business means increasing its size and pace of activity. Unfortunately, the very thing that makes a business initially successful often makes it difficult to grow or scale. For example, businesses that are based on providing high levels of individualized service often don't grow or scale well. This is because it's hard to continue to offer individualized service as a business grows. There is also a category of businesses that sell high-end or specialty products that earn high margins. These businesses typically sell their products where customers prioritize quality over price. These businesses can grow, but only at a measured pace. If they grow too quickly, they can lose the "exclusivity" they are trying to project or can damage their special appeal. For example, fashion clothing boutiques often limit the number of garments they sell in a certain size or color. Even though they know they could sell more of a particular tie or dress, they deliberately limit their sales so their customers don't see each other wearing identical items.

Diff: 3 Page Ref: 445 LO: 13.1: Describe how firms can properly prepare for growth.

AACSB: Reflective Thinking 18) A firm's pace of growth is the rate it is growing ________.

A) compared to industry norms 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 Diff: 2 Page Ref: 446 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking

5 .

19) Which of the following options was not identified in the textbook as an appropriate reason for growth?

A) Need to accommodate the growth of key customers B) Influence, power, and survivability C) Economies of scale D) Market leadership E) Maintain the appearance that the firm is successful Answer: E Diff: 2 Page Ref: 448 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Reflective Thinking 20) Which of the following is not an appropriate reason for firm growth?

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: A Diff: 2 Page Ref: 449 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Reflective Thinking 21) ________ are(is) generated when increasing production lowers the average cost of each unit produced.

A) Business scalability B) Economies of scale C) Reaching for scale D) Market leadership E) Economies of scope Answer: B Diff: 2 Page Ref: 449 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Reflective Thinking 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 Diff: 2 Page Ref: 449 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking

6 .

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. The reason for growth illustrated in this example 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 Diff: 2 Page Ref: 449 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking 24) ________ costs are costs that a company incurs whether it sells something or not. ________ costs are the costs a company incurs as it generates sales.

A) Preset; Marginal B) Variable; Fixed C) Set; Marginal D) Fixed; Variable E) Marginal; Set Answer: D Diff: 2 Page Ref: 449 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking 25) ________ costs are costs that a company incurs whether it sells something or not.

A) Fixed B) Consistent C) Steady D) Variable E) Regular Answer: A Diff: 2 Page Ref: 449 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking 26) ________ costs are the costs a company incurs as it makes sales.

A) Static B) Irregular C) Balanced D) Variable E) Flexible Answer: D Diff: 2 Page Ref: 449 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking 7 .

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, regardless of whether he produces one computer monitor a month or 10,000. Zach's lease payment is a ________ cost.

A) variable B) secondary C) fixed D) marginal E) tangible Answer: C Diff: 2 Page Ref: 449 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking 28) Karen West owns a barbecue restaurant. One expense that Karen watches closely is 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 Diff: 2 Page Ref: 449 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking 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 Diff: 2 Page Ref: 449 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Reflective Thinking

8 .

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 Diff: 2 Page Ref: 449 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking 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 the reason for growth labeled ________.

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 Diff: 2 Page Ref: 449 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking 32) Katlyn Williams owns a company that makes specialized components for the aerospace industry. Her most important customer is a company that is growing at a rate of 33% per year.

Katlyn is working hard to grow her firm, because she knows that unless her company continually grows it will not be able to keep pace with the growth of its most important customer. This example illustrates the reason for growth referred to as ________.

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 Diff: 2 Page Ref: 450 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking 33) A firm's pace of growth is the rate at which it is growing compared to its main competitors.

Answer: FALSE Diff: 2 Page Ref: 448 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking

9 .

34) Fixed costs are the costs a company incurs as it generates sales.

Answer: FALSE Diff: 2 Page Ref: 449 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Analytical Thinking 35) Market leadership occurs when a firm holds the number one or number two position in an industry or niche market in terms of sales volume.

Answer: TRUE Diff: 2 Page Ref: 449 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Reflective Thinking 36) Sometimes firms are compelled to grow to accommodate the growth of a key customer.

Answer: TRUE Diff: 2 Page Ref: 450 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Reflective 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.

Diff: 2 Page Ref: 449 LO: 13.2: Discuss the six most common reasons firms pursue growth.

AACSB: Reflective Thinking 38) The majority of businesses go through a discernable set of stages of growth referred to as the ________.

A) business rotation cycle B) business existence cycle C) organizational sequence D) business life cycle E) organizational life cycle Answer: E Diff: 2 Page Ref: 451 LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Analytical Thinking

10 .

39) Which of the following is not one of the five stages in the organizational life cycle?

A) Introduction B) Early growth C) Scale D) Maturity E) Decline Answer: C Diff: 2 Page Ref: 451 LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Analytical Thinking 40) The ________ stage of the organizational life cycle is the startup phase, where a business determines what its core strengths and capabilities are and starts selling its initial product or service.

A) introduction B) launch C) ramp-up D) early growth E) continuous growth Answer: A Diff: 2 Page Ref: 451 LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Analytical Thinking 41) The main challenges for a business in the introduction stage of the organizational life cycle is ________.

A) beginning the process of transitioning the owner from a hands-on supervisor to a more managerial role and developing business partnerships B) developing business partnerships and making sure the initial product or service is right C) determining whether the owner of the business and the current management team is capable of taking the business further and developing systems and procedures D) developing systems and procedures and beginning the process of transitioning the owner from a hands-on supervisor to a more managerial role E) making sure the initial product or service is right and starting to lay the groundwork for building a larger organization Answer: E Diff: 2 Page Ref: 451 LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Reflective 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 Diff: 3 Page Ref: 452 LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Reflective Thinking 43) According to the textbook, the toughest decisions regarding business growth are made in the ________ stage of the organizational life cycle.

A) introduction B) early growth C) continuous growth D) maturity E) decline Answer: C Diff: 3 Page Ref: 452 LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Analytical Thinking 44) According to the textbook, a well-managed business 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 Diff: 2 Page Ref: 453 LO: 13.3: Explain the importance of being able to manage the stages of growth.

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45) According to the textbook, it is ________.

