Chapter 4 Understanding Entrepreneurship, Small …s3.amazonaws.com/prealliance_oneclass_sample/2lzKvbJbWz.pdf · Chapter 4 Understanding Entrepreneurship, Small Business, and New

Chapter 4 Understanding Entrepreneurship, Small Business, and New Venture Creation1) According to Industry Canada there are about ________ people who are "self employed"

A) 220,000B) 1.2 millionC) 5 millionD) 2.2 millionE) 725,000

Answer: DDiff: 2 Page Ref: 104

2) Nascent entrepreneurs are;A) people who have been in business over 10 yearsB) people who are trying to start a businessC) people who have started a businessD) people who are in their first year of businessE) people who have recently sold their business

Answer: BDiff: 1 Page Ref: 104

3) A small business is an owner managed business with less than ________ employees.A) 100B) 50C) 25D) 500E) 10

Answer: ADiff: 2 Page Ref: 105

4) What percentage of business establishments are located in Ontario and Quebec?A) 32B) 76C) 89D) 58E) 20


5) What is the name for the part of the economy made up of companies and organizations not owned orcontrolled by the government?A) legislated corporationsB) crown corporationsC) public sectorD) private sectorE) split sector


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6) According to Industry Canada small businesses account for over two thirds of employment in these fourindustries except:A) non-institutional health careB) other servicesC) constructionD) manufacturingE) accommodation and food


7) There are now more than ________ women entrepreneurs in Canada.A) 18,000B) 50,000C) 800,000D) 1 millionE) 1.5 million

Answer: CDiff: 2 Page Ref: 109

8) According to the textbook which area experienced the most growth?A) high technologyB) biotechnologyC) service producingD) retailingE) goods producing


9) What percentage of all businesses are small?A) 15 %B) 22 %C) 71 %D) 55 %E) 98 %

Answer: EDiff: 1 Page Ref: 110

10) Which is the most common source of ideas for a new venture?A) work experiencesB) familyC) childrenD) dreamsE) magazines


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11) Which of the following is not one of the various measures used to define a small business?A) the number of people the business employsB) the company's sales revenueC) the size of the investmentD) the number of items soldE) the type of ownership structure


12) ________ are people who create something new within an existing large firm or organization.A) NeopraneursB) IntrapraneursC) EntrepreneursD) Nascent entrepreneursE) Intrepreneurs


13) Which one of these questions is not one an entrepreneur would ask in the process of screening ideas?A) Does this create or add value for the customer?B) Does it provide a sustainable competitive advantage?C) Is the idea marketable?D) Is it financially viable?E) Does this have a high entrance cost?

Answer: EDiff: 1 Page Ref: 113-114

14) Which of the following statements is not one of the characteristics of a sales forecast?A) It is typically prepared after learning about the competition and customers.B) It estimates how much of a product or services will be purchased by prospective customersC) It forms the foundation for determining financial viability of the ventureD) It typically involves calculating total sales revenue.E) In typically consists of a set of financial statements


15) What is a financial forecast?A) A listing of total revenues for the first year of operations.B) An estimate of how many units will be purchased by a customer group.C) A two to three year projection of a venture's future financial position and performance.D) An estimate of the revenues for a business less the exit costs.E) It is the same as a business plan.


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16) A financial forecast includes all of these items except:A) an estimate of start up costsB) a cash budgetC) a listing of potential customerD) an income statementE) a balance sheet


17) A ________ typically includes a company description, product description, marketing analysis and plan,operating plan, financial plan and other supporting information.A) business planB) grant applicationC) bank loan applicationD) tax applicationE) partnership agreement


18) Bootstrapping involves:A) selling sharesB) doing more with less.C) preparing a business planD) the designing of new productsE) the creation of new ideas


19) Bootstrapping involves all of these actions except:A) doing more with lessB) acquiring resources such as people and equipmentC) using other people's resourceD) purchasing as many resources as possibleE) borrowing materials


20) Assets that a borrower uses to secure a loan or other credit are referred to as:A) assignmentsB) financed assetsC) collateralD) fixed assetsE) tangible assets


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21) One popular source of equity capital is informal capital from private investors also know as:A) private loansB) angelsC) off the books financingD) traditional lendingE) pseudo loans


22) Venture capitalists:A) typically offer loans with a 30 day payback period.B) typically invest funds from professionally managed pools of investor money.C) typically are well off individuals.D) are risk adverse lenders.E) require collateral for all transactions.


23) The ideal team:A) involves a 50-50 split in ownership.B) consists of two people.C) consists of people with similar skills.D) consists of people with complementary skills.E) consists of a large number of individuals.


24) Personal liability for all debts of the business is called:A) limited liabilityB) general liabilityC) asset managementD) restricted liabilityE) unlimited liability


25) According to the text the top 10 corporations in Canada includes:A) Power corp. of CanadaB) Leon's FurnitureC) Walmart CanadaD) Royal Bank of CanadaE) both A and D


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26) ________ is the governing body of a corporation.A) A shareholders boardB) The board of directorsC) The majority shareholders committeeD) The audit committeeE) The CEO


27) Which of the following is true?A) between 1991 and 1994 firms led by women created jobs ten times faster than the average of allCanadian companies

B) men tend to be more cautious than womenC) as entrepreneurs, men tend to make more money than womenD) more men are inclined to test the waters of the business environment before starting a business thanwomen

E) women tend to have fewer small business failures than menAnswer: EDiff: 2 Page Ref: 109

28) Geraldine McManus who started up Ab-Original Wear is referred to as a(n):A) independentsB) franchiseesC) networkersD) intrapreneursE) entrepreneurs


