1. __________ partners cannot take an active role in the operation of a business, but if the business fails, they stand to lose only what they have invested in the company. a. General b. Limited c. Master d. Insulated Q2. A rule of thumb for valuation of a business is to offer the owner 2.7 times the company's earnings. a. true b. false Q3. __________ franchising is a system in which a franchiser provides franchisees with a complete business system, including a license for the tradename, the products or services to be sold, the physical plant, the methods of operation, a marketing plan, and other necessary business services. a. tradename b. product distribution c. pure (or business format) d. process Q4. To validate an idea is accurate and useful, entrepreneurs may: a. conduct experiments b. run simulations c. test market d. build prototypes e. All of the above. Q5. Which of the following items should be included on a business buyer?s checklist a. Inventory b. Tax returns c. Lawsuits d. All of the above Q6. The balance sheet technique of business valuation is ___________. a. commonly used and recommended. b. commonly used but not recommended. c. not commonly used but recommended. d. neither commonly used nor recommended. Q7. A valid copyright last for: a. the life of the creator. b. 20 years from the date of publication and can be renewed once. c. 50 years. d. the life of the creator plus 50 years. Q8. Studies of the small business failure rate suggest that after six years, about __________ percent of new businesses will have failed. a. 33 b. 49 c. 63 d. 82 Q9. Perhaps the best source of financing the purchase of a business is: a. a commercial bank. b. a venture capital company. c. the seller. d. an initial public offering (IPO). Q10. The aggregation of factors that sets a small business apart from its competitors and gives it a unique position in the market is its: a. mission b. competitive advantage c. SWOT d. Strategy Q11. Inventory is valuable only if it: a. is in good condition. b. is of the highest quality. c. embodies the best technology available. d. is salable. Q12. Which of the following statements concerning entrepreneurship in the United States is true? a. A new business is born every 11 seconds in the United States b. One out of every 12 Americans is actively involved in trying to start a new business. c. A study found that 78 percent of influential Americans believe that entrepreneurship will be the defining trend of this century. d. All of the above Q13. You are using the excess earnings approach to determine the value of a business you have determined to be a "normal risk" business. What "years of profit" figure should you use to estimate the value of the intangible assets? a. 1 to 2 b. 3 to 4 c. 6 to 7 d. 10 to 12 Q14. Most entrepreneurs work ______ hours per week. a. 1-39 b. 40-50 c. 50-60 d. more than 60 Q15. Locating franchised outlets in high-traffic, non-traditional locations such as airports, hospitals, zoos, sports arenas, and others is based on the principle of: a. conversion franchising b. intercept marketing c. master franchising d. piggyback franchising Q16. The primary motivating force behind entrepreneurs is: a. money b. fame. c. achievement. d. recognition. Q17. The unique components of a product's identity that a company uses to create a product's image and to promote it is called its: a. trade costume b. trade dress c. trade wear d. trademark Q18. The primary consideration in negotiating a purchase agreement is to ensure the deal: a. does not jeopardize the future financial health or cash flows of the business. b. provides the buyer a good value and the seller fair compensation. c. guarantees a minimum level of profitability for the business to remain viable. d. provides a money back guarantee and a no-fault cancellation clause. Q19. Which of the following statements about the human brain is true? a. The brain is divided into two asymmetric hemispheres. b. The right side of the brain processes information intuitively, relying heavily on images, and uses kaleidoscopic, lateral thinking. c. The left side of the brain processes information in a step-by-step, logical fashion and uses linear, vertical thinking. d. All of the above. Q20. If a business buyer purchases assets that, unknown to him, have liens against them, who has financial responsibility for them? a. the buyer b. the seller c. the business broker d. none of the above Q21. A paradigm is: a. a tool used for determining the value of a business that is for sale. b. a preconceived idea of how the world should operate. c. a rule for overcoming the barriers to creativity. d. a tool entrepreneurs use to launch successful business ventures. Q22. For years, a small, locally-owned pizza restaurant located near a university in a small town has focused on the university's students, offering them special student discounts and free on-campus delivery. Recently, Domino's Pizza announced its intention to open a new location in the same town so that it can sell pizza to the university students. To the locally-owned pizza restaurant, Domino's decision represents a: a. strength b. weakness c. opportunity d. threat Q23. The 3Rs of rapid prototyping are: a. rough, rapid, and right b. rapid, repeatable, and ready c. realistic, rapid, and reliable d. rough, rapid, and refined Q24. The balanced scorecard: a. gives managers a comprehensive view of an organization's performance from both a financial and an operational perspective. b. operates on the premise that relying on any single measure of a company's performance is dangerous. c. measures a company's performance by viewing it from a financial perspective, a customer perspective, an internal business perspective, and an innovation and learning perspective. d. all of the above. Q25. Only businesses who have