Question 1

All businesses that plan to use a fictitious name, which is any name other than the business owner's name, need a(n):

Accepted Answer

The best choice is E because a fictitious name is any name other than the business owner's name, and businesses that plan to use such a name need a fictitious business name permit. The other options are not accurate or commonly used terms for this type of permit, making them incorrect choices.

Question 2

Which of the following statements regarding business licenses and permits is incorrect?

Accepted Answer

Most business licenses and permits cannot wait until after a business is launched to be obtained. It is important to research and obtain all necessary licenses and permits before starting a business to avoid legal and financial issues.

Question 3

Most founders' agreements include a ________, 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.

Accepted Answer

A buyback clause is a common provision in founders' agreements that requires a departing founder to sell their shares back to the company or the remaining founders.

Question 4

Xplosafe, the company profiled in the opening feature for Chapter 7, interviewed four attorneys before selecting the attorney they now use. They selected the attorney they did for two reasons:

Accepted Answer

Xplosafe selected their attorney based on his experience working with startups and his willingness to adjust his fee structure as the company grew profitable. While being a startup entrepreneur himself and having prior experience with the U.S. Patent and Trademark Office can also be beneficial, these factors were not specifically mentioned as reasons for Xplosafe's selection of their attorney. The attorney being the President of the Oklahoma City, Oklahoma, bar association and having strong references may also be desirable characteristics, but again, these were not mentioned as reasons for Xplosafe's selection. Lastly, the attorney having the lowest fees alone may not necessarily be the best choice if they lack the necessary experience or credentials to provide effective legal counsel.

Question 5

Which of the following is typically not included in the founders' agreement for a firm?

Accepted Answer

A marketing plan is not typically included in a founders' agreement, as it is a separate document outlining the company's marketing strategy. The founders' agreement typically focuses on the ownership structure, stock allocation, decision-making processes, and other internal aspects of the company.

Question 6

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.

Accepted Answer

The first blank refers to a nondisclosure agreement, which specifically pertains to the protection of trade secrets. The second blank refers to a noncompete agreement, which prohibits an individual from competing with their former employer.

Question 7

A ________ is a formal statement of an organization's values on certain ethical and social issues.

Accepted Answer

A code of conduct is a formal statement that outlines an organization's values and principles on several ethical and social issues. It is used to guide the behavior of employees and ensure ethical conduct within the organization. A code of behavior is a similar term but is not commonly used in this context. A code of performance is a statement of expectations for employee performance, and a code of principles and a code of morals are not commonly used terms in this context.

Question 8

Rachael James just took a job with IKEA. As part of her employment agreement, IKEA required Rachael to sign an agreement, which states that if she leaves IKEA, she will not work for a firm that competes against IKEA for at least two years. The agreement that Rachael signed is called a:

Accepted Answer

The statement describes a noncompete agreement, which is a contract that prohibits an employee from working for a competing firm for a certain period after leaving their current employer.

Question 9

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?

Accepted Answer

Leading by example is the most important thing that entrepreneurs can do to build a strong ethical culture in their organization. The behavior of leaders sets the tone for the organization, and employees look to their actions as a guide for their own behavior. While implementing an ethics training program, writing a mission statement, hiring an ethics compliance officer, and writing a code of conduct are all important steps, they are not as effective as leading by example.

Question 10

The Savvy Entrepreneurial Firm feature in Chapter 6 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.

Accepted Answer

According to the feature, a typical startup's vesting schedule lasts 36 months and includes a 12-month cliff.

Question 11

According to the textbook, the single most important thing the founders of an entrepreneurial venture can do is:

Accepted Answer

Establishing a strong ethical culture for their firms is the single most important thing the founders of an entrepreneurial venture can do. This is because ethics form the foundation of a company's culture and guide its decision-making processes. A strong ethical culture can help attract customers and employees, build trust, and enhance the company's reputation. It can also help the company avoid legal and financial troubles in the long run. Therefore, ethical considerations should be a top priority for entrepreneurs when starting and growing their ventures.

Question 12

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.

Accepted Answer

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, 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. The other options (A, B, D, E) do not accurately describe this type of agreement.

Question 13

Trevor Parsons just took a job with Twitter. As part of his employment contract, Trevor signed an agreement that states that he will not disclose any of Twitter's trade secrets. The agreement that Trevor signed is called a(n):

Accepted Answer

The agreement that Trevor signed is specifically designed to prevent him from disclosing Twitter's trade secrets and is known as a nondisclosure agreement. None of the other choices specifically fit the scenario described in the question.

Question 14

According to Chapter 7, which of the following forms of misconduct or unethical behavior was observed by the highest percentage of the U.S. workforce?

Accepted Answer

According to Chapter 7, company resource abuse was observed by the highest percentage of the U.S. workforce, with 75% of employees reporting that they had witnessed or experienced it. The other options (B, C, D, E) were also forms of misconduct or unethical behavior observed to varying degrees, but not as frequently as company resource abuse.

Question 15

A situation that involves doing something that is beneficial to oneself or the organization, but may be unethical, is called a(n):

Accepted Answer

An ethical dilemma is a situation in which one must choose between two or more competing ethical principles or values. In this case, the individual or organization must weigh the potential benefits gained from the action against the potential ethical consequences. It is important to consider all possible outcomes and consider ethical principles such as honesty, fairness, and respect for others when making a decision.

Question 16

"Don't be evil" is the corporate motto for:

Accepted Answer

"Don't be evil" was the corporate motto for Google, now Alphabet Inc., and was adopted in the early 2000s as a reminder to employees to avoid unethical practices. However, in 2018, Google removed the phrase from its code of conduct, stating that it had outgrown its usefulness.

Question 17

The What Went Wrong? feature in Chapter 7 focuses on the failure of Green Plant, a company that sold smoothie drinks. Green Plant failed in part because it was sued by Jamba Juice for:

Accepted Answer

The answer of The What Went Wrong? feature in Chapter...

Question 18

According to the 2009 National Business Ethics Survey, a total of ________ of the employees surveyed said they had observed misconduct or unethical behavior in the past year.

Accepted Answer

According to the 2009 National Business Ethics Survey, 49 percent of employees surveyed said they had observed misconduct or unethical behavior in the past year. This indicates a high prevalence of unethical behavior in the workplace, highlighting the need for increased ethical awareness and training.

Question 19

Which form of business ownership is a particularly poor choice for an aggressive entrepreneurial firm?

Accepted Answer

A sole proprietorship is a poor choice for an aggressive entrepreneurial firm because it offers no liability protection for the owner and makes it difficult to raise capital. The best choice would be a C corporation or a limited liability corporation (LLC) as they offer liability protection and allow for easy access to capital through the sale of stock. A subchapter S corporation and limited partnership may also be viable options depending on the specific needs of the firm.

Question 20

________ is the process in which an impartial third party helps those involved in a dispute reach an agreement.

Accepted Answer

Mediation is the process in which an impartial third party, known as a mediator, helps those involved in a dispute reach an agreement. The mediator does not make a decision but rather facilitates communication and guides the parties towards a mutually acceptable resolution. Conciliation, reconciliation, negotiation, and appeasement may also involve third-party intervention, but they differ in their approach and level of involvement.

Quiz 7: Preparing the Proper Ethical and Legal Foundation

All businesses that plan to use a fictitious name, which is any name other than the business owner's name, need a(n) :