29) A(n) ________ is a person who recognizes and seizes opportunities.A) entrepreneurB) Generation XerC) venture capitalistD) small businesspersonE) businessperson


30) Liz has decided to issue shares of her company to the public in order to raise some capital to build a newfactory.. Liz is now launching a(n):A) an extended corporationB) private corporationC) initial public offeringD) income tax trustE) blended corporation


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31) A study by CIBC world markets found that small businesses with above average growth were run by:A) owners with more formal education.B) owners that used professional advisors.C) owners that adopted a corporate ownership structure.D) owners that had a high level of internet connectivity.E) all of the above


32) When Bob first opened his restaurant he wanted to earn enough to lead a comfortable life style. But it hasbeen so successful that he has changed his mind and now wants to grow the business into a national chain.Bob is best described as a(n):A) venture capitalistB) entrepreneurC) businesspersonD) small businesspersonE) Generation Xer


33) Individuals who accept both recognize and seize opportunities are referred to as:A) independentsB) intrapreneursC) entrepreneursD) franchiseesE) speculators


34) What was not cited in the text as one of the common traits among entrepreneurs?A) venturesomeB) opportunisticC) assertivenessD) charismaticE) lack of self confidence


35) Causes of small business failures include all but:A) a lack of budgetary controlB) poorly designed production systemsC) family problemsD) weak accounting skillsE) an intense interest in the business


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36) Where does entrepreneurship take place?A) it occurs just in new firmsB) it occurs just in small firmsC) it occurs in old firmsD) it occurs in a variety of firmsE) it occurs in a & b only


37) What was not cited in the text as one of the entrepreneurial characteristics?A) self-confident and creativeB) unwilling to take risksC) venturesomeD) oriented towards achievement and actionE) challenge seeking


38) James pictures himself as an entrepreneur. However, he needs to know if he has the temperament to be one.Which of the following characteristics is not typical of an entrepreneur?A) desire to be independentB) opportunisticC) challenge seekingD) desire to be a millionaireE) desire to be in control


39) Sam Clark has a custom cheese cake business that he owns and operates out of his home. Sam's ownershipstructure likely isA) a sole proprietorshipB) a partnershipC) a corporationD) a franchiseE) a limited partnership


40) Which of the following characteristics is not typical of an entrepreneur?A) willing to work hardB) desire to lead a comfortable lifestyleC) enjoy taking a riskD) strong desire for personal freedomE) creative and venturesome


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41) Chris wants to set up his own business, but wants to know if what he wants is the same as mostentrepreneurs. Which of the following is not a typical entrepreneurial characteristic?A) energeticB) driven to achieveC) visionaryD) resourcefulE) adversion to risk


42) An organization designed to avoid paying corporate tax by distributing all or most of their earnings to theirshareholders is:A) a shareholders co-operativeB) a public companyC) a limited partnershipD) a private corporationE) an income trust


43) An outside director is:A) a person from the employee group outside the upper level ranksB) a person who is a high ranking company officialC) a person who is not an employee of the companyD) a person selected by the CEOE) a person from the audit committee


44) Harold's father owns a plumbing business, which Harold will likely take over. However, Harold needs toknow the problems that beset family businesses. Which of the following is not a problem in a familybusiness?A) untrained and uneducated family members as personnelB) choosing an appropriate successorC) failure to respond to changing market conditionsD) disagreement among family members about the future of the businessE) consistent under-financing


45) Jody is a young graduate from a business program. She can either help out in the family business or workwith another organization. Which of the following is not a typical advantage associated with a familybusiness?A) unified family managementB) highly trained individualsC) high employee loyaltyD) personal sacrifices leading to financial advantageE) valuable community relationships


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46) Ted is about to take over a family business. Among the issues of which he should be aware include all of thefollowing except:A) assuring economic security for the retiring leader and spouseB) successor selectionC) timing the successionD) benefits for the successorE) training the successor


47) Margaret has an opportunity to buy an existing business. Among the issues of which she should be awareinclude all of the following except:A) the location of the businessB) legal form of the businessC) difficulty in determining an appropriate price for the businessD) the reputation of the businessE) incomplete knowledge of the state of the business


48) The advantages of becoming a small businessperson by buying an existing business include all of thefollowing except:A) established working relationships with vendorsB) freedom to structure the business the way you want toC) established customer baseD) reputation in the communityE) odds of success are better


49) About one-third of all new businesses ownersA) buy an existing businessB) start from scratchC) buy out the other partnerD) inherit the businessE) win the business in a draw


50) Which of the following is the main disadvantage of a co-operative?A) difficult to attract equity investmentB) high tax ratesC) each member only gets one voteD) high pricesE) low surplus distribution rates

Answer: ADiff: 2 Page Ref: 127-128

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51) A new firm is:A) one that has been in business for 5 years or lessB) one that opened its doors within the past 6 monthsC) one that has become operational within the previous 12 monthD) one that as not yet opened for businessE) one with less than 10 years experience.


52) Judy is a graduate from a denturist program. Normally, graduates start up their own business, much likedentists and doctors. She has the choice of starting on her own or buying an existing practice. What is anadvantage for her of starting a new business from scratch?A) not suffer from prior owner's errorsB) relationship with suppliers already establishedC) needs and desires of customers knownD) odds are better to succeedE) the risks are lower than if she were to buy an existing practice


53) What term is used to identify a detailed outline of the proposed business and market, the owner'sbackground, and other sources of funds?A) business loanB) business strategyC) franchiseD) business planE) a capital launch


54) Sam has always been interested in starting his own business, but as a recent graduate, is not certain where hecan get ideas. Which of the following is a good reliable source for information needed to make the decision tostart a new business?A) business analystsB) parentsC) bankersD) teachersE) experience in industry before starting a new business


55) Erin feels that she has a wonderful opportunity of creating a new apple beverage she saw in Europe by usingsurplus apples grown near Georgian Bay in Ontario. Which question must she answer in evaluating thisopportunity?A) What depreciation procedures will be used?B) Are there enough customers willing to buy this ?C) What kind of computers should I purchase?D) What interest rate will be charged for financing the purchase of capital equipment?E) Where will my business be located?