registered their product or service with the Library of Congress are allowed to use . a. true b. false Q26. __________ is the ability to develop new ideas and to discover new ways of looking at problems and opportunities. a. Innovation b. Creativity c. Entrepreneurship d. Brainstorming Q27. __________ is the practice of gathering, organizing, and disseminating the collective wisdom and experience of a company's employees for the purpose of strengthening its competitive position. a. strategic management b. differentiation c. knowledge management d. paradigm busting Q28. Each year, more than 500,000 businesses are sold, and __________ percent of those are valued at less than $5 million: a. 20 b. 50 c. 75 d. 90 Q29. Self-employed business owners make up about __________ of the millionaires in the United States. a. one-fourth b. one-half c. two-thirds d. three-fourths Q30. The period of time allowed for the subconscious to reflect on information that has been gathered is called: a. marination b. reflection c. illumination d. incubation Q31. The very abilities that make an entrepreneur successful often lead to managerial ineffectiveness. a. true b. false Q32. __________ are entrepreneurial couples who work together as co-owners of their business. a. Dropouts b. Copreneurs c. Castoffs d. Angels Q33. Franchise experts consider the three most important factors in franchising to be: a. training, advertising, and location. b. management expertise, financial reserves, and customer traffic. c. financing, timing, and location. d. location, location, and location. Q34. Bizcomp found the average sale price for small businesses across the United States was _____ times earnings. a. 15 b. 25 c. 0.05 to 0.10 d. 2.7 Q35. A grant from the U.S. federal government that gives a person an exclusive right to make or sell a product is called a: a. monopoly b. patent c. copyright d. trademark Q36. Which of the following is a way to enhance organizational creativity? a. Expecting creativity b. Expecting and tolerating failure c. Viewing problems as challenges d. All of the above Q37. Which form of ownership has the greatest ability to attract capital? a. sole proprietorship b. partnership c. corporation d. S-corporation Q38. The best method for determining the value of a business is: a. the adjusted balance sheet technique b. the excess earnings method c. the capitalized earnings approach d. the discounted future earnings approach e. There is no "best method" of determining the value of a business. Q39. A plant patent can be obtained: a. for the layout of a new manufacturing facility. b. extends for 20 years from the date of filing. c. only if the plant can be reproduced asexually d. None of the above. Q40. Which of the following factors plays a role in determining the rate of return used to value a business using one of the earnings approaches? a. the basic, risk-free rate of return b. an inflation premium c. the risk allowance for investing in that particular business d. all of the above Q41. In a competitive profile matrix, a factor that represents a major strength to a company would receive a rating of: a. 1 b. 2 c. 3 d. 4 Q42. The key legal issue in the sale of an asset typically is the proper, lawful transfer of _______ from the seller to the buyer. a. good title b. liabilities c. liens d. contracts Q43. The Uniform Franchise Offering Circular (UFOC): a. is not required from franchisers with fewer than 10 franchised outlets. b. must be checked, verified, and approved by the Federal Trade Commission before franchisers can use it. c. is designed to provide franchisees with important information about a franchise and must be given to franchisees before they sign a franchise contract or pay any money to the franchiser. d. All of the above. Q44. The failure rate for franchises is __________ the failure rate for independent businesses. a. lower than b. higher than c. the same as d. cannot be determined Q45. Nearly two years ago, Terry launched a business that has just failed. As a typical entrepreneur, what will Terry most likely do? a. go to work for a major corporation. b. try to learn from his failed venture so that he will not make the same mistake in the future. c. give up on becoming a successful entrepreneur. d. spend the rest of his life wondering what happened to his business. Q46. In most business sales, a. the buyer pays the seller 100 percent of the purchase price at the closing of the deal. b. the seller finances 100 percent of the purchase price over a 30-year time period. c. the buyer makes a down payment up front with the seller financing the remaining 30 to 80 percent of the purchase price over three to ten years. d. the actual price the buyer pays is much more important than the structure and the terms of the deal. Q47. A company whose owner wants to sell to her employees by establishing an employee stock ownership plan (ESOP) should: a. be profitable b. have at least 15 to 20 employees c. have an annual payroll of at least $500,000 d. all of the above Q48. Which of the following should alert a potential franchisee that a franchiser is dishonest? a. Claims that the franchise contract is a standard one and that "you don't need to read it." b. No written documentation to support claims and promises the franchiser makes about the franchise, its operation, and its performance. c. Reluctance to provide a list of existing franchisees to talk to. d. All of the above. Q49. A ________ gives one the right to exclude others from making, using, or selling something. a. trade secret b. trademark c. copyright d. patent Q50. By setting its products apart from those of competitors, Straus Family Creamery, a family business that produces organic, all-natural dairy products, is using which strategy? a. low-cost b. differentiation c. focus d. maintenance