St. John's ISG Program
Business Planning & Entrepreneurship
Review for Final Exam
January 2015
Professor Tepfer

MULTIPLE CHOICE.  Choose the one alternative that best completes the statement or answers the question. 

1) 

Financial management deals with two things—managing a company's finances and: 

1) 

_______ 

A) 

operations management 

B) 

supply chain management 

C) 

production management 

D) 

inventory control 

E) 

raising money 

Answer:  

E 

Page Ref: 255 

Topic:  

Introduction to Financial Management 

2) 

Which of the following was not identified as one of the four main financial objectives of a firm? 

2) 

_______ 

A) 

liquidity 

B) 

efficiency 

C) 

stability 

D) 

profitability 

E) 

timeliness 

Answer:  

E 

Page Ref: 256 

Topic:  

Introduction to Financial Management 

3) 

The four main financial objectives of a firm are: 

3) 

_______ 

A) 

success, strength, liquidity, and profitability 

B) 

control, effectiveness, liquidity, and power 

C) 

profitability, liquidity, efficiency, and stability 

D) 

power, success, efficiency, and effectiveness 

E) 

efficiency, effectiveness, strength, and flexibility 

Answer:  

C 

Page Ref: 256 

Topic:  

Introduction to Financial Management 

4) 

Match the financial objective with its correct definition. 

4) 

_______ 

A) 

efficiency/a company's ability to meet its short-term obligations 

B) 

profitability/how productively a firm utilizes its assets 

C) 

stability/the overall health of the financial structure of the firm, particularly as it relates to its debt-to-equity ratio 

D) 

profitability/the overall health of the financial structure of the firm, particularly as it relates to its debt-to-equity ratio 

E) 

liquidity/a company's ability to make a profit 

Answer:  

C 

Page Ref: 256 

Topic:  

Introduction to Financial Management 

5) 

________ is a company's ability to meet its short-term financial obligations.  

5) 

_______ 

A) 

Profitability 

B) 

Stability 

C) 

Effectiveness 

D) 

Liquidity 

E) 

Efficiency  

Answer:  

D 

Page Ref: 256 

Topic:  

Introduction to Financial Management 

6) 

A company's ability to productively utilize its assets relative to its revenue and its profits is referred to as: 

6) 

_______ 

A) 

stability 

B) 

liquidity 

C) 

effectiveness 

D) 

profitability 

E) 

efficiency 

Answer:  

E 

Page Ref: 256 

Topic:  

Introduction to Financial Management 

7) 

Southwest Airlines uses its assets very productively. Its turnaround time, or the time that its airplanes sit on the ground while they are being loaded and unloaded, is the lowest in the airline industry. In terms of the primary financial objectives of a firm, this attribute is a measure of Southwest's: 

7) 

_______ 

A) 

liquidity 

B) 

efficiency 

C) 

stability 

D) 

profitability 

E) 

effectiveness 

Answer:  

B 

Page Ref: 256 

Topic:  

Introduction to Financial Management 

8) 

________ are projections for future periods based on forecasts and are typically completed for two to three years into the future. 

8) 

_______ 

A) 

Concurrent financial statements 

B) 

Ad-hoc financial statements 

C) 

Pro forma financial statements 

D) 

Chronological financial statements 

E) 

Historical financial statements 

Answer:  

C 

Page Ref: 259 

Topic:  

Financial Statements and Forecasts 

9) 

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

9) 

_______ 

A) 

statement of cash flows 

B) 

efficiency statement 

C) 

balance sheet 

D) 

income statement 

E) 

effectiveness statement 

Answer:  

C 

Page Ref: 261 

Topic:  

Financial Statements and Forecasts 

10) 

Real estate, buildings, equipment and furniture are classified as ________ on a company's balance sheet. 

10) 

______ 

A) 

current assets 

B) 

intermediate term assets 

C) 

fixed assets 

D) 

permanent assets 

E) 

other assets 

Answer:  

C 

Page Ref: 263 

Topic:  

Financial Statements and Forecasts 

11) 

Cash plus items that are readily convertible to cash, such as accounts receivable, marketable securities, and inventories are classified as ________ on a firm's balance sheet.  

11) 

______ 

A) 

current assets 

B) 

intermediate term assets 

C) 

fixed assets 

D) 

other assets 

E) 

temporary assets 

Answer:  

A 

Page Ref: 263 

Topic:  

Financial Statements and Forecasts 

12) 

Which of the following is an example of a long-term liability? 

12) 

______ 

A) 

real estate mortgage 

B) 

owners' equity 

C) 

accrued expenses 

D) 

current portion of real estate mortgage 

E) 

accounts payable 

Answer:  

A 

Page Ref: 263 

Topic:  

Financial Statements and Forecasts 

13) 

When evaluating a balance sheet, the two primary questions are: 

13) 

______ 

A) 

whether a firm is profitable and whether a firm is financially sound 

B) 

whether its costs of sales is going up and whether it is generating excess cash that could be used to pay down debt or pay dividends 

C) 

whether a firm has sufficient short-term assets to cover its short-term debts and whether it is profitable 

D) 

whether a firm is profitable and whether it is generating excess cash that could be used to pay down debt or pay dividends 

E) 

whether a firm has sufficient short-term assets to cover its short-term debts and whether it is financially sound 

Answer:  

E 

Page Ref: 263 

Topic:  

Financial Statements and Forecasts 

14) 

A firm's ________ is its current assets divided by its current debt. 