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56) Robert wants to start a new business. According to the textbook, among the questions he needs to askhimself before he starts are all of the following except:A) what value is created or added to for the customerB) what is my competitive advantageC) what is the marketability of this ideaD) how much will the customer buyE) what legal form should the business take


57) Your textbook suggested questions to ask in order to identify a genuine business opportunity. Which of thequestions below is not one of the recommended questions?A) Does this product/service solve a problem or meet a significant need?B) Will we have a short competitive advantage?C) Will our sales lead to profits?D) What is our estimated demand?E) Who are our customers?

Answer: BDiff: 2 Page Ref: 113-114

58) The two most widely used methods to form a corporation include:A) traditional or contemporary incorporationB) inside or outside incorporationC) limited or unlimited incorporationD) private or public incorporationE) federal or provincial incorporation


59) Bill is starting up a new business. In order to raise the capital needed for the business Bill has sold shares ofhis company to a few close relatives. This type of structure is known as a:A) public corporationB) public enterpriseC) sole proprietorshipD) private corporationE) macroenterprise


60) Franchising is a contract between a(n) ________ and a(n) ________ that stipulates how ________ or ________will be sold.A) manufacturer, seller, a service, a productB) outlet owner, dealer, food, a serviceC) manufacturer, dealer, a product, a serviceD) buyer, seller, a product, a serviceE) retailer, outlet owner, food, a service


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61) Which term identifies the arrangement in which a buyer purchases the right to sell the good or service of theseller?A) licenseB) right marketerC) exporterD) importerE) franchise


62) To start up a new business by operating under a license issued by a parent company to local entrepreneurswho own and management them is known as:A) a franchiseB) a microenterpriseC) a small businessD) an enterpriseE) a macroenterprise


63) In a franchise agreement, the ________ is purchasing the right to sell the products of the ________.A) franchisor, franchiseeB) franchisee, franchisorC) franchisor, parent companyD) subleaser, leaserE) pigeon, shyster


64) Roger has made a list of what he considers to be advantages of buying a franchise. You tell him that one itemon his list is not an advantage. Which one is it?A) low start-up costsB) access to big business management skillsC) don't have to build a business step by stepD) incentives of owning your own businessE) improved chances of success


65) Hector wants to buy a franchise. He has developed a list of advantages and disadvantages. Which one doesnot apply?A) the start-up costsB) it is virtually impossible to lose money owning a well-known franchiseC) usually involves contributing a percentage of the sales to the parent companyD) franchises have a greater success rate than starting businesses from scratchE) a franchise arrangement combines the incentive of owning a business with the advantage of access tobig business management skills


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66) Which of the following is not likely to be provided by the seller of a franchise?A) financing helpB) training for employees and managersC) marketing strategyD) guarantee of successE) management advice


67) Ken wants to start a business, but because he is not certain about his success of starting one from scratch heis thinking about a franchise. Which of the following is not an advantage of franchising?A) financial assistanceB) promotional assistanceC) recognitionD) economies of scale in buyingE) failure rates are lower than starting a business from scratch


68) Molly believes that success is almost guaranteed when one buys a franchise. You point out that she shouldconsider the costs such as:A) the franchise sales priceB) training expensesC) operational expensesD) emergency needsE) all of the above


69) Which of the following is not one of the disadvantages of owning a franchise?A) on-going payments to the parent companyB) high start-up costsC) sacrifice of independenceD) high failure ratesE) difficult to terminate


70) Franchises in Canada generate approximately ________ in annual sales revenue.A) 10 millionB) 30 billionC) 1.5 millionD) 50 billionE) 50 million


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71) Which of the following is considered to be an advantage to both the franchisee and franchisor?A) recognitionB) guaranteed successC) promotion savingsD) management assistanceE) economies of scale in buying


72) Lester is hoping that by buying a franchise, he will get a lot of assistance from the company providing thefranchise. Which of the following would not be a benefit to Lester should he decide to buy a franchise?A) management assistanceB) recognitionC) economies of scale in buyingD) standardized appearance of the franchiseE) guaranteed success


73) Karen is trying to assess whether she can start her own small business. But, as with many small businesses,money is a problem. She asks for your help. You indicate that the most likely source of money for starting upa small business is:A) banksB) credit unionsC) personal savingsD) lottery winningsE) family investment


74) Which source of capital is identified as a group of small investors who are willing to invest money into thenew firm in exchange for an ownership share?A) silent domestic partnerB) stockbroker syndicateC) foreign investorsD) venture capital firmE) banks


75) Sources of assistance for small business include all of the following except:A) venture capitalistsB) banksC) consultantsD) politiciansE) government agencies


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76) Trade credit is:A) the selling of bonds or debenturesB) derived from funds generated from the operation of the businessC) paid to the owners in the form of dividendsD) delayed payment terms offered by suppliersE) reinvested in the enterprise


77) A forecast of the cash receipts and cash disbursements of a business is referred to as:A) a sales forecastB) a cash budgetC) a business planD) an income statementE) a balance sheet


78) The income statement shows:A) the owner's investment.B) the business's cash receipts.C) who the business owes money to.D) what the business owns.E) the business's profits or loss.


