Small Business Management
Exam Questions
Course Introduction
Small Business Management explores the foundational principles and practices essential for launching, operating, and growing a small enterprise. Students will examine the entrepreneurial process, including opportunity recognition, business planning, securing financing, and managing daily operations. The course covers key topics such as marketing strategies, financial management, legal considerations, and human resource challenges unique to small businesses. Emphasis is placed on practical tools and techniques for problem-solving and decision-making, with the goal of preparing students to successfully navigate the complexities of small business ownership and management in a competitive marketplace.
Recommended Textbook
Entrepreneurship A Process Perspective 2nd Edition by
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Page 2
Robert A. Baron
Chapter 1: Entrepreneurship:: A Field, an Activity - and a Way of Life
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Q1) A research method which refers to collecting a large amount of data about one organization that is used to draw conclusions about cause and effect relationships is known as
A) case method.
B) business plan.
C) hypothesis.
D) intrapreneur.
E) technology transfer.
Answer: A
Q2) At the 3 M Company,scientists are told to spend 15% of their working time on things that are not part of their "normally assigned tasks." That is,they are to experiment with materials in attempts to "come up with" new products;to be very creative. This is know as
A) theory building.
B) entrepreneurship.
C) engine of economic growth.
D) social change.
E) intrapreneurship.
Answer: E
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Chapter 2: Entrepreneurial Opportunities: Their Origins, Forms,
and Suitability For New Ventures
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Q1) An entrepreneurial opportunity can be exploited through the A) creation of a new product or service.
B) opening of a new market.
C) development of a new way of organizing.
D) introduction of a new production process.
E) all of the above.
Answer: E
Q2) The textbook mentions that because Barnes & Noble spent a large amount of money to build its regular bookstores,it resisted selling books on the Internet. Barnes & Noble resisted selling book on the Internet because of
A) the low capital intensity required to sell on the Internet.
B) fears that sales on the Internet would cannibalize sales in the stores.
C) fears that books were in the early stage of the industry life cycle.
D) fears that the technology required would not be challenging.
E) fears that books could not be amortized.
Answer: B
Q3) A new firm is said to be higher on the learning curve than an established firm.
A)True
B)False
Answer: False
Page 4
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Chapter 3: Cognitive Foundations of Entrepreneurship:
Creativity and Opportunity Recognition
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Q1) Although many approaches to understanding the utilization of information exist,among them a cognitive perspective is especially helpful.
A)True
B)False
Answer: True
Q2) The production of ideas for something new is called
A) creativity.
B) idea generation.
C) opportunity generation.
D) opportunity cognition.
E) human cognition.
Answer: B
Q3) Good opportunities are always spotted quickly by entrepreneurs..
A)True
B)False
Answer: False
Q4) The ability to solve problems in everyday life is called practical intelligence.
A)True
B)False
Answer: True
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Chapter 4: What Entrepreneurs Need to Know Before They
Start: Acquiring and Interpreting Information About Markets
Competitors and Government
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Q1) Which of the following will guarantee success?
A) Excellent marketing information.
B) Strong demographic data.
C) Undisputed secondary data.
D) An equal combination of A and C.
E) None of the above.
Q2) Federal and state governments often offer tax incentives to companies for which,if any,of the following reasons?
A) Locating in certain geographic regions.
B) choosing to renovate and improve older buildings that have been designated as having historical significance.
C) For research and development activities that are directed towards discovering information that is "technological in nature.
D) A, B, and C.
E) None of the above.
Q3) Why is it important for entrepreneurs to gather marketing information before starting a new venture and what are some ways of gathering information?
Q4) Explain the "discovery test."
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Chapter 5: Assembling the Team: Acquiring and Utilizing
Essential Human Capital
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Q1) Relevant previous entrepreneurial experience tends to increase the probability that a new firm will be successful.
A)True
B)False
Q2) When dealing with the similarity and complementarity approach related to co-founders starting a business,it is best to focus primarily on complementarity with respect to knowledge,skills,and experience,but bring similarity into the picture with respect to personal characteristics and motives.
A)True
B)False
Q3) The success of any new venture depends on which of the following?
A) Knowledge.
B) Skills.
C) Social networks.
D) Talents.
E) All of the above are important.
Q4) Discuss similarity and complementarity and the roles that they play in choosing cofounders for a new venture.
Q5) What is the "Big Five?"
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Chapter 6: Financial Resources For New Ventures: How To
Them, How To Manage Them
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Q1) A system for guaranteeing loans to new and small businesses to finance inventory or accounts receivable is offered by
A) Small Business Administration Program.
B) CAPLine Program.
C) Large Business Administration Program.
D) SADF Program.
E) None of the above.
Q2) Which of the following is a problem that could be raised by the fact that entrepreneurs have information about their business opportunities that investors don't have?
A) Investors have to make decisions based on limited information.
