Question 1

Dan wants to start a supermarket in his hometown, and wants to get into the business only after finding out about the market and how successful his business might be. The best way for Dan to gain knowledge is to:

Accepted Answer

The best way to gain knowledge about a market is to work in it before going into business in it.

Question 2

Which of the following is a disadvantage of franchising agreements?

Accepted Answer

Buying a franchise also entails less tangible costs. For one thing, the small-business owner sacrifices some independence.

Question 3

Which of the following statements is true about a franchise agreement?

Accepted Answer

A franchise is an arrangement that permits the franchisee (buyer) to sell the product of the franchiser (seller, or parent company). Franchisees can thus benefit from the selling corporation's experience and expertise. They can also consult the franchiser for managerial and financial help.

Question 4

Delta Inc., an electric car maker, initially had financing from a small group of investors seeking to make profits through rapid growth. The investors did not lend money, but invested it in the company in return for stock. Delta's source of financing was:

Accepted Answer

Venture capital companies are groups of small investors seeking to make profits on companies with rapid growth potential. Most of these firms do not lend money: They invest it, supplying capital in return for stock.

Question 5

_____ are federally licensed to borrow money from the Small Business Administration and to invest it in or lend it to small businesses.

Accepted Answer

Created by the Small Business Investment Act of 1958, SBICs are federally licensed to borrow money from the SBA and to invest it in or lend it to small businesses.

Question 6

Marianne, who has started a software development firm, is looking for sources of financing. Marianne has approached Zenith LLC., a large consulting firm, to partner with her venture. Zenith has agreed to partner with Marianne's venture and provide it with capital. In this scenario, Marianne's source of financing falls in the category of:

Accepted Answer

Strategic alliances are becoming a popular method for financing business growth.

Question 7

Jane has started a new business venture. Since the resources available are minimal, Jane needs to reduce the production costs of the venture. Jordon, a student of advanced business management, is helping Jane come up with techniques and strategies to reduce costs. Jordon's grades will be influenced by how effectively he helps Jane. Such an arrangement is provided by the _____ project of the Small Business Administration.

Accepted Answer

The talents and skills of students and instructors at colleges and universities are fundamental to the Small Business Institute (SBI). Under the guidance of seasoned professors of business administration, students seeking advanced degrees work closely with small-business owners to help solve specific problems, such as sagging sales or rising costs.

Question 8

Venture capital companies:

Accepted Answer

Venture capital companies are groups of small investors seeking to make profits on companies with rapid growth potential. Most of these firms do not lend money: They invest it, supplying capital in return for stock.

Question 9

The _____ boasts a total membership of more than 10,000 small-business owner largest number in the country; it offers its members not only networking possibilities but also educational programs and services tailored to their needs.

Accepted Answer

The Council of Smaller Enterprises of Cleveland, boasts a total membership of more than 10,000 small-business owners, the largest number in the country. This organization offers its members not only networking possibilities but also educational programs and services tailored to their needs.

Question 10

The most significant disadvantage of a franchising agreement is that:

Accepted Answer

The most significant disadvantage of owning a franchise is the high start-up cost.

Question 11

Which of the following is an advantage of a franchising agreement?

Accepted Answer

Unlike the person who starts from scratch, the franchisee does not have to build a business step by step. Instead, the business is established virtually overnight. Moreover, because each franchise outlet is probably a carbon copy of every other outlet, the chances of failure are reduced.

Question 12

Begun in 1976, _____ are designed to consolidate information from various disciplines and institutions, including technical and professional schools.

Accepted Answer

Small Business Development Centers (SBDCs) are designed to consolidate information from various disciplines and institutions, including technical and professional schools. Then they make this knowledge available to new and existing small businesses.

Question 13

When an entrepreneur pays a parent company a monthly percentage of the gross income of her business in return for using the parent company's name and products, it is known as _____.

Accepted Answer

In a contract between an entrepreneur (the franchisee) and a parent company (the franchiser); the entrepreneur pays the parent company for the use of its trademarks, products, formulas, and business plans.

Question 14

One disadvantage of hiring management consultants to solve problems in business is that:

Accepted Answer

Opinions vary widely about the value of management consultants-experts who charge fees to help managers solve problems. They can be quite expensive as some consultants charge $1,000 or more for a day of assistance.

Question 15

Jason worked as a manager for 30 years in a leading corporation who now works with the Small Business Administration. As he wishes to help small business, he provides free consultation and assistance to new entrepreneurs. Jason is most likely to belong to:

Accepted Answer

A small-business owner who needs help in starting a new business can get it free through the Service Corps of Retired Executives (SCORE). All SCORE members are retired executives, and all are volunteers.

Question 16

Which of the following is the the most important source of money for individuals starting up new businesses?

Accepted Answer

According to a study by the National Federation of Independent Business (NFIB), an owner's personal resources, not loans, are the most important source of money.

Question 17

The National Association of Women Business Owners:

Accepted Answer

The National Association of Women Business Owners (NAWBO)provides a variety of networking forums. The NAWBO also has chapters in most major cities, where its members can meet regularly.

Question 18

Which of the following statements is true about sources of financing for entrepreneurs?

Accepted Answer

Lending institutions are more likely to help finance the purchase of an existing business than a new business because the risks are better understood.

Question 19

____ are a group of small investors seeking to make profits on companies with rapid growth potential.

Accepted Answer

Venture capital companies are groups of small investors seeking to make profits on companies with rapid growth potential.

Question 20

Identify an advantage of a franchising agreement.

Accepted Answer

Franchises offer many advantages to both sellers and buyers. For example, franchisers benefit from the ability to grow rapidly by using the investment money provided by franchisees.

Quiz 5: Entrepreneurship and New Venture Management