14) 

______ 

A) 

present share 

B) 

current ratio 

C) 

working capital 

D) 

working share 

E) 

owners' equity 

Answer:  

B 

Page Ref: 263 

Topic:  

Financial Statements and Forecasts 

15) 

According to the textbook, the most practical way to interpret or make sense of a firm's historical financial statements is through: 

15) 

______ 

A) 

profit analysis 

B) 

regression analysis 

C) 

percentage analysis 

D) 

ratio analysis 

E) 

the preparation of pro forma financial statements 

Answer:  

D 

Page Ref: 266 

Topic:  

Financial Statements and Forecasts 

16) 

A firm's pro forma financial statements are similar to its historical financial statements except that: 

16) 

______ 

A) 

they look back rather than forward 

B) 

they look forward rather than back 

C) 

they are required by the SEC in all cases 

D) 

they do not include the statement of cash flows 

E) 

they do not include the income statement 

Answer:  

B 

Page Ref: 271 

Topic:  

Pro Forma Financial Statements 

17) 

According to the textbook, the most important function of the pro forma statement of cash flows is to project whether the firm will have sufficient: 

17) 

______ 

A) 

short-term assets to cover its short-term liabilities 

B) 

income to exceed industry norms 

C) 

income to meet its payroll on a weekly or monthly basis 

D) 

cash to meet its needs 

E) 

inventory to meet its sales and production forecasts 

Answer:  

D 

Page Ref: 277 

Topic:  

Pro Forma Financial Statements 

18) 

Jenny Templeton is preparing to launch a home security firm. The team of people that will launch Jenny's firm are as follows: Jenny (CEO), Brent (VP-Finance), Carrie (VP-Sales), a four-person Board of Directors, a five-person Board of Advisors, and Jenny's primary investor, who will assume an advisory role. The group of people that will launch Jenny's firm is called its: 

18) 

______ 

A) 

new venture panel 

B) 

startup squad 

C) 

new venture team 

D) 

startup troop 

E) 

startup cadre 

Answer:  

C 

Page Ref: 290 

Topic:  

Creating a New Venture Team 

19) 

The fact that companies often falter because the people who start the firms can't adjust quickly enough to their new roles and because the firm lacks a "track record" with outside buyers and sellers, is referred to as the: 

19) 

______ 

A) 

liability of newness 

B) 

liability of preparedness 

C) 

burden of novelty 

D) 

millstone of innovation 

E) 

burden of freshness 

Answer:  

A 

Page Ref: 291 

Topic:  

Creating a New Venture Team 

20) 

Which of the following was not identified in the textbook as an element of a new venture team? 

20) 

______ 

A) 

key employees 

B) 

board of advisors 

C) 

management team 

D) 

suppliers and vendors 

E) 

lenders and investors 

Answer:  

D 

Page Ref: 292 

Topic:  

Creating a New Venture Team 

21) 

The members of heterogeneous teams are: 

21) 

______ 

A) 

diverse in terms of their abilities, but very similar in terms of their experiences 

B) 

similar in terms of their abilities and experiences 

C) 

sometimes diverse in terms of their abilities and experiences and sometimes similar along the same dimensions 

D) 

diverse in terms of their abilities and experiences 

E) 

diverse in terms of their experiences, but very similar in terms of their abilities 

Answer:  

D 

Page Ref: 294 

Topic:  

Creating a New Venture Team 

22) 

A(n) ________ is a chart that depicts the most important skills that are needed in a new venture and where skills gaps exist. 

22) 

______ 

A) 

talent profile 

B) 

abilities summary 

C) 

skills profile 

D) 

expertise report 

E) 

talent summary 

Answer:  

C 

Page Ref: 296 

Topic:  

Creating a New Venture Team 

23) 

A board of directors is typically made up of both: 

23) 

______ 

A) 

experienced and inexperienced directors 

B) 

paid and unpaid directors 

C) 

novice and expert directors 

D) 

inside and outside directors 

E) 

junior and senior directors 

Answer:  

D 

Page Ref: 300 

Topic:  

Creating a New Venture Team 

24) 

A board of directors has three formal responsibilities: 

24) 

______ 

A) 

appoint the officers of the firm, declare dividends, and oversee the affairs of the corporation 

B) 

write the firm's strategic plan, declare dividends, and conduct the annual meeting 

C) 

provide funding to the firm, write the firm's strategic plan, and submit the firm's annual report to the Securities & Exchange Commission 

D) 

appoint the officers of the firm, conduct the annual meeting, and submit the firm's annual report to the Securities & Exchange Commission 

E) 

periodically update the firm's business plan, declare dividends, and write the firm's marketing plan 

Answer:  

A 

Page Ref: 300 

Topic:  

Creating a New Venture Team 

25) 

A(n) ________ is a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis. 

25) 

______ 

A) 

suggestion panel 

B) 

consultation board 

C) 

counseling panel 

D) 

advisory board 

E) 

idea panel 

Answer:  

D 

Page Ref: 302 

Topic:  

Rounding Out the Team: The Role of Professional Advisers 

26) 

According to the textbook, many entrepreneurs go about the task of raising capital haphazardly because: 

26) 

______ 

A) 

they are intimidated by the process and they are unsure of how much money they need 

B) 

they are focused on the nuts and bolts of starting their business 

C) 

they haven't completed a feasibility analysis or business plan 

D) 

they lack experience in this area and because they don't know much about their choices 

E) 

they are uncomfortable talking about money and they haven't written a business plan 

Answer:  

D 

Page Ref: 321 

Topic:  

The Importance of Getting Financing or Funding 

27) 

The three reasons startups need funding are: 

27) 

______ 

A) 

cash flow challenges, capital investments, and lengthy product development cycles 

B) 

attorney fees, capital investments, and marketing research 

C) 

business research, cash flow challenges, and costs associated with building a brand 

D) 

bonuses for members of the new venture team, marketing research, and personnel costs 

E) 

bonuses for members of the new venture team, attorney fees, and lengthy product development cycles 

Answer:  

A 

Page Ref: 321 

Topic:  

The Importance of Getting Financing or Funding 

28) 

In startup firms, inventory must be purchased, employees must be trained and paid, and advertising must be paid for before cash is generated from sales. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example? 

