100 questions -small business management

Small Business Management
Final Examination

Final Examination
BAM 418 – Small Business Management
Multiple Choice Questions (Enter your answers on the enclosed answer sheet)
1) The nation is rapidly moving from:
a. industrial to knowledge-based
b. industrial to capitalism
c. capitalism to industrial
d. none of the above
2) Entrepreneurs start businesses for a number of reasons including:
a. the opportunity to get rich much quicker than if they work for a large company
b. having to deal with less government regulation than as an executive of a large
c. an opportunity to make a difference
d. a much lower risk of career failure due to layoff or acquisition than working for a
large company
3) Surveys show that owners of small businesses believe that:
a. they work harder on their own than if they worked for someone else
b. they earn less than if they worked for someone else
c. venture capital is relatively easy to raise
d. they are less satisfied than if they worked for someone else
4) Which of the following is true about home-based businesses?
a. The average home-based business earns over $50,000 a year.
b. The growth of technology has significantly slowed the growth of home-based busi-
c. Over 2/3 of all home-based businesses are owned by minority males.
d. Home-based businesses tend to focus on blue-collar, lower skill industries.
5) “Copreneurs” are marked by:
a. a decline in the number of businesses
b. their similarity to the traditional mom and pop operation
c. a greater success at raising venture capital than sole proprietorship-type busi-
d. a division of labor by expertise
6) The location of the business is especially important for what type of start-up business?
a. manufacturing
b. service
c. retail
d. computer-based service
Final Examination
BAM 418 – Small Business Management
7) The key ingredient-the crucial element-to avoiding the failure of a new business is:
a. the business plan
b. differentiating the business and product from the competition
c. technical expertise regarding the product
d. knowing the business
8) “Copreneurs” are:
a. personality traits of entrepreneurs
b. business magazines targeted towards entrepreneurs
c. entrepreneurial couples who work together as co-owners of their business
d. none of the above
9) Forces driving the entrepreneurial trend in our economy include which of the follow-
a. Technological advancement
b. World Wide Web
c. Shift to a service economy
d. all of the above
10) Management incompetence includes all but:
a. insufficient capital
b. the owner lacks the leadership ability necessary to operate it successfully
c. lack of capacity to make the business work
d. inexperience
11) Which of the following best expresses the relationship of a company vision to its mis-
a. There is no relationship between the two.
b. The company vision comes from the company mission.
c. The mission statement is the written expression of the company vision.
d. The company mission statement is the verbal expression of the written vision.
12) ________ are negative internal factors that inhibit the accomplishment of a firm’s
a. Threats
b. Opportunities
c. Weaknesses
d. Strengths
Final Examination
BAM 418 – Small Business Management
13) ________ are relationships between a controllable variable–plant size, quality, packag-
ing–and a critical factor influencing the firm’s ability to compete in the marketplace.
a. The competitive advantages
b. Key success factors
c. Core competencies
d. Goals and objectives
14) The information-gathering process in competitive analysis:
a. is an expensive process that only established small companies can afford
b. is closely regulated by various federal laws
c. can be relatively inexpensive and easy for the small business owner to conduct
d. is a process that requires expert help but is relatively inexpensive
15) ________ are the broad, long-range attributes the small business seeks to accomplish;
________ are the specific, measurable milestones the company wants to achieve.
a. Strategies; goals
b. Objectives; goals
c. Goals; objectives
d. Goals; strategies
16) A differentiation strategy:
a. must create the perception of value in the customer’s eyes through the lowest
possible price
b. seeks to find and defend an identifiable market niche
c. focuses solely on making the physical characteristics of the product as unique as
d. is built on a company’s competence
17) The final step of the strategic planning process is:
a. translating the strategic plan into operational plans
b. choosing a marketing strategy to pursue
c. evaluating the competitive environment
d. establishing accurate controls
18) The ________ is a set of measures unique to the company that gives managers a
quick and comprehensive view of how the business is doing and includes both finan-
cial and operational factors.