A) not inevitable that a business enter the decline stage of the organizational life cycle B) inevitable that a business enter the decline stage of the organizational life cycle C) not inevitable that service firms enter the decline stage of the organizational life cycle but is inevitable for manufacturing firms D) not inevitable that manufacturing firms enter the decline stage of the organizational life cycle but is inevitable for service firms E) not inevitable that international firms enter the decline stage of the organizational life cycle but is inevitable for strictly domestic firms Answer: A Diff: 2 Page Ref: 453 LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Reflective Thinking 46) The Savvy Entrepreneurial Firm feature in Chapter 13 focuses on Salesforce.com, a company that pioneered the idea of software as a service (SaaS). The main point of the case is that rather than remaining a niche product, Salesforce.com's product, which is an online software platform for salespeople, has ________ and appeals to mainstream customers.

A) crossed the divide B) jumped the divide C) leaped the technology curve D) crossed the chasm E) crossed the valley Answer: D Diff: 2 Page Ref: 454 LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Reflective Thinking 47) The majority of businesses go through a discernable set of stages referred to as the business/industry life cycle.

Answer: FALSE Diff: 2 Page Ref: 451 LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Reflective 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 Diff: 2 Page Ref: 451 LO: 13.3: Explain the importance of being able to manage the stages of growth.

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49) A business's early growth stage is generally characterized by increasing sales and heightened complexity.

Answer: TRUE Diff: 2 Page Ref: 452 LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Analytical Thinking 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 Diff: 2 Page Ref: 452 LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Reflective Thinking 51) What is the organizational life cycle and why is it important?

Answer: The majority of businesses go through a discernable set of stages referred to as the organizational life cycle. The stages include introduction, early growth, continuous growth, maturity, and decline. It's important for business owners to be familiar with these stages, because each stage offers unique opportunities and challenges. By knowing the unique opportunities and challenges posed by each stage, a business owner can be prepared to respond appropriately.

Diff: 2 Page Ref: 451 LO: 13.3: Explain the importance of being able to manage the stages of growth.

AACSB: Reflective Thinking 52) The author of the book titled The Theory of the Growth of the Firm, which is referred to in Chapter 13, is ________.

A) Jim Collins B) Joseph Schumpeter C) Edith Penrose D) Michael Gerber E) Seth Godin Answer: C Diff: 3 Page Ref: 455 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Application of Knowledge

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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) prolific potential B) dynamic opportunity options C) productive opportunity set D) passionate opportunity set E) creative field of potential Answer: C Diff: 2 Page Ref: 455 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective 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 Diff: 3 Page Ref: 455 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Analytical Thinking 55) When a firm's managerial resources are insufficient to take advantage of its new product and service opportunities, the subsequent bottleneck is referred to as the ________ problem.

A) commercial capacity B) entrepreneurial aptitude C) managerial capacity D) business capacity E) business aptitude Answer: C Diff: 2 Page Ref: 455 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking

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56) Jack Wills owns a commercial nursery. Jack has more business than he wants, in fact, he is presently turning away exciting new business opportunities because it is expensive to hire new employees, and 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. Jack'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 Diff: 2 Page Ref: 455 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Analytical Thinking 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) Difficult hazard B) Adverse hazard C) Adverse selection D) Moral selection E) Moral hazard Answer: C Diff: 2 Page Ref: 455 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking

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58) Kendell Adams 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 Kendell's firm has grown, and his need for employees has increased, he is finding that it is increasingly difficult to find employees who have the qualifications he is looking for, are good matches for the positions he has available, and fit within the supervisory framework he has developed. Kendell 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 Diff: 3 Page Ref: 455 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking 59) ________ 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) Moral hazard B) Adverse selection C) Adverse hazard D) Complex hazard E) Complex selection Answer: B Diff: 2 Page Ref: 455 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking 60) ________ 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.

A) Difficult selection B) Adverse hazard C) Ethical selection D) Productivity hazard E) Moral hazard Answer: E Diff: 2 Page Ref: 455 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking

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61) According to the basic model of firm growth articulated in Chapter 13, the ability to increase managerial services to facilitate growth is not friction free but is constrained and limited. Which of the following selections is not one of the factors that constrains or limits a firm's ability to increase its 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 Diff: 3 Page Ref: 455 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Analytical Thinking 62) Which of the following was not identified in the textbook as one of the day-to-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 Diff: 2 Page Ref: 456 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Analytical Thinking 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 Diff: 2 Page Ref: 456 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking

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64) Terry Wells owns a growing company that makes innovative kitchen appliances. One thing that Terry has to continually work at is to keep enough cash on hand to make sure she has sufficient liquidity to meet her payroll and cover her other short-term obligations. The day-to-day challenge of firm growth this example is referring to is ________.

A) quality control B) capital constraints C) price stability D) cash flow management E) personnel issues Answer: D Diff: 2 Page Ref: 457 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Analytical Thinking 65) The What Went Wrong feature in Chapter 13 focuses on Wesabe, a Web-based company that was launched in 2006 to help people manage their personal finances. According to Marc Hedlund, one of Wesabe's cofounders, the company failed for two primary reasons. First, it didn't allow a partner to provide it with an essential service that it decided to build on its own.

Second, it ________.

A) didn't hire an experienced CEO B) didn't achieve a large enough critical mass of users C) didn't implement a revenue model fast enough D) didn't utilize both internal and external growth strategies E) misunderstood its users Answer: E Diff: 2 Page Ref: 458 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking 66) Megan Johnson 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. One thing that Megan is worried about is that the large stores might fight back by lowering their prices, which hurts everyone except the consumer. The day-to-day challenge of firm growth that this example is referring to is ________.

A) quality control B) price stability C) capital constraints D) cash flow management E) benchmarking Answer: B Diff: 2 Page Ref: 459 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking 19 .

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 about one thing. 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 Diff: 2 Page Ref: 459 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking 68) According to Penrose, managerial services generate new market, product, and service ideas, while entrepreneurial services administer the routine functions of the firm and facilitate the proper execution of new opportunities.

Answer: FALSE Diff: 2 Page Ref: 455 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking 69) According to Penrose, entrepreneurial services generate new market, product, and service ideas.

Answer: TRUE Diff: 2 Page Ref: 455 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective 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 Diff: 3 Page Ref: 455 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

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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 Diff: 3 Page Ref: 455 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking 72) Growth usually increases rather than decreases the challenges involved with cash flow management.