79) An example of a debt source of funds is ________ and an example of an equity source of funds is ________.A) venture capitalists, private lendersB) family and friends, venture capitalistsC) private lenders, trade creditD) family and friends, private lendersE) private lenders, family and friends


80) ________ is an example of a debt source and ________ is an example of an equity source.A) Venture capitalists, governmentsB) Family and friends, governmentsC) Trade credit, selling shares to the publicD) Trade credit, private lendersE) Venture capitalists, entrepreneur's personal funds


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81) The success factors for a small business include:A) Hard work and driveB) Owner has a business degreeC) Market demand for the productD) LuckE) All of the above except B


82) ________ percentage of businesses in Canada have less than 100 employees.A) 58B) 28C) 88D) 78E) 98


83) The number of ________ entrepreneurs has grown by 208% in the last two decades compared to a 38%increase of ________ entrepreneurs.A) male, femaleB) marketing, financeC) ambitious male, cautious femaleD) female, maleE) ambitious, cautious


84) Which of the following is true?A) there is a higher growth in the number of women entrepreneurs than men entrepreneursB) men own about 90 percent of entrepreneurshipsC) men are more successful as entrepreneurs than womenD) women fail less frequently in small business than men doE) male entrepreneurs have a survival rate twice as high as that of females


85) Start up costs and complexities are among the main disadvantages of ________.A) starting up a partnershipB) incorporatingC) selling sharesD) starting up a sole proprietorshipE) none of the above


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86) How many people are "self-employed" according to Industry Canada?A) 30 millionB) 1.5 millionC) 15 millionD) 5 millionE) 2.2 million


87) According to Statistics Canada which province has the highest percentage of growth in terms of number offirms:A) QuebecB) British ColumbiaC) OntarioD) AlbertaE) Manitoba


88) What was cited as a contributing factor to the success of a small business?A) undercapitalizationB) weak control systemsC) lots of hard work and inner driveD) neglected by not enough time or effortE) insufficient capital


89) All of the following are reasons for success of small businesses except:A) managerial competenceB) hard workC) luckD) market demand for the productE) money


90) Which of the following is not one of the general factors that contribute to small business success?A) strong demand for the product/serviceB) hard work, drive, and dedicationC) managerial competenceD) access to fundingE) good luck


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91) All of the following are reasons for failure of small businesses except:A) inadequate financial capabilitiesB) disastersC) inadequate marketing capabilitiesD) poor management skillsE) luck


92) You want to start your own business, but, like all operators, want to minimize the risk of failure. Which ofthe following was cited as a general reason for small business failure?A) market demand for the product or serviceB) luckC) neglectD) overcapitalizationE) managerial competence


93) Which is the most common reason for the failure of small business?A) poor production capabilitiesB) loss of interest in the businessC) fraudD) poor management styleE) poor marketing


94) The features of a sole proprietorship include all the following except:A) easy to dissolveB) limited resourcesC) simple to formD) a lot of government paperworkE) unlimited liabilities


95) Which of the following is not typical for a sole proprietorship?A) hard to borrow moneyB) limited liabilityC) lack of continuityD) easy to dissolveE) losing money at start-up


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96) Tax laws permit ________ to treat the sales revenues and operating expenses of the business as part of theirpersonal finances.A) privately-held corporationsB) joint venturesC) publicly-held corporationsD) either publicly-held or privately-traded corporationsE) sole proprietorships


97) Low start up costs, simplicity in formation, and freedom are advantages in establishing a:A) cooperativeB) sole proprietorshipC) joint ventureD) partnershipE) corporation


98) A major disadvantage of the sole proprietorship is the:A) lack of freedom in making business decisionsB) difficulty in beginning business activitiesC) high start-up costsD) unlimited liabilityE) ability to grow by adding talent


99) Gilbert is considering setting up a business. He likes some of the advantages of sole proprietorships, but isconcerned about some of the disadvantages. He should consider all of the following except:A) limited managerial and financial resourcesB) difficulty of liquidationC) unlimited liabilityD) difficulty of passing the business on to his heirsE) difficulty in getting bank loans


100) A general partnership has advantages which are similar to a sole proprietorship, such as:A) being simple to organizeB) providing for continuityC) being dependent upon resources of an individualD) limiting owner's liabilityE) easy to transfer ownership


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101) A limited partnership attempts to:A) avoid the problem of unlimited liability for the ownersB) provide for continuity of operation upon the departure of one of the partnersC) limit the number of partners who may purchase a share of ownershipD) limit the number of partners who may vote at board meetingsE) limit the geographical area of operation for a business firm


102) Partnerships, generally, are more advantageous than sole proprietorships because:A) some businesses can only be formed as partnershipsB) many people can be the president of the companyC) partners are jointly and severally liableD) the talents of the partners can be pooledE) there are many types of partnerships


103) Which of the following statements about partnerships is false?A) general partnerships are limited to ten partnersB) the partnership terminates upon the death of a partnerC) a partner cannot sell their interest without the other partners' consentD) a partner cannot retire without the other partners' consentE) it is easier to borrow money than a sole proprietorship

Answer: ADiff: 3 Page Ref: 122-123

104) If sole proprietor, Tom Smith, decided to merge his business with that of another sole proprietor, CindyDeShell, a ________ would result.A) dual proprietorshipB) T-4A special corporationC) partnershipD) co-operativeE) publicly-traded corporation


105) Many professional organizations such as legal and accounting are formed as:A) public corporationsB) partnershipsC) joint venturesD) private corporationsE) sole proprietorships


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106) Which of the following is not true of partnerships? Partnerships:A) are often an extension of a business that began as a sole proprietorshipB) can grow by adding talent and moneyC) are simple to organizeD) sometimes consists of only one partnerE) have few legal requirements