a. balanced scorecard
b. core competencies
c. key success factors
d. action plan
Final Examination
BAM 418 – Small Business Management
19) It is important for the small business owner to remember that the strategic planning
process is:
a. a top management process completed only once every two years
b. an ongoing process that must be repeated
c. one that should produce a detailed, elaborate plan for running the business over
the next 3—5 years
d. a process which involves all the employees once every five years
20) The key to choosing the “right” form of ownership is:
a. the fact you cannot change the form of ownership once your company is estab-
b. understanding how each form affects both business and personal circumstances
c. having an experienced attorney and accountant to advise you in the choice
d. knowing the cost factor in time and money
21) Sole proprietorships characteristically are:
a. easy to discontinue
b. subject to special legal restrictions
c. fairly complex to create
d. expensive to create
22) The most critical disadvantage of the sole proprietorship is:
a. unlimited personal liability
b. limited skills and capacities of the owner
c. limited access to capital
d. lack of continuity
23) Which form of ownership generally has the least ability to accumulate capital?
a. Partnership
b. S-corporation
c. Sole proprietorship
d. Corporation
Final Examination
BAM 418 – Small Business Management
24) While a sole proprietorship gives the owner maximum flexibility in running the busi-
ness, it also:
a. creates a sense of isolation
b. makes it difficult to sell
c. makes the company a prime target for an acquisition or merger
d. makes it difficult to hire management talent to help grow the business
25) Probably the most important feature of a partnership agreement is:
a. that it resolves potential sources of conflict
b. that it states the purpose and location of the business
c. that determines how the partnership will pay taxes and fees
d. that it identifies the name of the partnership
26) In a limited partnership, the limited partners are treated like ________ by the law.
a. honorary partners
b. general partners
c. investors
d. sole proprietors
27) The ________ is a document that states in writing all of the terms of operating the
partnership for the protection of each partner involved.
a. Partnership document
b. Certificate of Incorporation
c. Certificate for Conducting Business as Partners
d. Partnership agreement
28) Shares the corporation itself owns are called:
a. preferred stock
b. bonds
c. common stock
d. treasury stock
29) In franchising, the reputation of the franchiser is dependent on:
a. the rate of growth and the number of national outlets
b. the quality of the goods and services provided
c. the brand name recognition and appeal
d. their locations and popularity with the local customer
Final Examination
BAM 418 – Small Business Management
30) The primary advantage of buying a franchise over starting your own company is:
a. the fact it is much less expensive than doing your own business start-up
b. in the purchase of the franchiser’s experience, expertise, and products
c. the absolute territory protection offered by all franchisers
d. the extensive assistance offered in finding start-up capital
31) Based on the principle of ___________, the idea is to put a franchise’s products or
services directly in the paths of potential customers, wherever that may be.
a. franchise marketing
b. path marketing
c. guerilla marketing
d. intercept marketing
32) To protect investors from unscrupulous franchisers, the ____________ adopted
legislation similar to California’s Franchise Investment Law.
a. FTC
b. Justice Department
c. FDA
d. FCC
33) The Uniform Franchise Disclosure Document (UFDD):
a. is only necessary in the 33 states that do not have their own franchise disclosure
b. includes 23 major topics in its disclosure statement
c. was developed in 1946 in the State of California
d. requires the release of a detailed earnings projection
34) Which of the following should make a potential franchisee suspicious about a
franchiser’s honesty?
a. Not providing detailed operational information until 10 days before signing the
b. An offer of direct financing of a specific element of the franchise package.
c. Requiring franchisees to spend a certain percentage of profits on advertising.
d. Claims that the franchise contract is a standard one and that there’s no need to
read it.
35) The franchiser has the right to cancel a contract if a franchisee:
a. fails to maintain quality standards
b. declares a bankruptcy
c. fails to make required payments on time
d. all of the above
Final Examination
BAM 418 – Small Business Management
36) The most efficient method of franchising, from the franchiser’s point-of-view, is called
___________ and permits one franchise to hold several franchises from the same
franchise company.
a. multi-unit franchising
b. piggybacking
c. conversion franchising
d. master franchising
37) ________ is when owners of independent businesses become franchisees to gain the
advantage of name recognition.
a. Combination franchising
b. Master franchising
c. Multiple-unit franchising
d. Conversion franchising
38) According to the text, the first step in buying a business is:
a. explore various financing options that are beneficial to creating a profitable
b. conduct a “self-audit” to determine the ideal business.
c. develop a list of the criteria that define the “ideal business”.
d. None of the above.