28) 

______ 

A) 

lengthy product development cycles 

B) 

cash flow challenges 

C) 

marketing costs 

D) 

personnel costs 

E) 

capital investments 

Answer:  

B 

Page Ref: 321 

Topic:  

The Importance of Getting Financing or Funding 

29) 

For startup firms, the cost of buying real estate, building facilities, and purchasing equipment often exceeds the firm's ability to provide funds for those needs on its own. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example? 

29) 

______ 

A) 

capital investments 

B) 

cash flow challenges 

C) 

costs associated with building a brand 

D) 

personnel costs 

E) 

lengthy product development cycles 

Answer:  

A 

Page Ref: 322 

Topic:  

The Importance of Getting Financing or Funding 

30) 

Peter Simmons owns an electronic games company. Although Peter's game designers and programmers are very good, it takes 2-3 years to develop a good electronic game. This example illustrates the need for funding or financing referred to as: 

30) 

______ 

A) 

costs associated with building a brand 

B) 

marketing costs 

C) 

cash flow challenges 

D) 

lengthy product development cycles 

E) 

personnel costs 

Answer:  

D 

Page Ref: 322 

Topic:  

The Importance of Getting Financing or Funding 

31) 

According to our textbook, the seed money that gets a company off the ground typically comes from: 

31) 

______ 

A) 

the founders of the firm 

B) 

venture capitalists 

C) 

governmental agencies 

D) 

angel investors 

E) 

commercial banks 

Answer:  

A 

Page Ref: 323 

Topic:  

The Importance of Getting Financing or Funding 

32) 

Jason Graham's startup, which is in the electronics industry, was launched on January 1, 2009. However, prior to its formal launch, Jason spent many hours working on his business, particularly during the feasibility analysis stage. The time and effort that entrepreneurs put into their venture, that can't be easily measured from a financial point of view, is referred to as: 

32) 

______ 

A) 

intangible equity 

B) 

sweat equity 

C) 

worry equity 

D) 

effort equity 

E) 

fret equity 

Answer:  

B 

Page Ref: 323 

Topic:  

The Importance of Getting Financing or Funding 

33) 

According to the textbook, beyond their own funds, the second source of funds for many new ventures is: 

33) 

______ 

A) 

government grants 

B) 

friends and family 

C) 

business angels 

D) 

venture capital 

E) 

banks 

Answer:  

B 

Page Ref: 323 

Topic:  

The Importance of Getting Financing or Funding 

34) 

Amy Clark just opened a soup and salad restaurant near Golden Gate Park in San Francisco. Rather than borrow money or raise funds from investors, Amy used her creativity and ingenuity and figured out how to get her business up and running without the need for external funding. Amy is utilizing a technique referred to as: 

34) 

______ 

A) 

bootstrapping 

B) 

networking 

C) 

scrounging 

D) 

prospecting 

E) 

reaching 

Answer:  

A 

Page Ref: 324 

Topic:  

The Importance of Getting Financing or Funding 

35) 

Equity financing (or funding) means: 

35) 

______ 

A) 

exchanging partial ownership in a firm, usually in the form of stock, for funding 

B) 

getting a grant or outright gift 

C) 

getting a loan 

D) 

getting a loan guarantee 

E) 

getting a lease 

Answer:  

A 

Page Ref: 325 

Topic:  

The Importance of Getting Financing or Funding 

36) 

Which of the following set of characteristics places a startup in the strongest position to apply for equity funding? 

36) 

______ 

A) 

strong cash flow, low leverage, audited financials, good management, healthy balance sheet 

B) 

unique business idea, strong cash flow, low-to-moderate growth, broad market 

C) 

strong cash flow, high leverage, low-to-moderate growth, unproven management 

D) 

unique business idea, high growth, niche market, proven management 

E) 

weak cash flow, high leverage, low-to-moderate growth, unproven management 

Answer:  

D 

Page Ref: 326 

Topic:  

Sources of Equity Funding 

37) 

Historically, commercial banks: 

37) 

______ 

A) 

have been a good source of funds for service firm startups but not for manufacturing firm startups 

B) 

have not been a good source of funds for startup firms 

C) 

have not funded startup firms at all 

D) 

have been a good source of funds for manufacturing firm startups but not for service firm startups 

E) 

have been a good source of funds for startup firms 

Answer:  

B 

Page Ref: 337 

Topic:  

Sources of Debt Financing 

38) 

There are two major advantages of getting a loan versus investment capital: 

38) 

______ 

A) 

banks are reliable sources of funding for startups and lenders typically take an active interest in borrowers 

B) 

banks are reliable sources of funding for startups and interest payments are tax deductible 

C) 

no ownership in the firm is surrendered and interest payments are tax deductible 

D) 

the money doesn't have to be paid back and no ownership in the firm is surrendered 

E) 

the money doesn't have to be paid back and lenders typically take an active interest in their borrowers 

Answer:  

C 

Page Ref: 338 

Topic:  

Sources of Debt Financing 

39) 