Answer: TRUE Diff: 3 Page Ref: 449 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective 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 Diff: 2 Page Ref: 459 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

AACSB: Reflective Thinking 74) Few businesses need access to capital to fuel their growth.

Answer: FALSE Diff: 2 Page Ref: 459 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

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75) What are the primary 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. In regard to cash flow management, 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. In regard to price stability, if a firm's growth comes at the expense of a competitor's market share, a price war can result. In regard to quality control, as a firm handles the increase in activity that accompanies growth, unless it is careful, quality can suffer. Finally, in regard to capital constraints, growth often requires the expansion of a firm's facilities, which is difficult because purchasing or building facilities takes capital.

Diff: 2 Page Ref: 456 LO: 13.4: Describe the challenges of firm growth, particularly those of adverse selection and moral hazard.

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Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 14 Strategies for Firm Growth 1) Shake Smart, the company profiled in the opening feature of Chapter 14, sells nutritious smoothie-like shakes. The first place the shakes were sold was ________.

A) at a pop-up store in the Memorial Union on the Iowa State University campus B) at a kiosk just outside the Aztec Center on the San Diego State University campus C) at concession stands in Spartan Stadium on the Michigan State University campus D) on central campus at the University of Nebraska campus E) in the Lory Student Center on the Colorado State University campus Answer: B Diff: 2 Page Ref: 473 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Application of Knowledge 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 Diff: 1 Page Ref: 475 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Analytical Thinking 3) New product development, other product-related strategies, and international expansion are examples of ________ growth strategies.

A) external B) domestic C) primary D) internal E) in-house Answer: D Diff: 2 Page Ref: 475 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Application of Knowledge

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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) external funding D) internal leadership E) internal design expertise Answer: A Diff: 2 Page Ref: 475 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Analytical Thinking 5) Which of the following is an example of an external growth strategy?

A) Geographic expansion B) Improving an existing product or service C) Increasing the market penetration of an existing product or service D) Extending product lines E) Strategic alliances Answer: E Diff: 2 Page Ref: 475 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Application of Knowledge 6) Modcloth, Zappos 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 Diff: 2 Page Ref: 475 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Application of Knowledge 7) Which mechanism for firm growth involves the creation and sale of new products or services?

A) Strategic alliances B) New product development C) Licensing D) Franchising E) Joint ventures Answer: B Diff: 1 Page Ref: 475 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

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8) Which of the following is an advantage of internal growth strategies?

A) Need to develop new resources B) Get quality and pricing right C) Investment in a failed internal effort can be difficult to recoup D) Provides maximum control E) Adds to industry capacity Answer: D Diff: 2 Page Ref: 476 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Application of Knowledge 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) When new product development is properly executed, there is tremendous upside potential.

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 Diff: 2 Page Ref: 477 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking 10) The Savvy Entrepreneurial Firm feature in Chapter 14 focuses on SwitchFlops, a company that produces sandals with interchangeable straps. The primary takeaway from the feature is that savvy growth-minded startups ________.

A) utilize both internal and external growth strategies B) emphasize internal rather than external growth strategies C) emphasize international growth strategies from their inception D) configure their products and services in ways that have built-in growth potential E) compete on the basis of quality rather than price Answer: D Diff: 2 Page Ref: 477 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking

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11) Which of the following was not identified in the textbook 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 Diff: 2 Page Ref: 478 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking 12) Which of the following was not identified in Chapter 14 as one of the top five reasons new products fail?

A) The potential market was overestimated.

B) Customers saw the product as too expensive.

C) Lack of passion for the product D) The product was no different than the competition's.

E) The costs of developing the product line were too high.

Answer: C Diff: 3 Page Ref: 478 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Application of Knowledge 13) External growth strategies involve efforts taken within the firm itself, such as new product development, other product-related strategies, and international expansion.

Answer: FALSE Diff: 1 Page Ref: 473 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Application of Knowledge 14) Internally generated growth is often called organic growth because it does not rely on outside intervention.

Answer: TRUE Diff: 2 Page Ref: 475 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking 15) In many fast-paced industries, new product development is a competitive necessity.

Answer: TRUE Diff: 2 Page Ref: 475 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

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16) An advantage of internal growth is that it is a rapid form of growth.

Answer: FALSE Diff: 2 Page Ref: 476 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking 17) New product development is a low-risk growth strategy.

Answer: FALSE Diff: 2 Page Ref: 477 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking 18) Explain the difference between internal and external growth strategies. Provide examples of each.

Answer: Internal growth strategies rely on efforts generated within the firm itself, such as new product development, other product-related strategies, and international expansion. External growth strategies rely on establishing relationships with third parties, such as mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising.

Diff: 1 Page Ref: 475 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking 19) Describe the internal growth strategy of new product development. Why is it a competitive necessity in some industries that entrepreneurial firms focus on this form of growth?

Answer: New product development involves the creation and sale of new products (or services) as a means of increasing firm revenues. In many fast-paced industries, new product development is a competitive necessity. For example, the average product life cycle in the computer software industry can be measured in months. Because of this, to remain competitive, software companies must always have new products in their pipelines.

Diff: 2 Page Ref: 475 LO: 14.1: Identify and discuss the core internal growth strategy for entrepreneurial firms.

AACSB: Reflective Thinking 20) If a business enhances the quality of a product, makes it more convenient to use, improves its durability, or makes it more up-to-date, any one of those initiatives fall under the category of ________.

A) increasing the market penetration of an existing product or service B) extending product lines C) geographic expansion D) licensing E) improving an existing product or service Answer: E Diff: 2 Page Ref: 479 LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

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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) product line sharpening C) product line widening D) market penetration E) market expansion Answer: D Diff: 2 Page Ref: 479 LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Analytical Thinking 22) Pam Ryan owns a store that sells running shoes and related products. Pam is currently trying to increase sales through endorsements by famous runners and former Olympic athletes. Pam 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 Diff: 2 Page Ref: 479 LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Analytical Thinking 23) Work that is done for a company by people other than the company's full-time employees is referred to as ________.

A) insourcing B) farming-out C) personnel extension D) outsourcing E) capacity enhancement Answer: D Diff: 1 Page Ref: 480 LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

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24) A(n) ________ strategy involves making additional versions of a product so that it will appeal to different clientele.