39) The valuation approach that considers the value of goodwill is the:
a. excess-earnings method
b. balance sheet technique
c. market approach
d. discounted future earnings approach
40) The capitalized earnings approach determines the value of a business by capitalizing
its expected profits using:
a. the prime interest rate
b. the normal rate of return
c. the prevailing rate of inflation
d. the rate of return reflecting the risk level
41) In a business sale, the buyer seeks to:
a. negotiate favorable payment terms, preferably over time
b. minimize the amount of cash paid up front
c. get the business at the lowest price possible
d. all of the above
Final Examination
BAM 418 – Small Business Management
42) To avoid a bumpy transition, a business buyer should do the following:
a. concentrate on communicating with employees
b. listen to employees restructure the company & devote time to selling your vision
for the company to its key stakeholders
c. be honest with employees
d. all of the above
43) A purchase agreement draft should include which of the following?
a. Whether the purchaser assumes any liabilities, and, if so- which ones.
b. Allocation of purchase price to specific assets.
c. Special conditions that the parties must satisfy to close the deal.
d. all of the above
44) Sometimes, business owners sell the majority interest in their companies to investors,
competitors, suppliers, or large companies with an agreement that they will stay on
after the sale. This is called:
a. restructuring the company
b. sale of controlling interest
c. use a two-step sale
d. none of the above
45) A well-developed business plan provides the entrepreneur with a number of benefits,
such as:
a. a valuable tool for recruiting management to help in running the business
b. assisting the entrepreneur in going public with his/her new venture on the stock
c. a way to identify probable financial backers
d. determining the principle risks confronting the business
46) An explanation of how the product will be distributed is contained within the:
a. description of the product line
b. business strategy section of the business plan
c. marketing strategy portion of the business plan
d. competitive analysis
47) The most common reason cited by banks for rejecting small business loans is:
a. lack of collateral
b. poor credit history
c. undercapitalization or too much debt
d. insufficient cash flow or poor profitability
Final Examination
BAM 418 – Small Business Management
48) Any assets pledged to the bank as security for repayment of the loan are the ________
of the five Cs.
a. capacity
b. collateral
c. capital
d. conditions
49) A ________ is what a customer gains from the product or service feature
a. benefit
b. feature
c. discount
d. bonus
50) Proving that a profitable market exists involves:
a. showing customer interest
b. documenting market claims
c. both A and B
d. neither A nor B
51) Depreciation is:
a. the owner’s total investment at the company’s inception plus retained earnings
b. creditors’ total claims against the firm’s assets
c. the difference between the total sources available to the owner and the total uses
of those assets
d. listed as a source of funds because it is a non-cash expense, deducted as a cost
of doing business
52) Projecting financial statements via the budgeting process helps the small business
owner to:
a. measure liquidity of the firm
b. calculate his/her return on the amount invested in the company
c. transform business goals into reality
d. track and monitor current expenses
53) The ________ ratio is a conservative measure of a firm’s liquidity and shows the ex-
tent to which a firm’s most liquid assets cover its current liabilities.
a. turnover
b. net profit
c. current
d. quick
Final Examination
BAM 418 – Small Business Management
54) ________ ratios help a business owner evaluate the company’s performance and indi-
cate how effectively the business employs its resources.
a. Leverage
b. Liquidity
c. Profitability
d. Operating
55) Which of the following expenses would likely be classified “semi-variable”?
a. sales commissions
b. rent
c. wages
d. electric utilities
56) Which of the following expenses would be considered “fixed?”
a. utilities
b. raw materials
c. rent
d. wages
57) The first step in managing cash more effectively is:
a. having an adequate cash reserve for emergency expenditures
b. understanding the company’s cash flow cycle
c. rapid payment of accounts payable
d. speeding up payment of accounts receivable
58) Bill and Henry are discussing the volume of cash that has been coming into and going
out of their business during the accounting period. They are discussing:
a. profit
b. cash flow
c. net income
d. accounts receivable and payable
59) A cash budget is only as accurate as the ________ forecast from which it is derived.
a. income
b. receivables
c. profit
d. sales
Final Examination
BAM 418 – Small Business Management
60) When forecasting cash disbursements in the cash budget:
a. the money can be used for other purposes until it is due for disbursement
b. the disbursement should be recorded in the month the obligation was incurred
c. they count as a cash receipt until they are paid
d. they should be recorded in the month they will be paid
61) The most important item on the balance sheet is:
a. cash
b. expenses
c. disbursements
d. receivables
62) Which of the following are credit reporting services a small business owner could use
to check a customer’s credit?