107) The size of a partnership is:A) limited to a maximum of $100 million in annual salesB) limited to a maximum of $100 million in assetsC) limited to a maximum of $100 million in annual sales and a maximum of 1000 employeesD) limited to a maximum of 1000 employeesE) there is no limit on the size of a partnership


108) Jeanne, a well-known actress is not an active participant in Highline Food Company but she has contributeda significant amount of capital as a partner to the business. Jeanne is known as a(n) ________ partner.A) dormantB) limitedC) managingD) generalE) secret


109) If a performer such as Madonna or Michael Jackson were to allow him/herself to be identified with aproduct but not an active partner, then his/her liability for the debts of the firm would be:A) ostensibleB) limitedC) undisclosedD) generalE) not disclosed publicly


110) According to the textbook, there are two basic types of partners general and:A) limited partnerB) miscellaneous partnerC) dormant partnerD) secret partnerE) key partner


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111) Your grandmother wishes to invest in your partnership, but she does not want to have unlimited liability.What is the best form of partnership for her?A) silent partnerB) secret partnerC) general partnerD) limited partnerE) dormant partner


112) The two basic types of partners include ________ and ________ partners.A) secret, ostensibleB) secret, dormantC) private, ostensibleD) general, limitedE) general, secret


113) Paul invests $50 000 in a partnership with his sister to operate a computer sales outlet. Paul is not involved inthe operation of the store and has a limited liability through the written partnership agreement. Paul is a(n)________ partner.A) generalB) secretC) ostensibleD) limitedE) dormant


114) Two architects are considering forming a partnership. Both want a partnership agreement. All of thefollowing should be part of their agreement except:A) how the profits will be sharedB) the formal reporting relationship between the two partnersC) how the company will be dissolvedD) the amount of the individual investmentE) how new employees will be hired


115) In a partnership that has a liability:A) each partner pays only his or her share of the liability even if one partner runs out of money beforethat partner's share is paid

B) each partner is responsible only for the debts he or she incurredC) a partner is not responsible for debts if another partner created the liability through some action thatviolated the partnership agreement

D) each partner is responsible for the debts even if the debt was the result of the actions of only onepartner

E) partners are not liable for debts of other partners if there is no partnership agreementAnswer: DDiff: 3 Page Ref: 123

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116) Ann and David want to form a partnership. They should consider all of the following except:A) possibility of disagreementB) unlimited liabilityC) the combined talents of both partnersD) ease in transferring ownershipE) ease of setting up a partnership


117) Disadvantages of the general partnership form of business organization include:A) limited liabilityB) simplicity of establishmentC) ability to provide dividends to shareholdersD) lack of continuityE) difficult to organize


118) Mark wants to set up a corporation; however, he feels that his business is not big enough. He must wait untilhis business has ________ of annual revenue before he can do it.A) there is no minimum amountB) $100 000C) $1 millionD) $100 millionE) $10 million


119) Computers-B-Us is a new company. Its owners all have no personal liability for any debts of the company.All five of its owners invested the same amount and will share equally in the profits. The structure ofComputers-B-Us is most likely a:A) public corporationB) sole proprietorshipC) private corporationD) limited partnershipE) general partnership


120) A public corporation is:A) owned by the government, hence "public"B) owned by all taxpayers in a countryC) one whose stock is held by only a few people and the shares are not generally available for saleD) chartered by the federal governmentE) one whose stock is available for sale to the general public


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121) What is the difference between a public and private corporation?A) public corporations issue shares that are widely held whereas private corporations issue shares thatare held by only a few people

B) public corporations are owned by a government whereas private corporations are owned by privateindividuals

C) public corporations issue shares whereas private corporations do notD) public corporations are always large whereas private corporations are not allowed by law to be largeE) public corporations have articles of incorporation whereas private corporations do not


122) ________ is defined as "an artificial being, invisible, intangible and existing only in contemplation of thelaw".A) A corporationB) A partnershipC) A sole proprietorshipD) A business ownerE) A co-operative


123) In order to obtain debt financing an entrepreneur typically must have at least ________ equity investment inthe business.A) 50%B) 35%C) 40%D) 20%E) 60%


124) ________ financing refers to the amount of money that is borrowed and ________ financing refers to moneyinvested in exchange for an ownership interest.A) Equity, debtB) Debt, equityC) Treasury, equityD) Treasury, debtE) Collateral, equity


125) A business is normally at its riskiest point during the ________ phase.A) growthB) start-upC) preliminaryD) maturityE) conception


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126) A share of ownership in a corporation is referred to as:A) a principleB) a partnerC) debtD) stockE) a director


127) A ________ is an incorporated form of business that is organized, owned and democratically controlled bythe people who use its products and services.A) corporationB) partnershipC) proprietorshipD) preferred shareE) co-operative


128) Shareholders are ________ of a company and profits are distributed among shareholders in the form of________.A) owners, chequesB) managers, profit sharingC) owners, dividendsD) owners, proxiesE) managers, proxies


129) Which one of the following is not one of the main new venture entry strategies?A) Introduce a totally new product or serviceB) Test new marketplaceC) Introduce a product or service that competes directly with current offerings but has a new twistD) FranchiseE) All are new entry strategies.