A) market penetration B) geographic expansion C) improving an existing product or service D) strategic alliance E) product line extension Answer: E Diff: 2 Page Ref: 480 LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Application of Knowledge 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 he sold in his showroom, but to increase sales, Chris now sells a low-end, a medium-priced, and a high-end version of each of the ATVs he sells. 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 Diff: 2 Page Ref: 480 LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Analytical Thinking 26) Entrepreneurial businesses that grow by expanding from their original location to additional geographic sites are pursuing a ________ strategy.

A) common expansion B) market penetration C) universal networking D) geographic expansion E) product line extension Answer: D Diff: 2 Page Ref: 480 LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Analytical Thinking

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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 Diff: 2 Page Ref: 480 LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Analytical Thinking 28) A market penetration strategy involves actions taken to increase the sales of a product or service through greater marketing efforts or through increased product capacity and efficiency.

Answer: TRUE Diff: 2 Page Ref: 479 LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Application of Knowledge 29) A product line extension strategy involves making additional versions of a product so that it will appeal to a different clientele or making related products to sell to the same clientele.

Answer: TRUE Diff: 2 Page Ref: 480 LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Reflective Thinking 30) Geographic expansion is most common in manufacturing settings.

Answer: FALSE Diff: 2 Page Ref: 480 LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

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31) Describe what a product line extension strategy is. What are the advantages of this strategy?

Describe a company you are familiar with that utilizes a product line extension growth strategy.

Answer: A product line extension 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.

For example, a company may take a low-end product, make another version of it that is a little better, and then make another version of it that represents the top of the line. The advantage of a product extension strategy is that it allows a firm to take one product and extend it into several products without incurring significant additional development expense. In regard to making related products to sell to the same clientele, many firms start by offering one product or service and then expand into related areas. Many companies utilize product extension strategies.

Starbucks, for example, now sells bottled Frappuccino Coffee, which is an extension of its more traditional hot coffees and related drinks sold in its restaurants.

Diff: 2 Page Ref: 480 LO: 14.2: Describe additional internal product-growth strategies entrepreneurial firms can use.

AACSB: Reflective Thinking 32) According to a survey of rapid growth firms conducted by the Small Business & Entrepreneurship Council and the Financial Services Roundtable, ________ percent of the firms in the survey said that expanding into overseas markets factored into their business plans over the next five years.

A) 9 B) 21 C) 40 D) 53 E) 66 Answer: B Diff: 3 Page Ref: 481 LO: 14.3: Examine international expansion as a growth strategy.

AACSB: Application of Knowledge 33) International new ventures are ________.

A) businesses that have employees located in two or more countries B) businesses that sell products in two or more countries C) businesses that, from inception, seek to derive significant competitive advantage by using their resources to sell products or services in multiple countries D) businesses that are headquartered in a foreign country and export their products to the United States E) new ventures that export at least one-third of their products to foreign countries Answer: C Diff: 2 Page Ref: 481 LO: 14.3: Examine international expansion as a growth strategy.

AACSB: Analytical Thinking

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34) The What Went Wrong feature in Chapter 14 focuses on the failure of Crumbs Bake Shop, a specialty-restaurant chain that sold gourmet cupcakes. According to the feature, Crumbs failed due to ________.

A) lack of funding to facilitate expansion, high real estate costs, management turnover, poor operating margins B) no pivot or change in strategy, lack of international expansion, trademark dispute with a competitor, failure to franchise C) increasingly crowded market, consumers started losing interest in cupcakes, high real estate costs, and no pivot or change in strategy D) lack of funding to facilitate expansion, management turnover, increasingly crowded market, and high fixed costs E) high operating costs, trademark dispute with a competitor, consumers started losing interest in cupcakes, and failure to franchise Answer: C Diff: 3 Page Ref: 482 LO: 14.3: Examine international expansion as a growth strategy.

AACSB: Analytical Thinking 35) Which of the following is the primary advantage of exporting as a foreign market entry strategy?

A) Provides a firm total control over its foreign operations B) Ability to generate revenue C) Exporting is a relatively inexpensive way for a firm to become involved 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 Diff: 2 Page Ref: 484 LO: 14.3: Examine international expansion as a growth strategy.

AACSB: Reflective Thinking 36) Which of the following is the primary disadvantage of licensing as a foreign market entry strategy?

A) A firm in effect "teaches" a foreign company how to produce its proprietary products.

B) High transportation costs C) It is usually a one-time activity.

D) A firm loses partial control of its business operations.

E) Quality control Answer: A Diff: 2 Page Ref: 484 LO: 14.3: Examine international expansion as a growth strategy.

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37) Which of the following is the primary advantage of a wholly owned subsidiary as a foreign market entry strategy?

A) Provides a firm total control over its operations B) Easier to raise capital to implement than other foreign market entry strategies C) Gaining an appreciation of local customs and market preferences D) Low transportation costs E) The ability to give employees foreign market experience Answer: A Diff: 2 Page Ref: 484 LO: 14.3: Examine international expansion as a growth strategy.

AACSB: Analytical Thinking 38) The majority of entrepreneurial firms first enter foreign markets as exporters.

Answer: TRUE Diff: 2 Page Ref: 484 LO: 14.3: Examine international expansion as a growth strategy.

AACSB: Application of Knowledge 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) Outside D) External E) Peripheral Answer: D Diff: 1 Page Ref: 485 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Application of Knowledge 40) Brian Ramsey owns a firm that develops and sells smartphone accessories. He is currently trying to grow his firm through strategic alliances and joint ventures. Brian is pursuing a(n) ________ growth strategy.

A) domestic B) external C) subsidiary D) internal E) secondary Answer: B Diff: 1 Page Ref: 485 LO: 14.4: Discuss different types of external growth strategies.

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41) Which of the following is an example of an external growth strategy?

A) New product development B) Mergers and acquisitions C) Market penetration D) Product line extension E) Geographic expansion Answer: B Diff: 2 Page Ref: 485 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Application of Knowledge 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 Diff: 2 Page Ref: 485 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking 43) A(n) ________ is the pooling of interests to combine two or more firms into one. A(n) ________ is the outright purchase of one firm by another.