a. National Association of Credit Management
b. Dun & Bradstreet
c. TRW
d. all of these
63) The focus of the small company’s marketing plan is:
a. attracting capital
b. an evaluation of key competitors
c. the customer
d. its product or service
64) ________ puts the customer at the center of a company’s thinking, planning, and
action and shifts the focus from a product or service to customers and their needs
and wants.
a. Entertailing
b. Guerilla marketing strategy
c. Customer Relationship Management (CRM)
d. Data mining
65) Small companies with limited financial resources can often use ________ as a way to
differentiate themselves from larger competitors.
a. innovation
b. high price and high quality
c. customer service
d. lower prices with higher quality
Final Examination
BAM 418 – Small Business Management
66) Which of the following principles can help business owners create powerful, effective
guerrilla marketing strategies?
a. don’t just sell, entertain
b. strive to be unique
c. focus on the customer
d. all of the above
67) _______ is(are) where a small number of customers to give you feedback on specific
issues in your business–quality, convenience, hours of operation, service, and so on.
a. Questionnaires
b. Surveys
c. Focus groups
d. all of the above
68) The Last Hole, a small golf shop, sponsors a hole-in-one contest in a golf tournament
to raise money for charity. Anyone scoring a hole-in-one on #16 wins a complete set
of clubs; the golfer closest to the pin on #16 wins a golf wardrobe. The Last Hole is
the subject of several reports and stories in the local media. This is an example of:
a. sales promotion
b. advertising
c. publicity
d. personal selling
69) The key to the success of direct mail advertising is:
a. designing the right envelope
b. creative use of color and photographs in the mailing
c. using key words such as “free,” “hurry,” and “savings”
d. the accuracy of the customer mailing list
70) Which of the following is an advantage of outdoor ads?
a. flexibility
b. long exposure
c. prominence of the ads
d. narrow reach
Final Examination
BAM 418 – Small Business Management
71) Transit advertising’s advantages include:
a. the high quality color reproduction
b. its generality
c. its wide coverage
d. the prominence of display
72) Under the ________ method of establishing an advertising budget, the owner sees
advertising as a luxury.
a. matching competitors
b. objective-and-task
c. what-is-affordable
d. percentage of sales
73) A new product ________ pricing strategy is often used in markets with little competi-
tion and when the company seeks to recover start-up costs quickly.
a. penetration
b. sliding-down-the-demand-curve
c. skimming
d. discount
74) The Pastry Shop normally sells cheese Danishes for 60 cents each. On Mondays and
Tuesdays, its slowest days, The Pastry Shop offers cheese Danishes at “4 for $2.00.”
This is:
a. leader pricing
b. price lining
c. multiple pricing
d. odd pricing
75) To establish a reasonable, profitable price for service, the small business owner needs
to know:
a. competitors’ prices, and costs of direct and indirect labor
b. fixed and variable costs, the break-even point, and his/her contribution percent-
c. full-absorption costs, direct and indirect labor, and the break-even point
d. the cost of materials, direct labor, and overhead for each unit of service
Final Examination
BAM 418 – Small Business Management
76) For some customers, a higher price equals:
a. uniqueness
b. higher quality
c. greater perceived value
d. all of the above
77) Price ________ usually begin when one competitor believes that they can achieve a
higher volume through lower price, or they believe that they can exert enough pres-
sure on competitor’s profits to drive them out of business.
a. discounts
b. wars
c. penetration
d. markdowns
78) A relatively easy way of getting into international marketing, which currently handles
about 10% of all U.S. exports, is through ________ where two or more U.S. small
businesses form an alliance for the purpose of exporting their goods and services
a. joint ventures
b. export trading companies
c. international franchises
d. foreign licensees
79) A/an ________ is a business that buys and sells products in a number of countries,
offering a range of services–importing, exporting, shipping, distributing, and others to
their clients.
a. foreign joint venture
b. foreign licensee
c. export trading company
d. resident buying office
80) Candi is thinking through a number of management issues in making her exporting
decision. She is thinking about her company’s ________ capacity when she is thinking
about how exporting will affect meeting domestic orders, her pricing structure, collec-
tion process, and what it will cost her for the company to make enough product for
foreign export.
