Exam 2 - Entrepreneurship and Business
25 Questions, plus 1 Bonus Question 1. ( _ ) pricing policy is used to introduce a relatively low-priced good into a market where no "elite segment" exists. a. Penetration b. Skimming c. Discount d. Sliding-down-the-demand-curve 2. The normal fee that a credit service charges for using the system for a credit card is ( _ ) percent of total credit card charges. a. 1 - 6 b. 7 - 10 c. 8 - 9 d. 1/2 - 1 3. One requirement for building an effective advertising campaign is a large budget. a. True b. False 4. Promotion encompasses publicity, personal selling and advertising. a. True b. False 5. An extensive study of sales people concluded that 55 percent of all sales representatives have "absolutely no ability to sell." a. True b. False 6. Common causes of sales rejections include the sales representative's failure to determine customers' needs, talking too much, and neglecting to ask for an order. a. True b. False 7. Developing a cash budget is not essential for new businesses since early sales will generate ample cash to keep the company afloat. a. True b. False 8. It is possible for a business to make a profit and go out of business due to cash flow problems. a. True b. False 9. Slow-paying credit customers are essentially "borrowing" money from the small business, interest free. a. True b. False 10. The shows what assets the business owns and what claims creditors and owners have against those assets. a. balance sheet b. income statement c. sources and uses of funds statement d. pro forma 11. The compares costs and expenses against a sales firm's net profit (or loss). a. balance sheet b. income statement c. sources and uses of funds statement d. pro forma 12. The represents a "snapshot" of a business, showing an estimate of its value on a given date. a. balance sheet b. income statement c. source and uses of funds statement d. pro forma 13. Analyzing financial ratios could alert a business owner to which of these problems? a. excessive inventory b. poor collection of credit sales c. too much debt d. inadequate financing e. all of the above 14. The ratio measures the owner's rate of return on the investment in the business. a. net profit to equity b. net profit on sales c. quick profit d. net sales-to-working capital 15. The break-even point, a. occurs where a company's fixed expenses equal its variable expenses. b. is the point at which a company neither earns a profit nor incurs a loss. c. tells a business owner the minimum level of activity needed to keep her company in operation. d. all of the above. e. b and c only. 16. The balance sheet is based on the fundamental accounting equation: Assets = Liabilities + Owner's Equity. a. True b. False 17. The small firm's income statement presents a "moving picture" of its profitability over time. a. True b. False 18. New business owners can find published financial statistics in order to collect sufficient information to calculate net sales from a profit target. a. True b. False 19. The first place an entrepreneur should look for startup capital is, a. a bank. b. a venture capitalist. c. the Small Business Administration. d. his or her own pockets. e. government grant programs. 20. Which of the following is not a suggestion for making successful family and friendship deals? a. Consider the impact of the investment on everyone involved. b. Treat the money as "bridge financing" that can feed the company until you can establish relationships with other sources of capital. c. Settle all of the details - from the amount and the terms to the time horizon and the risk - up front. d. Since you are dealing with family or friends, don't make the deal too formal; a "handshake deal" will do. 21. One group of potential investors in a new business venture are ( _ ) wealthy individuals, often entrepreneurs themselves, investing for an equity stake in the business. a. commercial bankers b. venture capitalists c. foreign bankers d. angels 22. Venture capitalists look for as the most important ingredient in the success of any business. a. innovation b. a growth industry c. a competitive edge d. competent management 23. When evaluating a company as a potential investment target, venture capitalists look for which of the following? a. a competent management team b. a competitive edge c. a growth industry d. all of the above 24. For many entrepreneurs in need of startup capital, the primary problem is not a lack of funding sources but a lack of knowledge of how to find them. a. True b. False 25. Equity capital is the financing that a business owner has borrowed and must repay with interest. a. True b. False 26. "I guess we were kinda poor when we were kids, but we didn't know it. That's because my dad always refused to let us look at the family's financial records." - Jack Smith 'I remember one night I was walking by Mom and Dad's room when I heard them talking about how they might not have enough money to pay the bills that night. I knew what I had to do. I went and got my piggy bank and buried it in the back yard, where they couldn't get their mitts on it." - Jack Smith The above recollections demonstrate which of the following principles: a. Family members can be a difficult source of financing to manage. b. Jack Smith is a whacko. Solutions: 1. a. Penetration 2. d. 1/2 - 1 3. b. False 4. a. True 5. a. True 6. a. True 7. b. False 8. a. True 9. a. True 10. a. balance sheet 11. b. income statement 12. c. source and uses of funds statement 13. e. all of the above 14. a. net profit to equity 15. e. b and c only. 16. a. True 17. a. True 18. a. True 19. d. his or her own pockets. 20. d. Since you are dealing with family or friends, don't make the deal too formal; a "handshake deal" will do. 21. b. venture capitalists 22. c. a competitive edge 23. d. all of the above 24. a. True 25. a. True 26. a. Family members can be a difficult source of financing to manage.
Business key words: entrepreneur, credit, marketing, advertising, adwords, sales, representatives, selling, cash flow, creditors, purchase order, capital, investment, balance sheet, statements, venture capitalist, breakeven analysis, accounting, financials, profit, currency exchange.