A) acquisition; merger B) merger; acquisition C) licensing agreement; acquisition D) joint venture; strategic alliance E) strategic alliance; joint venture Answer: B Diff: 1 Page Ref: 485 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking 44) In an acquisition, the surviving firm is called the ________, and the firm that is acquired is called the ________.

A) target; acquirer B) goal; objective C) objective; aggressor D) acquirer; target E) aggressor; objective Answer: D Diff: 2 Page Ref: 485 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking 12 .

45) Two years ago, Cameron Jones and Mary Scott each owned a small chain of smoothie restaurants in New York City. Just recently, they decided to pool their interests and combine their individual chains of restaurants into one chain. What Cameron and Mary did with their firms is called a(n) ________.

A) licensing agreement B) strategic alliance C) acquisition D) joint venture E) merger Answer: E Diff: 2 Page Ref: 485 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 46) Which of the following is a disadvantage of growth by means of external growth strategies?

A) Diversification of business risk B) Economies of scale C) Getting access to proprietary products or services D) Reducing competition E) Loss of organizational flexibility Answer: E Diff: 3 Page Ref: 486 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Application of Knowledge 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 Diff: 3 Page Ref: 486 LO: 14.4: Discuss different types of external growth strategies.

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48) The two primary steps involved in finding an appropriate acquisition candidate are (1) Make a "short list" of appropriate acquisition candidates and (2) ________.

A) carefully screen each candidate to determine its suitability for acquisition B) interview the CEO of each candidate to determine his/her openness to an acquisition C) determine if acquiring each candidate is financially feasible D) meet with each candidate's top management team to discern if they are compatible with your top management team E) hire a consulting firm to determine the best acquisition candidate Answer: A Diff: 3 Page Ref: 487 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 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 Diff: 1 Page Ref: 489 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Application of Knowledge 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 Diff: 2 Page Ref: 489 LO: 14.4: Discuss different types of external growth strategies.

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51) ________ licensing is the licensing of proprietary technology that the licensor typically controls by virtue of a utility patent.

A) Skill B) Intellectual property C) Utility D) Technology E) Expertise Answer: D Diff: 1 Page Ref: 490 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 52) Qualcomm, 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, Qualcomm grants permission to many companies to use specific forms of its intellectual property in exchange for monetary compensation. Qualcomm 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 Diff: 2 Page Ref: 490 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking 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 Diff: 2 Page Ref: 490 LO: 14.4: Discuss different types of external growth strategies.

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54) Merchandise and character licensing is the licensing of a recognized trademark or brand that the licensor typically controls through a registered ________.

A) trade secret or copyright B) patent or copyright C) trademark or patent D) patent or trade secret E) trademark or copyright Answer: E Diff: 2 Page Ref: 490 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 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 Diff: 2 Page Ref: 490 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking 56) According to the textbook, the key to effective merchandise and character licensing is ________.

A) get licensing income monthly rather than yearly B) resist the temptation to license a trademark too widely C) licensing a trademark very widely D) restrict licensing agreements to one year E) restrict licensing to product categories that have no relevance and appeal to a firm's core customers Answer: B Diff: 3 Page Ref: 490 LO: 14.4: Discuss different types of external growth strategies.

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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) joint alliance B) joint venture C) licensing agreement D) merger E) strategic alliance Answer: E Diff: 1 Page Ref: 491 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 58) Which of the following was identified in the textbook as an advantage of participating in strategic alliances and joint ventures?

A) Management complexities B) Loss of organizational flexibility C) Partners' cultures may clash.

D) Risk becoming dependent on a partner E) Learning Answer: E Diff: 2 Page Ref: 491 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 59) Which of the following was identified in the textbook as a disadvantage of participating in strategic alliances and joint ventures?

A) Risk and cost sharing B) Economies of scale C) Partial loss of decision autonomy D) Gain access to a foreign market E) Neutralizing or blocking competitors Answer: C Diff: 2 Page Ref: 491 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective 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 Diff: 2 Page Ref: 491 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 17 .

61) In the context of strategic alliances, ________ alliances typically match a company with a distribution system with a company that has a product to sell to increase sales of a product or service.

A) promotion B) marketing C) organizational D) directional E) technological Answer: B Diff: 2 Page Ref: 491 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 62) The Partnering for Success feature in Chapter 14 is titled "Three Steps to Alliance Success."

The three steps to alliance success identified in the feature are ________.

A) drafting a licensing agreement, setting up a governance structure, and making it work B) selecting a partner, cutting the deal, and making it work C) interviewing potential partners, cutting the deal, and supervising the implementation of the agreement D) drafting a licensing agreement, cutting the deal, and setting up a governance structure E) selecting an alliance "manager," setting up a governance structure, and making it work Answer: B Diff: 3 Page Ref: 492 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 63) External growth strategies rely on establishing relationships with third parties, such as mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising.

Answer: TRUE Diff: 1 Page Ref: 485 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 64) An acquisition is the pooling of interests to combine two or more firms into one. A merger is the outright purchase of one firm by another.

Answer: FALSE Diff: 2 Page Ref: 485 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking 65) In an acquisition, the surviving firm is called the acquirer, and the firm that is acquired is called the target.

Answer: TRUE Diff: 2 Page Ref: 486 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 18 .

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 Diff: 3 Page Ref: 486 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective 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 Diff: 2 Page Ref: 489 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 68) Technology licensing is the licensing of proprietary technology that the licensor typically controls by virtue of a utility patent.

Answer: TRUE Diff: 2 Page Ref: 490 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 69) Loss of proprietary information is a disadvantage of participating in strategic alliances and joint ventures.

Answer: TRUE Diff: 2 Page Ref: 491 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 70) A joint venture is a partnership between two or more firms that is developed to achieve a specific goal and has no joint ownership involved.

Answer: FALSE Diff: 2 Page Ref: 491 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking 71) In a link joint venture, the partners collaborate at a single point in the value chain to gain economies of scale in production or distribution.

Answer: FALSE Diff: 2 Page Ref: 493 LO: 14.4: Discuss different types of external growth strategies.

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72) In a scale joint venture, the position of the parties is not symmetrical, and the objectives of the partners may diverge.