130) Finance companies lend to ________ risk ventures and typically charge ________ interest rates.A) medium, lowB) medium, mediumC) low, highD) low, lowE) high, high


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131) If Doug voted by proxy this means:A) his vote was cast by someone who was able to attend the shareholder's meetingB) he cast a private voteC) he withheld his voteD) he waived his opportunity to voteE) he cast his vote as a regular shareholder in a company


132) Due to his hard work and notable contributions as an employee of Kisk Electronics, Nori has just beenelected to the board of directors of Kisk Electronics. He will now be expected to fulfill his obligations as bothan employee and director. Nori is a(n):A) outside directorB) corporate officialC) special representativeD) inside directorE) regular seat holder


133) CEO is the abbreviated form of:A) corporate enterprise overseerB) corporate enterprise ownerC) corporate executive officerD) central executive operatorE) chief executive officer


134) Suzy is considering incorporating her financial consulting business. Of the items listed below which onewould not be a problem if she incorporates?A) unlimited liabilityB) heavy regulationC) high costs of incorporationD) complex legal requirementsE) double taxation


135) In the double taxation endured by some businesses, which of the following is the first taxation?A) social security taxB) value-added taxC) property tax on ownersD) tax on dividendsE) tax on corporate profits


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136) In the double taxation endured by some businesses, which of the following is the second taxation?A) property tax on ownersB) value-added taxC) tax on corporate profitsD) social security taxE) tax on dividends


137) Advantages of the public corporation as a form of business organization do not include:A) the guarantee of fixed dividendsB) professional managementC) continuityD) relatively easy to raise moneyE) limited liability


138) Jonathan is upset that he is a victim of double taxation. What form of business is he involved in?A) big business ventureB) unlimited liabilityC) corporationD) partnershipE) small corporate venture


139) Gloria wants to turn her sole proprietorship into a business corporation. Among the things that she mustconsider are:A) the double taxation that occurs with corporationsB) sole proprietorships cannot be made into corporationsC) the threat of takeovers if she has a private corporationD) whether or not she will issue shares when the company becomes a corporationE) the cost of dissolving her sole proprietorship


140) The purpose of a cooperative is:A) to buy fertilizer at reduced prices because of volume buying on the part of its membersB) to benefit its owners in the form of reduced prices and/or distribution of surplus at year endC) as a benevolent association designed to help out its members in times of needD) to remain small so that they can help all their members on an individual basisE) as an association only for farmers


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141) Voting rights in a cooperative are:A) required before one can buy anything from a cooperativeB) there are no votes taken in the running of a cooperativeC) the same as those found in a corporation, that is, the more one owns or contributes the more votes onehas

D) one vote per member regardless of the amount owned or contributedE) not restricted just to members


142) Cooperatives generally function in the following main areas except:A) financial cooperativesB) banking cooperativesC) consumer cooperativesD) insurance cooperativesE) service cooperatives


143) The person responsible for the firm's overall performance is:A) the CFOB) the CEOC) the COOD) the directorE) none of the above


144) Most new corporations start out as ________ corporations and then move to ________ corporations as theygrown.A) private, publicB) public, privateC) unlimited, limitedD) limited, unlimitedE) general, active


145) The ________ fit involves determining if the resources needed to capitalize on the opportunity can beacquired.A) opportunity- resourceB) entrepreneur-resourceC) entrepreneur-opportunityD) resource-entrepreneurE) personal-entrepreneur


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146) The benefits of franchising the franchisor enjoys includes all of these items except:A) more revenueB) rapid growthC) freed from all details of local operationsD) more financingE) advertising money is spent more efficiently


147) According to Sandra Wilson the founder of "Robeez" ________ is vital to her company's growth.A) employee share ownershipB) having a profit sharing planC) having a relaxed supportive cultureD) television advertisingE) having a strong team of consultants


148) Everyday approximately ________ businesses are started in Canada.A) 380B) 55C) 850D) 275E) 692


149) Three of the most common criteria used to determine ________ include: when it was formed, whether it wasincorporated and if it sold goods and/or service.A) a conglomerateB) a nascent businessC) when the firm moves from a small to medium sizeD) when a new firm existsE) a corporation


150) Which one of the following statements is true?A) Love money is a form of debt financing.B) Debt financing refers to money invested by the owner in the company.C) Borrowing money reduces the potential for higher returns when a business is performing well.D) Banks are typically risk adverse.E) Suppliers typically provide long term financing.


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151) A new business typically adopts one of four main organizational forms:A) franchise, sole proprietorship, partnership or corporation.B) debt, equity, venture capital or gifted.C) sole proprietorship, partnership, corporation or co-operative.D) sole proprietorship, franchise, corporation or co-operative.E) franchise, partnership, corporation or co-operative.


152) Entrepreneurs often generate many ideas and ________ them is a key part of the entrepreneurial ideaprocess.A) screeningB) dead-endingC) sellingD) franchisingE) sketching


153) Which of the following is NOT one of the general factors that contribute to small business failure?A) weak control systemsB) managerial incompetence or inexperienceC) bad luckD) neglectE) insufficient capital


154) About 88 percent of all businesses in Canada are small.Answer: FALSEDiff: 1 Page Ref: 106

155) Manufacturing businesses are the largest and fastest growing segment of small business enterprise.Answer: FALSEDiff: 1 Page Ref: 109

156) A serving producing business is considered small if it has fewer than 50 employees.Answer: TRUEDiff: 1 Page Ref: 104

157) According to statistics 49% of private sector employees work for a small businessAnswer: TRUEDiff: 1 Page Ref: 107

158) Small businesses often provide an environment to use personal attributes such as creativity.Answer: TRUEDiff: 1 Page Ref: 105

159) Entrepreneurship is defined as an individual's willingness to take advantage of business opportunities andto assume the risks of establishing and operating a business.Answer: TRUEDiff: 1 Page Ref: 105

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160) For the text purposes a small business is considered to be an owner managed business with less than 100employees.Answer: TRUEDiff: 1 Page Ref: 105