Andy Sanders owns a sporting goods store that appeals to hunters and fishermen. The market that Andy is trying to appeal to is called his: 

39) 

______ 

A) 

objective market 

B) 

intention market 

C) 

focal market 

D) 

critical market 

E) 

target market 

Answer:  

E 

Page Ref: 359 

Topic:  

Selecting a Market and Establishing a Position 

40) 

The first step in selecting a target market is to study the industry in which the firm intends to compete and determine the different potential target markets in that industry. This process is called: 

40) 

______ 

A) 

market segmentation 

B) 

market positioning 

C) 

market splitting 

D) 

market targeting 

E) 

market subdividing 

Answer:  

A 

Page Ref: 359 

Topic:  

Selecting a Market and Establishing a Position 

41) 

Once a firm has segmented the market, the next step is to: 

41) 

______ 

A) 

select a critical market 

B) 

select a target market 

C) 

decide on a position within the segment 

D) 

immediately decide on the "4Ps" of the marketing strategy 

E) 

select a focal market 

Answer:  

B 

Page Ref: 359 

Topic:  

Selecting a Market and Establishing a Position 

42) 

A ________ is a place within a market segment that represents a narrower group of customers with similar interests. 

42) 

______ 

A) 

spot market 

B) 

position market 

C) 

gap market 

D) 

niche market 

E) 

slot market 

Answer:  

D 

Page Ref: 360 

Topic:  

Selecting a Market and Establishing a Position 

43) 

A ________ illustrates a firm's positioning strategy relative to its major rivals. 

43) 

______ 

A) 

positioning analysis grid 

B) 

positioning plot 

C) 

product attribute map 

D) 

competitive analysis grid 

E) 

positioning diagram  

Answer:  

C 

Page Ref: 361 

Topic:  

Selecting a Market and Establishing a Position 

44) 

________ is a term that denotes the set of assets and liabilities that are linked to a brand and enable it to raise a firm's valuation. 

44) 

______ 

A) 

Trade name strength 

B) 

Brand equity 

C) 

Trademark equity 

D) 

Trademark value-added 

E) 

Logo equity 

Answer:  

B 

Page Ref: 365 

Topic:  

Branding 

45) 

Which of the following is not one of the four elements that constitute a firm's marketing mix? 

45) 

______ 

A) 

product 

B) 

promotion 

C) 

price 

D) 

passion 

E) 

place (or distribution) 

Answer:  

D 

Page Ref: 367 

Topic:  

The Four Ps of Marketing for New Ventures 

46) 

In ________, the list price of an item is determined by adding a markup percentage to a product's cost. 

46) 

______ 

A) 

competitive-based pricing 

B) 

compliance-based pricing 

C) 

cost-based pricing 

D) 

value-based pricing 

E) 

economic-based pricing 

Answer:  

C 

Page Ref: 369 

Topic:  

The Four Ps of Marketing for New Ventures 

47) 

In ________, the list price is determined by estimating what consumers are willing to pay for a product and then backing off a bit to provide a cushion. 

47) 

______ 

A) 

cost-based pricing 

B) 

tactical pricing 

C) 

value-based pricing 

D) 

economic-based pricing 

E) 

strategic pricing 

Answer:  

C 

Page Ref: 369 

Topic:  

The Four Ps of Marketing for New Ventures 

48) 

Karen Simon recently purchased a digital camera. She considered three cameras, a Kodak that was priced at $139.00, a Panasonic priced at $189.00, and a Nikon priced at $229.00. Karen couldn't tell much difference between the cameras, so she bought the Nikon, figuring that because it was the most expensive of the three, it must be the best. According to the textbook, Karen was making a: 

48) 

______ 

A) 

price-quality attribution 

B) 

price-merit attribution 

C) 

cost-worth attribution 

D) 

price-worth acknowledgement 

E) 

cost-value acknowledgement 

Answer:  

A 

Page Ref: 369 

Topic:  

The Four Ps of Marketing for New Ventures 

49) 

A(n) ________ is a route a product takes from the place it is made to the customer who is the end user. 

49) 

______ 

A) 

allotment channel 

B) 

distribution channel 

C) 

trade channel 

D) 

product channel 

E) 

promotion channel 

Answer:  

B 

Page Ref: 377 

Topic:  

The Four Ps of Marketing for New Ventures 

50) 

Which of the following is an example of intellectual property? 

50) 

______ 

A) 

AirTran's fleet of planes 

B) 

Nike's swoosh logo 

C) 

Microsoft's headquarters in Redmond, Washington 

D) 

the computer that you use 

E) 

the trucks that deliver White Wave soymilk to grocery stores 

Answer:  

B 

Page Ref: 394 

Topic:  

The Importance of Intellectual Property 

51) 

Which of the following is not an example of intellectual property? 

51) 

______ 

A) 

Google's trademark 

B) 

Microsoft's Windows operating system 

C) 

the Internet domain name www.nytimes.com 

D) 

a computer mouse 

E) 

Proactiv's formula for acne medication 

Answer:  

D 

Page Ref: 395 

Topic:  

The Importance of Intellectual Property 

52) 

Which of the following are the four key forms of intellectual property protection? 