a. management
b. marketing
c. financial
d. production
Final Examination
BAM 418 – Small Business Management
81) ________ is the exchange of goods and services for other goods and services.
a. Export
b. Import
c. Bartering
d. Countertrade
82) A key to successfully establishing an international location is:
a. securing the necessary licenses to operate in the foreign country
b. being able to speak the language of the foreign country
c. making a substantial investment in personnel
d. finding the right person to manage the international office
83) E-commerce requires a basic infrastructure somewhere in the channel of distribution
to process orders, maintain inventory, ________, and handle customer service.
a. technology
b. fill orders
c. process e-mail
d. all of the above
84) KHA.com started selling sporting goods designed for senior citizens who live in retire-
ment homes and apartments. KHA.com is selling its products using:
a. senior citizens strategy
b. niche strategy
c. mass strategy
d. community strategy
85) A ________ is one that visitors are willing to share with their friends.
a. banner
b. viral site
c. sticky site
d. pop-up
86) Another word for browse-to-buy is:
a. tracker
b. conversion
c. controller
d. None of the above.
Final Examination
BAM 418 – Small Business Management
87) Which of the following is correct?
a. Make it easy for customers to change the contents of their shopping carts.
b. Make it easy for customers to pay for their online purchases.
c. Give customers the option of calling to resolve problems they encounter during
d. all of the above
88) When raising money to launch new businesses, the entrepreneurial segment of the
nation’s economy:
a. needs $170 billion per year in seed capital to fuel its growth
b. is spending less time and finding more money than in the past decade
c. finds it easier every year to find risk capital
d. knows where to find it, as traditional sources are full of venture capital
89) Most venture capitalists purchase ownership in a small business through:
a. loans with an option to buy stock
b. a general partnership
c. a common stock or convertible preferred stock
d. an ESOP
90) One of the biggest advantages of going public is:
a. the ability to retain control while gaining maximum funding
b. the ability to attract low cost equity funding
c. enhanced credibility and improved corporate image
d. better employee morale and productivity
91) Working capital can be calculated by:
a. Current Asset – Current Liabilities
b. Total Asset – Current Liabilities
c. Total Asset – Total Liabilities
d. Total Liabilities – Total Asset
92) Equity capital is also called:
a. stock money
b. equity money
c. risk capital
d. none of the above
Final Examination
BAM 418 – Small Business Management
93) Which form of financing works especially well for manufacturers, wholesalers, dis-
tributors, and other companies with significant stocks of inventory, accounts receiv-
able, equipment, real estate, or other assets?
a. asset-based lenders
b. government funding
c. corporate investors
d. none of the above
94) The most common method used by commercial finance companies to provide credit
to small businesses is:
a. balance-sheet based
b. insurance-based
c. unsecured lines of credit or “character loans”
d. asset-based
95) A loan from a stockbroker, based on the stocks and bonds in the customer’s portfolio:
a. has a fixed repayment schedule and must be paid within 90 days
b. can be “called” for payment in a matter of hours or days
c. is for a maximum of $50,000
d. tends to be at a higher rate than a bank but easier to obtain
96) Which of the following businesses would be eligible for an SBA loan?
a. Small computer manufacturer
b. Nonprofit business
c. Casino
d. Magazine publisher
97) The science of adapting work and working conditions to complement employees and
to suit customers is called:
a. kinesiology
b. ergonomics
c. layout design
d. physiology
98) Approximately ________ of a store’s customers will go more than halfway into the
a. three-fourths
b. one-fourth
c. one-third
d. one-half
Final Examination
BAM 418 – Small Business Management
99) Entrepreneurs must evaluate the impact of which of the following?
a. property taxes
b. specialized taxes
c. sales tax
d. all of the above
100) Joe wanted to start an outside café in his neighborhood. When he started the con-
struction, the building department made him stop since he was not in accordance
to the local zone. What would be the best option for Joe?
a. Joe should hire an attorney and sue the city for the money he has spend thus far.
b. Joe could appeal to the local zoning commission.
c. He could have the subcontractors to complete the café at night so the building
department will not be around.
d. He should quit and consider another location.

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