161) Over the past two decades the growth in the number of male entrepreneurs has exceed that of femaleentrepreneurs.Answer: FALSEDiff: 2 Page Ref: 109

162) An advantage of the sole proprietorship form of business is its unlimited liability.Answer: FALSEDiff: 2 Page Ref: 122

163) People are "born" to be entrepreneurs.Answer: FALSEDiff: 1 Page Ref: 110

164) When it comes to contributing to employment SME collectively do not outperform large businesses.Answer: FALSEDiff: 2 Page Ref: 110

165) Two of the major problems in family businesses are choosing and training successors, and determining thedirection of the firm.Answer: TRUEDiff: 1 Page Ref: 120

166) The risks of starting a business from scratch are greater than the risks of buying an existing firm.Answer: TRUEDiff: 1 Page Ref: 119

167) A sole proprietorship is easy to form.Answer: TRUEDiff: 1 Page Ref: 122

168) In a franchising agreement the franchisor is the person who is buying the franchise to run as a smallbusiness.Answer: FALSEDiff: 1 Page Ref: 120

169) Part of the franchise agreement usually requires that the franchisor pay a fee to the franchisee.Answer: FALSEDiff: 2 Page Ref: 120-121

170) A very significant advantage of a franchise as a way of running a small business is that the chances ofsuccess are greatly enhanced.Answer: TRUEDiff: 1 Page Ref: 120

171) Trade credit is a form of barter between supplier and retailer.Answer: FALSEDiff: 1 Page Ref: 117

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172) Equity refers to the money, or capital, invested in the enterprise by individuals in return for an ownershipinterest.Answer: TRUEDiff: 2 Page Ref: 116

173) There are two main types of financing, debt and equity.Answer: TRUEDiff: 1 Page Ref: 116

174) A business is at its riskiest point during the start up phase.Answer: TRUEDiff: 2 Page Ref: 116

175) One popular source of debt financing is through private investors also know as Angels.Answer: FALSEDiff: 2 Page Ref: 117

176) Luck is a significant factor in the success of small businesses.Answer: TRUEDiff: 1 Page Ref: 130

177) One important business decisions is that involving the legal form of organization for the firm.Answer: TRUEDiff: 1 Page Ref: 121

178) A sole proprietorship is a business owned and operated by one person.Answer: TRUEDiff: 1 Page Ref: 122

179) Sole proprietors can generally treat business revenues and operating expenses as part of their personalfinances.Answer: TRUEDiff: 1 Page Ref: 122

180) If a sole proprietorship business fails to generate enough cash, bills must be paid out of the owner's pocket.Answer: TRUEDiff: 2 Page Ref: 122

181) Partnerships are often an extension of a business that began as a sole proprietorship.Answer: TRUEDiff: 2 Page Ref: 122

182) A private corporation is a business whose stock is held by a small group of individuals and is available forsale to the general public.Answer: FALSEDiff: 1 Page Ref: 126

183) In order to raise money, Microsoft can sell shares through a process called an initial public offering (IPO).Answer: FALSEDiff: 3 Page Ref: 126

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184) An income trust structure allows converted corporations to avoid paying tax if they distribute all or most oftheir earnings.Answer: TRUEDiff: 2 Page Ref: 126

185) Inside directors are board members who both serve on the board of directors and are company employees.Answer: TRUEDiff: 2 Page Ref: 124

186) A business that features limited liability, continuity, and easier access to money is a limited partnership.Answer: FALSEDiff: 2 Page Ref: 123

187) The greatest potential drawback of the corporate form of organization is double taxation. Althoughshareholders pay income taxes on the dividends they receive from the corporation, the dividends are taxdeductible for corporations.Answer: FALSEDiff: 3 Page Ref: 127

188) A co-operative is an incorporated form of business.Answer: TRUEDiff: 1 Page Ref: 127

189) Some of the causes of small business failure include poor management skills, inadequate marketingcapabilities and inadequate financial capabilities.Answer: TRUEDiff: 1 Page Ref: 131

190) Describe a sales forecast.Answer: ∙ this is an estimate of how much of a service/product will be purchased during a specific period of

timeDiff: 1 Page Ref: 114

191) How is a small business defined for purpose of the text?Answer: ∙ an independently owned and managed business with less than 100 employeesDiff: 2 Page Ref: 105

192) What are the two most important questions to ask when evaluating an idea for market and financialviability?Answer: ∙ Are there enough customers willing to buy the product or service?

∙ Will sales lead to profits?Diff: 2 Page Ref: 113

193) Should government be involved in giving assistance to small businesses?Answer: Yes:

∙ due to the tremendous impact of small business on the Canadian economy∙ significant contributor to development of new products∙ small businesses are net creators of new jobs∙ ensures competition∙ assistance is needed to help overcome the difficulties of starting

Diff: 3 Page Ref: 107

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194) What is a intraprenuer?Answer: ∙ a person who creates something new within an existing large firm or organization.Diff: 1 Page Ref: 105

195) Discuss the two most widely used methods to form a corporation. What are the stipulations to becomingfederally incorporated?Answer: ∙ federal incorporation under the Canada Business Corporations Act

∙ provincial incorporation under any of the provincial corporations acts∙ except for banks and certain insurance and loan companies any company can be federallyincorporated under the Canada Business Corporations Act


196) Describe the role and responsibilities of the Board of Directors.Answer: ∙ a board of directors who oversee the corporation's operation

∙ select the president and other officers to run the day to day operations∙ set dividend policy∙ set policies on major spending and executive salaries and benefits


197) What are the three key entrepreneurial process elements?Answer: ∙ the entrepreneur

