Entrepreneurship 6-10 Exam (Quiz Review)

A​ ___ is a written​ narrative, typically between 25 and 35 pages​ long, that describes what a new business intends to accomplish and how it intends to accomplish it.

business plan

_____ refers to the process investors go through after they tentatively commit to an investment.

due dilligence

Defining the market size too broadly is​ ________ in a business plan.

an ecample of a red flag

Dollar Shave​ Club's "Shave​ Time, Shave​ Money" is an example of​ a(n) _____.

tagline

​Jim's Handicrafts' main product sells for​ $100 and the cost of goods sold is​ $40. The​ $60 (the difference between the​ two) is called​ ______.

contribution margin

Juiced Up determined that the​ $11,000 per month rent for their store in​ Manhattan, New York was a cost the company had to pay whether it sold something or not. For Juiced​ Up, the rental cost was a​ _______ cost.

fixed

A​ firm's _____ is an analysis of its fixed versus variable costs.

operating leverage

​A(n) _____ is a panel of individuals elected by a​ corporation's shareholders to oversee the management of the firm.

board of directors

​A(n) ______ chart is a graphic representation of how authority and responsibility are distributed within the company.

organization

Return on assets is an example of​ a(n) _____.

ratio

A code of conduct is also called a​ _______.

code of ethics

An ethical dilemma is a situation that involves doing something that is beneficial to oneself or the​ organization, but may be​ _____.

unethical

Which of the following is an issue typically covered in a​ founders' agreement?

A. The timing of the​ firm's financial statements.

B. The nature of the​ firm's mission.

C. Relative split of the equity among the founders of the firm.

D. The role of each founder in developing the business model.

E. The delineation of responsibilities regarding the business plan.

C. Relative split of the equity among the founders of the firm.

A buyback clause legally obligates the​ ____ to sell to the remaining founders their interest in the firm if the remaining founders are interested.

departing foudners

All research scientists at Apex Biotechnology are required to sign a​ ________ agreement that binds the employee to not disclose a​ company's trade secrets.

nondisclosure

In a​ _____, the person and the business are essentially the same.

sole proprietorship

Which of the following is NOT an advantage of a general​ partnership?

A. Liability on the part of each general partner is unlimited.

B. Creating one is relatively easy and inexpensive compared with a corporation or a limited liability company.

C. Having more than one owner may make it easier to raise funds.

D. It is not subject to double taxation.

E. Business losses can be deducted against the​ partners' other sources of income.

A. Liability on the part of each general partner is unlimited.

​Tom, Sam, and Pete run a​ business, the Argyle Food Center. Each has invested​ $100,000 in the venture. If Tom and Sam have unlimited liability but Pete is liable only up to​ $100,000, what is the organizational form of this​ venture?

limited partnership

Which of the following is NOT an advantage of a C​ corporation?

A. The mechanics of raising capital are easier.

B. The ability to share stock with employees through stock option or other incentive plans can be a powerful form of employee motivation.

C. Stock is liquid if traded on a major stock exchange.

D. Owners are liable only for the debts and obligations of the corporation up to the amount of their investment.

E. Income is taxed at the corporate and shareholder levels.

E. Income is taxed at the corporate and shareholder levels.

Which of the following is NOT a standard that a business must meet to qualify for status as a subchapter S​ corporation?

A. All shareholders must agree to have the corporation formed as a subchapter S corporation.

B. It can issue only one class of stock.

C. The business cannot be a subsidiary of another corporation.

D. It can have no more than 100 members.

E. Its shareholders need not be U.S. citizens.

E. Its shareholders need not be U.S. citizens.

Tammy's Antiques sells goods both for cash and on credit. At the end of a​ month, Tammy determined that​ $23,000 was owed to her firm by customers. The​ $23,000 is​ Tammy's Antiques'​ ______.

accounts receiveable

The Southwest Airlines quote​ "Our planes​ don't make any money sitting on the ground—we have to get them back into the​ air" relates to which of the main financial​ objectives?

efficiency

​_______, which depict relationships between items on a​ firm's financial​ statements, are used to discern whether a firm is meeting its financial objectives and how it stacks up against its industry peers.

financial ratios

Historical financial statements include the income​ statement, the balance​ sheet, and the statement of​ _______.

cash flows

The​ _______ reflects the results of the operations of a firm over a specified period of time.

income statement

Marci Luner is going over the finances of her clothing boutique firm. If her firm has a net income of​ $131,000 and net sales of​ $586,000, its profit margin is​ _______ percent.