Answer: FALSE Diff: 2 Page Ref: 493 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Analytical Thinking 73) A spin-out occurs when a large company divests itself of one of its smaller divisions and the division becomes an independent company.

Answer: TRUE Diff: 3 Page Ref: 494 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 74) Describe what licensing is. What type of intellectual property can be licensed? 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. Virtually any intellectual property a company owns that is protected by a patent, trademark or copyright can be licensed to a third party. 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.

Diff: 2 Page Ref: 489 LO: 14.4: Discuss different types of external growth strategies.

AACSB: Reflective Thinking 75) Describe what a joint venture is. 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. For example, many of the joint ventures between American and Canadian food companies provide the American partner with access to Canadian markets and distribution channels and the Canadian partner with the opportunity to add to its product line.

Diff: 3 Page Ref: 493 LO: 14.4: Discuss different types of external growth strategies.

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Entrepreneurship: Successfully Launching New Ventures, 5e (Barringer/Ireland) Chapter 15 Franchising 1) Uptown Cheapskate, the company profiled in the opening feature of Chapter 15, was started

by Chelsea and Scott Sloan. According to the feature, Chelsea and Scott decided to grow Uptown Cheapskate via franchising because they wanted to ________.

A) grow quickly without making a huge investments in real estate B) capture the prestige of being a franchise organization C) maintain maximum control of their business while at the same time maximizing profits D) grow quickly while at the same time maintaining maximum control of their business E) grow slowly while at the same time maximizing profits Answer: A Diff: 2 Page Ref: 507 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective Thinking 2) Which of the following statements is incorrect regarding franchising?

A) In some industries, such as automotive and retail food, franchising is a dominant form of business ownership and growth.

B) There are some instances in which franchising is not appropriate.

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 relatively poorly understood form of business ownership and growth.

Answer: C Diff: 2 Page Ref: 509 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Application of Knowledge 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 business in exchange for an initial franchise fee and an ongoing royalty.

A) Licensing B) Joint Venturing C) Contracting D) Franchising E) Sub-Contracting Answer: D Diff: 1 Page Ref: 510 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking

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4) Franchising 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 another business in exchange for ________.

A) an initial franchise fee and an ongoing royalty B) a one-time franchise fee C) an equity position in the new business D) an ongoing royalty E) an initial franchise fee and an equity position in the new business Answer: A Diff: 2 Page Ref: 510 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical 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 trademark B) company's business concept is easy to teach and individual Comfort Keeper 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 grow quickly E) company has a good trademark and a good business method Answer: E Diff: 3 Page Ref: 510 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective Thinking 6) The two distinctly different types of franchise systems are ________ franchise and ________ franchise.

A) product trademark; business arrangement B) product plus; business format C) business design; product improvement D) product extension; business design E) product trademark; business format Answer: E Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works.

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7) A ________ franchise is an arrangement under which the franchisor grants to the franchisee the right to buy its products and use its trade name.

A) product and trademark B) product extension C) business format D) production plus E) business design Answer: A Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking 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 Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective 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 Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works.

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10) Which of the following statements is incorrect regarding product and trademark franchises?

A) Rather than obtaining a royalty or franchise fee, 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 trademark franchises are more popular than business format franchises.

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 Diff: 3 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Application of Knowledge 11) Melanie Jacobs recently opened a Papa John's franchise. So far, she is very satisfied with Papa John's because in exchange for an initial franchise fee and an ongoing royalty payment, Papa John's has provided Melanie a formula for doing business along with training, advertising, and other forms of assistance. Melanie purchased a ________ franchise.

A) business extension B) formula driven C) sales extension D) product and trademark E) business format Answer: E Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective 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 illegal in some states.

E) The business format franchisor obtains the majority of its income from selling its products to its dealers at a markup.

Answer: B Diff: 3 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works.

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13) Which of the following is not an industry in which business format franchises predominate?

A) Soft drink bottlers B) Business services C) Hotels and motels D) Quick service restaurants E) Automotive service and repair Answer: A Diff: 1 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Application of Knowledge 14) A(n) ________ franchise agreement involves the sale of a single franchise for a specific location.

A) individual B) one-of-a-kind C) sole D) defined E) general Answer: A Diff: 1 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking 15) Jenna Page recently entered into an agreement with Anytime Fitness to open five Anytime Fitness franchises. According to the agreement that Jenna entered into, she has the right to open up to five Anytime Fitness franchises within the city limits of Lawrence, Kansas. Jenna has entered into a(n) ________ franchise agreement, A) individual B) district C) locality D) area E) city Answer: D Diff: 2 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective 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) stop making royalty payments if its sales decline 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 Diff: 3 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking 17) The people who buy franchises from master franchises are typically called ________ franchisees.

A) minor B) secondary C) miniD) subordinate E) sub Answer: E Diff: 2 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Application of Knowledge 18) A multiple-unit franchisee is a person who owns ________.

A) franchise outlets from more than one franchisor B) both product and trademark franchise outlets and business format franchise outlets C) and operates more than one outlet of the same franchisor D) more than 10 franchise outlets E) franchise units from multiple franchisors Answer: C Diff: 2 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking 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 Diff: 1 Page Ref: 510 LO: 15.1: Explain franchising and how this form of business ownership works.

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20) A product and trademark franchise typically connects a single manufacturer with a network of dealers or distributors.

Answer: TRUE Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking 21) A Pepsi Cola bottling dealership is an example of a business format franchise.

Answer: FALSE Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking 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 Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective Thinking 23) Business format franchises typically allow franchisees substantial flexibility in how they run their individual franchise units.

Answer: FALSE Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective Thinking 24) An area franchise agreement allows a franchisee to own and operate a specific number of outlets in a particular geographic area.

Answer: TRUE Diff: 2 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Reflective Thinking 25) The people who buy franchises from master franchisees are typically called employeefranchisees.

Answer: FALSE Diff: 2 Page Ref: 512 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking

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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. For example, General Motors has established a network of dealers that sell GM cars and use the GM trademark in their advertising and promotions. Other examples of product and trademark franchise systems include agricultural machinery dealers, soft drink bottlers, and beer distributorships. In a business format franchise, which is by far the more popular approach to franchising for entrepreneurial firms, the franchisor provides a formula for doing business to the franchisee along with training, advertising, and other forms of assistance. Fast-food restaurants and convenience stores are wellknown examples of business format franchises.