52) 

______ 

A) 

patents, official documents, copyrights, inventions 

B) 

discoveries, covenants, trademarks, patents 

C) 

convents, inventions, opportunities, and copyrights 

D) 

patents, copyrights, trademarks, and trade secrets 

E) 

discoveries, Internet domain names, innovations, trademarks 

Answer:  

D 

Page Ref: 399 

Topic:  

The Importance of Intellectual Property 

53) 

A grant from the federal government conferring the rights to exclude others from making, selling, or using an invention for a specific period of time is referred to as a(n): 

53) 

______ 

A) 

innovation 

B) 

trademark 

C) 

idea secret 

D) 

patent 

E) 

copyright 

Answer:  

D 

Page Ref: 399 

Topic:  

Patents 

54) 

Which of the following selections correctly identifies the three types of patents? 

54) 

______ 

A) 

manufacturing patents, process patents, and plant patents 

B) 

explicit patents, implicit patents, and plant patents 

C) 

manufacturing patents, service patents, and other patents 

D) 

utility patents, design patents, and plant patents 

E) 

usefulness patents, purpose patents, and genetic patents 

Answer:  

D 

Page Ref: 401 

Topic:  

Patents 

55) 

________ patents are the most common type of patent and cover what we generally think of as new inventions. 

55) 

______ 

A) 

Method 

B) 

Value 

C) 

Design 

D) 

Product 

E) 

Utility 

Answer:  

E 

Page Ref: 401 

Topic:  

Patents 

56) 

There are three basic requirements for a patent to be granted. The subject of the patent application must be: 

56) 

______ 

A) 

useful, difficult to copy, and novel in relation to prior arts in the field 

B) 

rare, difficult to copy, and not obvious to a person of ordinary skill in the field 

C) 

useful, scientific, and novel in relation to prior arts in the field 

D) 

based on cutting edge science or technology, not obvious to a person of ordinary skill in the field, and rare 

E) 

useful, novel in relation to prior arts in the field, and not obvious to a person of ordinary skill in the field 

Answer:  

E 

Page Ref: 401 

Topic:  

Patents 

57) 

Amazon.com's one-click ordering system, Priceline.com's "name-your-price" business model and Netflix's method for allowing customers to set up a rental list of movies they want mailed to them are examples of: 

57) 

______ 

A) 

copyright extension patents 

B) 

utility patents 

C) 

business process protection patents 

D) 

business method patents 

E) 

trademark extension patents 

Answer:  

D 

Page Ref: 401 

Topic:  

Patents 

58) 

________ takes place when one party engages in the unauthorized use of another party's patent. 

58) 

______ 

A) 

Patent violation 

B) 

Patent infringement 

C) 

Patent encroachment 

D) 

Patent breach 

E) 

Patent infraction 

Answer:  

B 

Page Ref: 407 

Topic:  

Patents 

59) 

A form of intellectual property protection that grants to the owner of a work of authorship the legal right to determine how the work is used and to obtain the economic benefits from the work is referred to as a(n): 

59) 

______ 

A) 

patent 

B) 

brand 

C) 

copyright 

D) 

trade secret 

E) 

assurance document 

Answer:  

C 

Page Ref: 412 

Topic:  

Copyrights 

60) 

If a local band wrote their own rendition of a Celine Dion song, the band could try to copyright their rendition of the song as a(n): 

60) 

______ 

A) 

imitative work 

B) 

offshoot work 

C) 

supplemental work 

D) 

derivative work 

E) 

subsequent work 

Answer:  

D 

Page Ref: 413 

Topic:  

Copyrights 

61) 

Copyright law protects any work of authorship: 

61) 

______ 

A) 

90 days after it is approved by the U.S. Copyright Office 

B) 

the moment it assumes a tangible form 

C) 

as soon as it is approved by the U.S. Copyright Office 

D) 

one year after it assumes a tangible form 

E) 

30 days after it assumes a tangible form 

Answer:  

B 

Page Ref: 413 

Topic:  

Copyrights 

62) 

A ________ is any formula, pattern, physical device, idea, process, or other information that provides the owner of the information with a competitive advantage in the marketplace. 

62) 

______ 

A) 

patent 

B) 

trade secret 

C) 

trademark 

D) 

copyright 

E) 

certification mark 

Answer:  

B 

Page Ref: 416 

Topic:  

Trade Secrets 

63) 

According to the textbook, there are three important things that a business can do to prepare for growth: 

63) 

______ 

A) 

plan for growth, adopt a growth-oriented business model, and stay committed to a core strategy 

B) 

develop a viral marketing campaign, stay committed to a core strategy, and adopt a growth-oriented business model 

C) 

develop business partnerships, diversify beyond the company's core strategy, and appreciate the nature of business growth 

D) 

appreciate the nature of business growth, stay committed to a core strategy, and plan for growth 

E) 

retain or hire one or more business growth consultants, diversify beyond the company's core strategy, and plan for growth  

Answer:  

D 

Page Ref: 433 

Topic:  

Preparing for Growth 

64) 

According to the textbook, the businesses that have the potential to grow the fastest over a sustained period of time are ones that: 

64) 

______ 

A) 

solve a significant problem or have a major impact on their customers' productivity or lives 

B) 

take advantage of environmental trends and are cost leaders 

C) 

solve a significant problem or sell high quality products 

D) 

are cost leaders and promote themselves aggressively 

E) 

have a major impact on their customers' lives and sell high quality products 

Answer:  

A 

Page Ref: 433 

Topic:  

Preparing for Growth 

65) 

________ are(is) generated when increasing production lowers the average cost of each unit produced. 

65) 

______ 

A) 

Economies of scale 

B) 

Market leadership 

C) 

Economies of scope 

D) 

Business scalability 

E) 

Reaching for scale 

Answer:  

A 

Page Ref: 440 

Topic:  

Preparing for Growth 

66) 

________ costs are costs that a company incurs whether it sells something or not. 

66) 

______ 

A) 