22.3 percent

​A(n) _____ is a snapshot of a​ company's assets,​ liabilities, and​ owners' equity at a specific point in time.

balance sheet

​_____ include(s) obligations that are payable within a year.

current liabilities

John and Brett have determined that the​ break-even point for their educational toys business is​ 60,000 units per month. Any units that John and Brett sell above​ 60,000 represent​ ________.

profits

The pro forma​ ________ provides a firm a sense of how its activities will affect its ability to meet its​ short-term liabilities and how its finances will evolve over time.

balance sheet

​______ refers to the fact that companies often falter because the people who start them​ aren't able to adjust quickly enough to their new roles and because the firm lacks a​ "track record" with outside buyers and suppliers.

liability of newness

Various people or groups form part of a

new-venture team; however,​ _____ are(is) not one of them.

suppliers

The​ three-member founding team at OnTime Cleaning Services consists of​ Tom, who has 14 years of operations​ experience, Billy, an accountant with 2 years of experience and​ Jane, a marketer with 22 years of work experience. The founding team at OnTime Cleaning Services is​ ________.

heterogenous

If the​ _____ of a firm have similar areas of​ expertise, it can be problematic.

foudners

Prior entrepreneurial​ experience, relevant industry​ experience, and​ ____ are the attributes that strengthen the chances of a​ founder's success.

networking

The results of research studies somewhat consistently suggest that​ _______ is one of the most consistent predictors of future entrepreneurial performance.

prior entrepreneurial experience

Billy Stamos is​ self-employed, works on his own time with his own tools and​ equipment, and performs computer services for a number of clients. Billy Stamos is​ a(n) _________.

freelancer

Freelancers and virtual assistants are considered​ _______.

independent contractors

If a new venture organizes as a​ corporation, it is legally required to have​ _________.

a board of directors

The board at Nuance Opticals offers help in providing direction and advice to the​ company, but it possesses no legal responsibility for the firm and gives nonbinding advice. The board at Nuance Opticals is​ a(n) ________.

advisory board

A​ company's _____ is the rate at which it is spending its capital until it reaches profitability.

burn rate

​_____ is the term attached to the general philosophy of minimizing start-up

expenses by aggressively pursuing cost cutting techniques and money-saving tactics.

bootstrapping

​A(n) ______ is the first sale of stock by a firm to the public.

IPO

Anthurium Florals needed cash and so it sold its​ $50,000 in accounts receivable to Omega Financing at a 20 percent discount. The financial transaction that Anthurium Florals did is called​ _____ .

factoring

​_____ is the practice of funding a project or new venture by raising monetary contributions from a large number of​ people, typically via the Internet.

crowdfunding

Which of the following is NOT a bootstrapping​ method?

A. Hiring interns.

B. Leasing equipment instead of buying.

C. Buying independently of other businesses.

D. Minimizing personal expenses.

E. Sharing office space.

C. Buying independently of other businesses.

John invested​ $25,000 in Marlo​ Ventures, a home flipping business. While Sammy invested​ $20,000 in the​ venture, Daniel did not put in any money in the​ venture, but became a 50 percent equity owner because he had contributed enormous time and expertise into the venture. The 50 percent is​ ________ equity that represents the value of the time and effort that Daniel put into Marlo Ventures.

sweat

Equity financing means exchanging partial ownership of a​ firm, usually in the form of​ ____, in return for funding.

stock

​A(n) _____ is a​ brief, carefully constructed statement that outlines the merits of a business opportunity.

elevator pitch

The most common sources of debt financing are commercial banks and​ _______.

SBA guaranteed loan

There are three reasons that most entrepreneurial ventures need to raise money during their early​ life: cash flow​ challenges, capital​ investments, and​ _____.

lengthy product development cycles

Which of the following is NOT an example of a bootstrapping​ method?

A. Coordinate purchases with other businesses

B. Buy new instead of used equipment

C. Share office space or employees with other businesses

D. Hire interns

E. Minimize personal expenses

B. Buy new instead of used equipment

The three most common​ _____ for a new venture are when it goes​ public, finds a​ buyer, or merges with another company.

liquidity events

​______ financing means exchanging partial ownership of a​ firm, usually in the form of​ stock, for funding.

equity

When a venture has high risk with an uncertain return​ (characterized by weak cash​ flow, high​ leverage), its most appropriate source of funding is​ ______.

personal funds, friends and family, and/or bootstrapping

In June​ 2017, Blue Apron made a first sale of its stock to the public. This was Blue​ Apron's ________.

IPO

Wanderberg Machines went on a whirlwind tour that consisted of meetings in 12 key cities where the firm presented its business plan to groups of investors. This tour was a​ ______.

road show

​_______ allows entrepreneurs to raise money in exchange for some type of amenity or reward.

rewards based crowdfunding