∙ the opportunity∙ the resource and how all three interact


198) What does it mean to say that shareholders in a corporation have limited liability?Answer: ∙ shareholders can only lose their initial investmentDiff: 1 Page Ref: 127

199) Where do the majority of entrepreneurial ideas come from?Answer: ∙ from everyday events relating to work or life with work experience begin the most common sourceDiff: 1 Page Ref: 113

200) What factors in the broader environment influence the entrepreneurial process?Answer: ∙ social factors

∙ economic factors∙ political factors∙ technological factors


201) Define a new venture.Answer: ∙ a recently formed new commercial organization

∙ one that provides goods and or services for saleDiff: 1 Page Ref: 105

202) How does franchising work?Answer: ∙ a legal agreement to supply a product/service that stipulates how a product/service will be supplied

and marketed in exchange for a specified franchise feeDiff: 2 Page Ref: 120-121

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203) Discuss the four major factors that contribute to small business failure.Answer: ∙ managerial incompetence

∙ neglect∙ weak control systems∙ insufficient capital


204) Describe the criteria used to screen an entrepreneur's idea.Answer: ∙ does this idea for a product or services create or add value for the customers?

∙ does this idea provide a sustainable competitive advantage?∙ Is this idea marketable?∙ Is it financially viable?∙ What about the exit costs?

Diff: 2 Page Ref: 113-114

205) Describe the difference between debt and equity financing.Answer: ∙ debt financing involves borrowing funds

∙ with debt financing the borrower is required to repay the amount of the loan plus interest charges∙ equity financing refers to money invested in a business in exchange for ownership interest∙ equity investors then are interested in profits and how they will be distributed∙ with equity financing there is not a locked in financing charge


206) Describe the characteristics of an entrepreneur.Answer: ∙ resourcefulness

∙ creative and innovative∙ opportunity orientated∙ profit orientation∙ perseverance∙ independence


207) Why do so many small businesses fail?Answer: ∙ predominant reason is lack of managerial

∙ neglect - overwhelmed by time commitment∙ weak control system - lack effective control systems to keep a business on track∙ insufficient capital - overly optimistic about how soon they will earn profits


208) Why would someone want to buy an existing business rather than start it from scratch?Answer: ∙ better chance of success

∙ established working relationships∙ past track record


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209) Why is it important to have a business plan?Answer: ∙ to help organize and act as a road map through the various stages of development

∙ requires the entrepreneur to document and explain why this is an opportunity∙ to indicate as many variables as possible for possible weaknesses or strengths in each of thefunctional areas: marketing, finance and operations∙ to show conceptually the owner/operator how the business should come together and whetherhe/she will need help


210) What are the major parts of a good business plan?Answer: ∙ company description

∙ product or service description∙ marketing analysis and plan∙ operating plan∙ management plan∙ financial plan∙ supporting details


211) Why is there such a difference between the failure rates of small businesses in general and franchisingoperations in particular?Answer: ∙ Franchises fail less because the owner/operator is supplied with:

∙ a proven product/service∙ proven marketing∙ financing strategy∙ established name∙ proven operations guide


212) Discuss the advantages and disadvantages of buying a franchise to start a new business.Answer: ∙ advantages

∙ not build step by step∙ increased chances of success∙ help from experienced management∙ training for employees∙ advertising

∙ disadvantages∙ start-up costs are high∙ on-going payments∙ lack of independence


213) Having decided to start a new business, where would you look for the money needed to start the business?Answer: ∙ personal resources

∙ lending institutions∙ friends or relatives∙ investors∙ government


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214) Discuss the four major factors that impact small business success.Answer: ∙ hard work, drive, and dedication

∙ market demand for the product or service∙ managerial competence∙ luck


215) Identify the four major forms of legal organization for business firms. List two advantages anddisadvantages of each.Answer: ∙ sole proprietorship - freedom, low start-up costs, unlimited liability, difficulty raising money

∙ partnership - greater talent pool, ease of formation, unlimited liability, lack of continuity∙ corporation - limited liability, continuity, high start-up costs, double taxation∙ cooperative - reduced prices, share of surpluses, one vote per member, wealthy members have novoting control


216) Why is unlimited liability a significant disadvantage to both the sole proprietorship and general partnershipforms of organization?Answer: ∙ sole proprietors are in a high risk situation as they are solely reliable for all debts of the firm

∙ those involved in a general partnership are also reliable for all debts of the firm, even if they are notresponsible for causing those debts or had no knowledge of them being made∙ personal possessions, with some limitations in both sole proprietorships and partnerships may haveto be sold to satisfy the debts of the business


217) Explain why double taxation is considered to be a disadvantage to a corporate form of organization. Explainhow double taxation occurs.Answer: ∙ a corporation must pay income taxes on its profits, and then shareholders must pay income taxes on

their dividends received∙ from the shareholder's point of view, this procedure amounts to double taxation of the corporation'sprofits∙ the profits of sole proprietorships and partnerships are only taxed once since profits are treated as theowner's personal income

Diff: 2 Page Ref: 122, 127

218) Describe the two most common sources of debt financing.Answer: ∙ financial institutions such as commercial banks, trust companies, co-operatives, finance companies,

equipment companies, credit unions and government agencies .∙ suppliers who provide goods or services to the entrepreneur with an agreement to bill them later


219) Describe private investors (Angels) and Venture Capitalists.Answer: ∙ Angels a popular method of equity financing, typically financially well off and often a successful

entrepreneur, looking to recycle their wealth through new business investment∙ Venture Capitalist a popular source of equity financing, professionally managed pools of investorsmoney, often deal in higher risk ventures with high growth opportunities


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