Fixed 

B) 

Variable 

C) 

Regular 

D) 

Steady 

E) 

Consistent 

Answer:  

A 

Page Ref: 440 

Topic:  

Preparing for Growth 

67) 

Jeremy Rhodes leases a manufacturing facility that produces computer keyboards. Jeremy tries to keep production high, because his lease payments are $6,200 a month, regardless of whether he produces one computer keyboard a month or 10,000. Jeremy's lease payment is a: 

67) 

______ 

A) 

marginal cost 

B) 

tangible cost 

C) 

secondary cost 

D) 

fixed cost 

E) 

variable cost 

Answer:  

D 

Page Ref: 440 

Topic:  

Preparing for Growth 

68) 

Tiffany Smith owns a barbecue restaurant. One expense that Tiffany watches closely is the cost of propane, which she uses to heat her ovens. The more barbecue food Tiffany sells, the more it costs her for propane on a monthly basis. For Tiffany, the cost of propane is a(n): 

68) 

______ 

A) 

resultant cost 

B) 

fixed cost 

C) 

variable cost 

D) 

secondary cost 

E) 

irregular cost 

Answer:  

C 

Page Ref: 440 

Topic:  

Preparing for Growth 

69) 

Valarie owns a company that makes specialized components for the auto industry. Her most important customer is a company that is growing at a rate of 25% per year. Valarie is working hard to grow her firm, because she knows that unless her company continually grows it will not be able to keep pace with the growth of its most important customer. This examples illustrates the reason for growth referred to as: 

69) 

______ 

A) 

executing a scalable business model 

B) 

influence, power, and survivability 

C) 

need to accommodate the growth of key customer 

D) 

market leadership 

E) 

capturing economies of scope 

Answer:  

C 

Page Ref: 441 

Topic:  

Preparing for Growth 

70) 

The main challenges for a business in the introduction stage of the organizational life cycle is: 

70) 

______ 

A) 

making sure the initial product or service is right and starting to lay the groundwork for building a larger organization 

B) 

beginning the process of transitioning the owner from a hands-on supervisor to a more managerial role and developing business partnerships  

C) 

developing business partnerships and making sure the initial product or service is right 

D) 

developing systems and procedures and beginning the process of transitioning the owner from a hands-on supervisor to a more managerial role 

E) 

determining whether the owner of the business and the current management team is capable of taking the business further and developing systems and procedures 

Answer:  

A 

Page Ref: 442 

Topic:  

Growth-Related Firm Attributes 

71) 

When a firm's managerial resources are insufficient to take advantage of its new product and s
ervice opportunities, the subsequent bottleneck is referred to as the: 

71) 

______ 

A) 

entrepreneurial aptitude problem 

B) 

business aptitude problem 

C) 

commercial capacity problem 

D) 

business capacity problem 

E) 

managerial capacity problem 

Answer:  

E 

Page Ref: 445 

Topic:  

Challenges of Growth 

72) 

________ means that as the number of employees a firm needs increases, it becomes increasingly difficult for it to find the right employees, place them in appropriate positions, and provide adequate supervision. 

72) 

______ 

A) 

Adverse selection 

B) 

Difficult hazard 

C) 

Moral hazard 

D) 

Moral selection 

E) 

Adverse hazard 

Answer:  

A 

Page Ref: 445 

Topic:  

Challenges of Growth 

73) 

________ means that as a firm grows and adds personnel, the new hires typically do not have the same ownership incentives as the original founders, so the new hires may not be as motivated as the founders to put in long hours or may even try to avoid hard work. 

73) 

______ 

A) 

Difficult selection 

B) 

Ethical selection 

C) 

Productivity hazard 

D) 

Adverse hazard 

E) 

Moral hazard 

Answer:  

E 

Page Ref: 445 

Topic:  

Managing Growth 

74) 

Abby Covin owns a firm that manufacturers and sells high-end furniture and home accessories. She is currently trying to grow her firm by developing new products. Abby is pursuing a(n) ________ growth strategy. 

74) 

______ 

A) 

inward 

B) 

internal 

C) 

domestic 

D) 

external 

E) 

outside 

Answer:  

B 

Page Ref: 463 

Topic:  

Internal Growth Strategies 

75) 

Which of the following is an example of an internal growth strategy? 

75) 

______ 

A) 

licensing 

B) 

acquisition 

C) 

new product development 

D) 

strategic alliance 

E) 

merger 

Answer:  

C 

Page Ref: 463 

Topic:  

Internal Growth Strategies 

76) 

Which of the following is an example of an external growth strategy? 

76) 

______ 

A) 

improving an existing product or service 

B) 

licensing 

C) 

geographic expansion 

D) 

increasing the market penetration of an existing product or service 

E) 

extending product lines 

Answer:  

B 

Page Ref: 463 

Topic:  

Internal Growth Strategies 

77) 

A(n) ________ seeks to increase the sales of a product or service through greater marketing efforts or through increased production capacity and efficiency. 

77) 

______ 

A) 

geographic expansion strategy 

B) 

market penetration strategy 

C) 

improving an existing product or service strategy 

D) 

strategic alliance strategy 

E) 

product line extension strategy 

Answer:  

B 

Page Ref: 467 

Topic:  

Internal Growth Strategies 

78) 

Ted Donovan owns a store that sells all-terrain vehicles (ATVs). In the past Ted just sold one version of each of the ATVs he sold in his showroom, but to increase sales, Ted now sells a low-end, a medium-priced, and a high-end version of each of the ATVs he sells. Ted's new strategy is called a(n): 

78) 

______ 

A) 

geographic expansion strategy 

B) 

product line extension strategy 

C) 

joint venture strategy 

D) 

market penetration strategy 

E) 

improving an existing product or service strategy 

Answer:  

B 

Page Ref: 468 

Topic:  

Internal Growth Strategies 

79) 

________ growth strategies rely on establishing relationships with third parties, such as mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising. 