Diff: 2 Page Ref: 511 LO: 15.1: Explain franchising and how this form of business ownership works.

AACSB: Analytical Thinking 27) From the franchisor's point of view, which of the following is incorrect 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) Franchising is a fairly heavily regulated form of business ownership.

Answer: B Diff: 3 Page Ref: 513 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Application of Knowledge 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 Diff: 2 Page Ref: 514 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Analytical Thinking

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29) Which of the following companies is suitable for franchising?

A) Home Depot B) Dropbox C) Qdoba Mexican Grill D) Walmart E) GoPro Answer: C Diff: 2 Page Ref: 514 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Analytical Thinking 30) The Savvy Entrepreneurial Firm feature in Chapter 15 focuses on Wahoo's Fish Taco, a franchise organization that offers Mexican food mixed with Brazilian and Asian flavors.

According to the feature, one of the things the founders of Wahoo did that has contributed to its success is elect to make Wahoo's ________.

A) a relatively slow growth system, focusing on branding and service quality rather than rapid growth B) a nationwide system, operating in all 50 states C) an extremely affordable system to buy into, with a $9,000 original franchise fee and an ongoing royalty of only 2-1/2 percent D) a niche franchise that is only available in theme parks and food courts of malls E) a fast growth system to establish a clear first-mover advantage in its niche Answer: A Diff: 2 Page Ref: 515 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Reflective Thinking 31) According to our textbook, which of the following is not 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 Diff: 2 Page Ref: 517 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Interpersonal Relations and Teamwork 32) Franchising is a popular form of business growth.

Answer: TRUE Diff: 1 Page Ref: 513 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

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33) Home Depot is an example of an organization that is perfectly suited for franchising.

Answer: FALSE Diff: 2 Page Ref: 514 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Reflective Thinking 34) An individual who is team oriented and has experience in the industry in which the franchise competes is a good candidate to be a franchisee.

Answer: TRUE Diff: 2 Page Ref: 517 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Reflective Thinking 35) When is franchising appropriate (from the business owner's point of view)? Provide an example of when franchising is appropriate and when it is inappropriate.

Answer: Franchising is appropriate when a firm has a strong or a potentially strong trademark, a well-designed business method, and a desire to grow. An example is Panera Bread. The company has a strong trademark (in the fast-casual dining segment), a well-designed business method, and a desire to grow. In some instances, franchising is not appropriate. For example, franchising would not work for Wal-Mart. While Panera Bread has a large number of franchised outlets, each individual outlet is relatively small and has a limited menu, and policies and procedures can be written to cover almost any contingency. In contrast, although Wal-Mart is similar to Burger King in that it too has a strong trademark and thousands of outlets, Wal-Mart stores are much larger, more expensive to build, and more complex to run than Panera Bread restaurants. It would also be nearly impossible for Wal-Mart to find an adequate number of qualified people who would have the financial capital and expertise to open Wal-Mart stores on their own.

Diff: 2 Page Ref: 514 LO: 15.2: Describe steps entrepreneurs can take to establish a franchise system.

AACSB: Analytical Thinking 36) According to a concept called ________ theory, it is more effective for the units of a growing chain to be run by franchisees than by managers 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 Diff: 1 Page Ref: 518 LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB: Analytical Thinking

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37) According to the textbook, 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 Diff: 3 Page Ref: 518 LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB: Analytical Thinking 38) Which of the following is a company that is suitable for franchising but has a relatively small number of franchise outlets?

A) Anytime Fitness B) Hampton Inn Hotels C) McDonalds D) Starbucks E) The UPS Store Answer: D Diff: 3 Page Ref: 518 LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB: Application of Knowledge 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 Diff: 2 Page Ref: 519 LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB: Application of Knowledge 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 Diff: 2 Page Ref: 518 LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB: Reflective Thinking 11 .

41) A management concept called agency theory refutes the value of franchising for organizations with multiple units, like restaurant chains.

Answer: FALSE Diff: 2 Page Ref: 518 LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB: Analytical Thinking 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.

Diff: 2 Page Ref: 518 LO: 15.3: Become familiar with the advantages and disadvantages of establishing a franchise system.

AACSB: Application of Knowledge 43) The What Went Wrong feature in Chapter 15 focuses on Curves International, the fitness center for women. Since 2006 Curves has closed more than 4,000 locations. Which of the following reasons was not identified in the feature as one of the possible explanations for why so many Curves centers have closed?

A) An inability to find enough potential franchisees B) The poor economy C) Cheaper competition D) The company failed to keep up with changing trends, including more flexible hours for busy working women.

E) The company sold too many franchises that are located too close together.

Answer: A Diff: 3 Page Ref: 521 LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Reflective Thinking

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44) According to the textbook, 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 Diff: 2 Page Ref: 524 LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Application of Knowledge 45) According to the textbook, a franchisee's weekly or monthly royalty fees are typically around ________ to ________ percent of gross income.

A) 1; 2 B) 2; 3 C) 3; 4 D) 4; 5 E) 5; 6 Answer: D Diff: 3 Page Ref: 524 LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Application of Knowledge 46) In the majority of cases, a franchisee pays the franchisor a royalty based on ________.

A) a predetermined fixed weekly or monthly amount B) weekly or monthly net income C) the size of the franchise outlet D) weekly or monthly gross income E) the age of the franchise outlet Answer: D Diff: 2 Page Ref: 524 LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Analytical Thinking 47) The Partnering for Success feature in Chapter 15 focuses on how franchise organizations can boost their sales while at the same time reduce their expenses. The technique that the feature recommends to achieve these dual objectives is ________.

A) strategic alliances B) joint ventures C) outsourcing D) licensing E) co-branding Answer: E Diff: 2 Page Ref: 525 LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Reflective Thinking 13 .

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 Diff: 3 Page Ref: 526 LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Application of Knowledge 49) According to the textbook, 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 D) the service sector of the U.S. economy is waning in importance E) franchising is waning in its popularity Answer: C Diff: 2 Page Ref: 527 LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Analytical Thinking 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 Diff: 2 Page Ref: 527 LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Application of Knowledge

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51) All of the following are advantages to buying a franchise except ________.