79) 

______ 

A) 

External 

B) 

Peripheral 

C) 

Distant 

D) 

Outside 

E) 

Domestic 

Answer:  

A 

Page Ref: 472 

Topic:  

External Growth Strategies 

80) 

Which of the following is an example of an external growth strategy? 

80) 

______ 

A) 

strategic alliance 

B) 

geographic expansion 

C) 

product line extension 

D) 

new product development 

E) 

market penetration 

Answer:  

A 

Page Ref: 472 

Topic:  

External Growth Strategies 

81) 

Which of the following is an advantage of growth by means of external growth strategies? 

81) 

______ 

A) 

antitrust implications 

B) 

loss of organizational flexibility 

C) 

clash of corporate cultures 

D) 

increased business complexity 

E) 

economies of scale 

Answer:  

E 

Page Ref: 473 

Topic:  

External Growth Strategies 

82) 

The granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions is referred to as: 

82) 

______ 

A) 

licensing 

B) 

confirming 

C) 

certifying 

D) 

verifying 

E) 

endorsing 

Answer:  

A 

Page Ref: 477 

Topic:  

External Growth Strategies 

83) 

A ________ is a partnership between two or more firms that is developed to achieve a specific goal, and has no joint ownership involved. 

83) 

______ 

A) 

joint alliances 

B) 

joint venture 

C) 

merger 

D) 

strategic alliance 

E) 

licensing agreement 

Answer:  

D 

Page Ref: 479 

Topic:  

External Growth Strategies 

84) 

Which of the following was identified in the textbook as a disadvantage of participating in strategic alliances and joint ventures? 

84) 

______ 

A) 

economies of scale 

B) 

partners' cultures may clash 

C) 

gain access to a foreign market 

D) 

learning 

E) 

risk and cost sharing 

Answer:  

B 

Page Ref: 479 

Topic:  

External Growth Strategies 

85) 

________ is a form of business ownership in which a firm that already has a successful product or service licenses its trademark and method of doing business to other business in exchange for an initial franchise fee and an ongoing royalty. 

85) 

______ 

A) 

Contracting 

B) 

Licensing 

C) 

Joint Venturing 

D) 

Subcontracting 

E) 

Franchising 

Answer:  

E 

Page Ref: 497 

Topic:  

What Is Franchising, and How Does It Work? 

86) 

There are two distinctly different types of franchise systems: 

86) 

______ 

A) 

product trademark franchise, business format franchise 

B) 

product trademark franchise, business arrangement franchise 

C) 

business design franchise, product improvement franchise 

D) 

product plus franchise, business format franchise 

E) 

product extension franchise, business design franchise 

Answer:  

A 

Page Ref: 498 

Topic:  

What Is Franchising, and How Does It Work? 

87) 

Betty Collins has been a Ford dealer for the past 20 years. Betty owns a: 

87) 

______ 

A) 

product plus franchise 

B) 

product and trademark franchise 

C) 

business design franchise 

D) 

business format franchise 

E) 

product and business format franchise 

Answer:  

B 

Page Ref: 498 

Topic:  

What Is Franchising, and How Does It Work? 

88) 

Clark Jensen recently opened a Planet Smoothie franchise. So far, he is very satisfied with Planet Smoothie because in exchange for an initial franchise fee and an ongoing royalty payment, Planet Smoothie has provided Clark a formula for doing business along with training, advertising, and other forms of assistance. Clark purchased a ________ franchise. 

88) 

______ 

A) 

business extension 

B) 

business format 

C) 

sales extension 

D) 

product and trademark 

E) 

formula driven 

Answer:  

B 

Page Ref: 499 

Topic:  

What Is Franchising, and How Does It Work? 

89) 

Phil Atkinson recently entered into an agreement with Sonic to open seven Sonic Fast-Food Restaurant franchises. According to the agreement that Phil entered into, he has the right to open up to seven Sonic Fast-Food Restaurant franchises within the city limits of Portland, Oregon. Phil has entered into a(n): 

89) 

______ 

A) 

locality franchise agreement 

B) 

neighborhood franchise agreement 

C) 

district franchise agreement 

D) 

area franchise agreement 

E) 

individual franchise agreement 

Answer:  

D 

Page Ref: 499 

Topic:  

What Is Franchising, and How Does It Work? 

90) 

Franchising is appropriate when: 

90) 

______ 

A) 

a firm has a weak trademark, it is well-funded, and it has a desire to grow 

B) 

a firm has a desire to grow, it has a well-designed business method, and it is well funded 

C) 

a firm has a strong trademark, a desire to grow, and a well-designed business method 

D) 

a firm's business methods are not polished, it has a desire to grow, and it is trying to commercialize a technology product 

E) 

a firm is trying to commercialize a technology product, it is well-funded, and it has a desire to grow 

Answer:  

C 

Page Ref: 502 

Topic:  

Establishing a Franchise System 

91) 

In the majority of cases, a franchisee pays the franchisor a royalty based on: 

91) 

______ 

A) 

a predetermined fixed weekly or monthly amount 

B) 

weekly or monthly gross income 

C) 

weekly or monthly net income 

D) 

the size of the franchise outlet 

E) 

the age of the franchise outlet 

Answer:  

B 

Page Ref: 511 

Topic:  

Buying a Franchise 

92) 

There are two primary advantages to buying a franchise over other forms of business ownership. First, franchising provides an entrepreneur the ability to own a business using tested and refined business methods, and second: 

92) 

______ 

A) 

franchising is almost a sure way of making a profit 

B) 

franchisors typically encourage creativity on the part of franchisees 

C) 

a franchise agreement is typically easy to exit if expectations aren't met 

D) 

the franchisor typically provides training, technical expertise, and other forms of support 

E) 

franchise organizations are consistently more profitable than non- franchise organizations in the same industry 

Answer:  

D 

Page Ref: 513 

Topic:  

Buying a Franchise 

TRUE/FALSE.  Write 'T' if the statement is true and 'F' if the statement is false. 