A) restrictions on creativity B) potential for business growth C) availability of financing D) a proven product or service within an established market E) franchisor's ongoing support Answer: A Diff: 2 Page Ref: 527 LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Analytical Thinking 52) In the majority of cases, a franchisee pays a royalty based on a percentage of weekly or monthly net income.

Answer: FALSE Diff: 3 Page Ref: 524 LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Application of Knowledge 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 Diff: 2 Page Ref: 524 LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Analytical Thinking 54) The royalty fees a franchisee pays are usually around four to five percent of gross income.

Answer: TRUE Diff: 2 Page Ref: 524 LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Reflective Thinking 55) One of the most important questions a prospective franchisor should consider is whether the fees and royalties charged by a franchisor are consistent with the franchise's value or worth.

Answer: TRUE Diff: 2 Page Ref: 524 LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Reflective Thinking

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56) How can a person tell if franchising is right for them?

Answer: Purchasing a franchise should be weighed against the alternatives of buying an existing business or launching an entrepreneurial venture from scratch. Answering the following questions will help determine whether franchising is a good fit for people thinking about starting their own business.

• Are you willing to take orders?

• Are you willing to be part of a franchise "system"?

• How will you react if you make a suggestion to your franchisor and your suggestion is rejected?

• What are you looking for in a business? How hard do you want to work?

• How willing are you to put your money at risk to "buy-into" someone else's system?

Diff: 2 Page Ref: 520 LO: 15.4: Describe actions and issues associated with a decision to buy a franchise.

AACSB: Reflective 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) not making a hasty decision Answer: E Diff: 3 Page Ref: 528 LO: 15.5: Explain the steps an entrepreneur goes through to buy a franchise.

AACSB: Analytical Thinking 58) List and explain three of the common misconceptions about franchising.

Answer: • 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.

Diff: 3 Page Ref: 529 LO: 15.5: Explain the steps an entrepreneur goes through to buy a franchise.

AACSB: Application of Knowledge

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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 Diff: 3 Page Ref: 530 LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge 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) Franchise Offering Contract C) Standardized Franchise Contract D) Franchise Disclosure Document E) Franchise Code of Conduct Answer: D Diff: 2 Page Ref: 530 LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge 61) The Franchise Disclosure Document is accepted in (or by) ________.

A) 11 states B) all 50 states, all of Canada, and parts of Mexico C) 39 states and all of Canada D) all 50 states and parts of Canada E) all nations participating in the North America Free Trade Agreement Answer: D Diff: 2 Page Ref: 531 LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge

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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 Diff: 2 Page Ref: 531 LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge 63) The document that consummates the sale of a franchise is called the ________.

A) franchise disclosure document B) franchise agreement C) license agreement D) uniform franchise contract E) franchise circular Answer: B Diff: 2 Page Ref: 531 LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge 64) While franchise agreements vary, each agreement typically contains these sections: the ________ agreement and the ________ agreement.

A) statutory; purchase B) franchise; buy C) buy; membership D) procurement; statutory E) purchase; franchise Answer: E Diff: 2 Page Ref: 531 LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge

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65) While franchise agreements vary, each agreement typically contains the purchase agreement and the ________ agreement.

A) legal B) procurement C) conversion D) sell E) franchise Answer: E Diff: 2 Page Ref: 531 LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge 66) In addition to FTC disclosure requirements, ________ states have laws providing additional protection to franchisees.

A) 6 B) 10 C) 15 D) 33 E) 47 Answer: C Diff: 3 Page Ref: 531 LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge 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 Diff: 2 Page Ref: 530 LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge 68) A prospective franchisee should fully understand all the information contained in the Franchise Disclosure Document before a franchise agreement is signed.

Answer: TRUE Diff: 2 Page Ref: 531 LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge

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69) The Franchise Disclosure Document is the document that consummates the sale of a franchise.

Answer: FALSE Diff: 2 Page Ref: 531 LO: 15.6: Identify and explain the various legal aspects associated with the franchise relationship.

AACSB: Application of Knowledge 70) According to a recent FTC report, instances of problems between franchisors and their franchisees tend to be ________.

A) prevalent practices B) isolated occurrences C) nonexistent D) prevalent practices for product and trademark franchise systems and isolated occurrences for business format franchise systems E) isolated occurrences for product and trademark franchise systems and prevalent practices for business format franchise systems Answer: B Diff: 2 Page Ref: 533 LO: 15.7: Discuss two additional issues—franchise ethics and international franchising— entrepreneurs should think about when considering franchising.

AACSB: Ethical Understanding and Reasoning 71) International opportunities for franchising are becoming ________.

A) less prevalent B) neither more nor less prevalent C) more prevalent for product and trademark franchise systems and less prevalent for business format franchise systems D) more prevalent E) less prevalent for product and trademark franchise systems and more prevalent for business format franchise systems Answer: D Diff: 2 Page Ref: 534 LO: 15.7: Discuss two additional issues—franchise ethics and international franchising— entrepreneurs should think about when considering franchising.

AACSB: Reflective Thinking

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72) In regard to international franchising, under a(n) ________ franchise agreement, the U.S. franchisor grants the rights to an individual or company (the developer) to develop multiple franchised businesses within a country or territory.

A) indirect B) global C) concurrent D) direct E) express Answer: D Diff: 2 Page Ref: 535 LO: 15.7: Discuss two additional issues—franchise ethics and international franchising— entrepreneurs should think about when considering franchising.

AACSB: Application of Knowledge 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) subordinate Answer: D Diff: 2 Page Ref: 535 LO: 15.7: Discuss two additional issues—franchise ethics and international franchising— entrepreneurs should think about when considering franchising.

AACSB: Application of Knowledge 74) In the context of international franchising, under a ________ franchise arrangement, the U.S. firm grants the rights to an individual or company (the master franchisee) 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 Diff: 2 Page Ref: 535 LO: 15.7: Discuss two additional issues—franchise ethics and international franchising— entrepreneurs should think about when considering franchising.

AACSB: Application of Knowledge

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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 Diff: 1 Page Ref: 533 LO: 15.7: Discuss two additional issues—franchise ethics and international franchising— entrepreneurs should think about when considering franchising.

AACSB: Ethical Understanding and Reasoning

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