93) 

Financial management deals with two things: raising money and managing a company's finances in a way that achieves the highest rate of return. 

93) 

______ 

Answer:  

True 

False 

Page Ref: 255 

Topic:  

Introduction to Financial Management 

94) 

If a firm's debt-to-equity ratio gets too high, it may have trouble meeting its obligations and securing the level of financing needed to fuel its growth. 

94) 

______ 

Answer:  

True 

False 

Page Ref: 256 

Topic:  

Introduction to Financial Management 

95) 

A new venture team is the group of founders, key employees, and advisers that move a new venture from an idea to a fully functioning firm. 

95) 

______ 

Answer:  

True 

False 

Page Ref: 290 

Topic:  

Creating a New Venture Team 

96) 

It is generally believed that new ventures started by an individual have an advantage over those started by a team. 

96) 

______ 

Answer:  

True 

False 

Page Ref: 293 

Topic:  

Creating a New Venture Team 

97) 

Typically, the seed money that gets a company off the ground comes from a commercial bank. 

97) 

______ 

Answer:  

True 

False 

Page Ref: 322 

Topic:  

The Importance of Getting Funding 

98) 

Debt financing means exchanging partial ownership in a firm in exchange for cash. 

98) 

______ 

Answer:  

True 

False 

Page Ref: 329 

Topic:  

The Importance of Getting Funding 

99) 

Venture capitalists are individuals who invest their personal capital directly in startups. 

99) 

______ 

Answer:  

True 

False 

Page Ref: 330 

Topic:  

Sources of Equity Funding 

100) 

A firm's "position" is concerned with how it is situated relative to its rivals. 

100) 

_____ 

Answer:  

True 

False 

Page Ref: 361 

Topic:  

Selecting a Market and Establishing a Position 

101) 

A firm's marketing mix is the assortment of products and services that it sells. 

101) 

_____ 

Answer:  

True 

False 

Page Ref: 367 

Topic:  

The Four Ps of Marketing for New Ventures 

102) 

Intellectual property is any product of human intellect that is intangible but has value in the marketplace. 

102) 

_____ 

Answer:  

True 

False 

Page Ref: 395 

Topic:  

The Importance of Intellectual Property 

103) 

The owner of a patent is granted a legal monopoly for an unlimited period of time. 

103) 

_____ 

Answer:  

True 

False 

Page Ref: 401 

Topic:  

Patents 

104) 

Computer software is not covered by copyright law. 

104) 

_____ 

Answer:  

True 

False 

Page Ref: 413 

Topic:  

Copyrights 

105) 

Sustained growth is defined as growth in both revenues and employees over an extended period of time. 

105) 

_____ 

Answer:  

True 

False 

Page Ref: 432 

Topic:  

Preparing for Growth 

106) 

All businesses have the potential to be aggressive growth firms. 

106) 

_____ 

Answer:  

True 

False 

Page Ref: 433 

Topic:  

Preparing for Growth 

107) 

Sometimes firms are compelled to grow to accommodate the growth of a key customer. 

107) 

_____ 

Answer:  

True 

False 

Page Ref: 441 

Topic:  

Preparing for Growth 

108) 

One of the most difficult challenges that businesses encounter as they grow is maintaining high levels of quality and customer service. 

108) 

_____ 

Answer:  

True 

False 

Page Ref: 448 

Topic:  

Challenges of Growth 

109) 

An acquisition is the pooling of interests to combine two or more firms into one. A merger is the outright purchase of one firm by another. 

109) 

_____ 

Answer:  

True 

False 

Page Ref: 474 

Topic:  

External Growth Strategies 

110) 

A business format franchise typically connects a single manufacturer with a network of dealers or distributors. 

110) 

_____ 

Answer:  

True 

False 

Page Ref: 499 

Topic:  

What Is Franchising, and How Does It Work? 

111) 

The business format franchise is a more popular approach to franchising than the product and trademark franchise. 

111) 

_____ 

Answer:  

True 

False 

Page Ref: 499 

Topic:  

What Is Franchising, and How Does It Work? 

112) 

Business format franchises typically allow franchisees substantial flexibility in how they run their individual franchise units. 

112) 

_____ 

Answer:  

True 

False 

Page Ref: 499 

Topic:  

What Is Franchising, and How Does It Work? 

113) 

In the majority of cases, a franchisee pays a royalty based on a percentage of weekly or monthly net income. 

113) 

_____ 

Answer:  

True 

False 

Page Ref: 511 

Topic:  

Buying a Franchise 

114) 

Franchisees are often required to pay into a national or regional advertising fund, even if the advertisements are directed at goals other than promoting the franchisor's product or service. 

114) 

_____ 

Answer:  

True 

False 

Page Ref: 511 

Topic:  

Buying a Franchise