B) Since entrepreneurs have superior information, they can use it to obtain capital from investors and use it for their own benefit.
C) The existence of adverse selection.
D) A and C only.
E) A, B, and C.
Q3) If a company is profitable,that means it has adequate cash..
A)True
B)False
8
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Chapter 7: Writing An Effective Business Plan: Building A
Road Map to Success
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Q1) Information illustrating projected operating results based on profit and loss can be found in the
A) proforma balance sheet.
B) proforma income statement.
C) cash flow statement.
D) break-even analysis.
E) None of the above.
Q2) Sophisticated investors want to see specific and detailed information concerning which one of the following marketing concerns?
A) What entrepreneurs have done to identify the market for their product.
B) The size of the markets.
C) How the new products or services will be promoted in the market.
D) Competing products.
E) All of the above.
Q3) Investors generally do not require a business plan before they will invest in a new firm.
A)True
B)False
Q4) Discuss the importance of a business plan and what questions it should answer.
Page 9
Q5) Why is break-even analysis important in the business plan?
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Chapter 8: Legal Issues Relating To New Ventures:
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Q1) Describe an S Corporation. Examine the requirements and the consequences if such requirements are not met.
Q2) Which of the following is most likely a professional corporation?
A) Boeing Corporation.
B) The University of Minnesota.
C) Southwest Airlines.
D) Johnson & Smith, Cardiac Surgeons.
E) New York City Government.
Q3) According to the Uniform Partnership Act,each partner has which of the following rights?
A) To share in the management of the business.
B) To share in the profits of the business.
C) To have access to the books.
D) All three choices (a, b, and c) are correct.
E) Only choices a and b are correct.
Q4) Assume that you work for a certain business and sign a nondisclosure agreement. That means you cannot discuss secret information of your employer with others outside of the business.
A)True
B)False
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Chapter 9: Marketing in a New Venture
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Q1) Suppose you are an entrepreneur and you sell TV's. When you first entered the market,TV's were in black and white and innovations were very slow. After about five years of time,TV innovations became more frequent with color,picture in picture,and TV/VCR combos. However,after about 10 more years,the innovations decreased again. This market behavior is known as what?
A) The product development S-curve.
B) Product Cycle.
C) Improvement Curve.
D) Feature Cycle.
E) All of the Above.
Q2) What are the three disadvantages that existing companies have when serving new markets with novel solutions to customers' needs? Please explain each disadvantage.
Q3) Which of the following is not a step in defining what consumers' real needs are?
A) Identifying any alternatives that might appear in the future.
B) Finding a solution to a problem.
C) Figuring out a problem.
D) Understanding how to satisfy the need.
E) Begin to advertise the new product.
Q4) Identify and explain an example using the product development S-curve?
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Chapter 10: Strategy: Planning For Competitive Advantage
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Q1) Adverse selection occurs when people take actions that benefit themselves at the expense of others.
A)True
B)False
Q2) What is a competitive advantage and why does an entrepreneur need it?
Q3) Tacit knowledge is the hardest information for competition to obtain.
A)True
B)False
Q4) An entrepreneur who is in direct control of all business components,marketing,production,finance,human resource,etc.is probably using which of the following types of business mode for exploiting opportunities?
A) Hierarchical.
B) Market-based.
C) Monopoly.
D) Franchise.
E) None of the Above.
Q5) Self-efficacy refers to ones confidence in his or her own abilities.
A)True
B)False
Q6) Explain technical uncertainty.
Page 12
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Chapter 11: Preparing For And Attaining Growth: Strategies
For Building Lasting Success
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Q1) Explain why high-growth companies tend to get into relationships with other companies more so than slow-growth companies.
Q2) Explain why managerial capacity might limit a company's growth.
Q3) High growth companies tend to not set specific goals for growth;growth tends to just happen.
A)True
B)False
Q4) A pharmaceutical company spends large amounts of money in developing new prescription drugs. Once the new drug is approved for use,it frequently can be produced and marketed for considerably less money than it took to develop,so the profit margins are large if one considers only the money spent during production and marketing. This situation represents the idea of
A) external strategies.
B) scalable business model.
C) managerial capacity.
D) geographical expansion.
E) new resource skills.
Q5) Explain why established firms are usually more efficient than are new firms.
Q6) Define tenacity and explain how it tends to be related to growing a company.
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Chapter 12: Managing New Ventures For Growth
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Q1) Caterpillar Inc.distributes 2% of its company profits to employees every year. This performance plan is known as
A) company-wide plan.
B) profit sharing plan.
C) merit pay plan.
D) employee stock ownership.
E) employee bonuses.
Q2) According to Expectancy Theory,which of the following conditions help to increase motivation?
A) People must see a link between effort and performance.
B) People must believe that good performance will be rewarded.
C) People must want the rewards that are being offered.
D) All of the above must be present.
E) Only choices a and c are correct.
Q3) One base of conflict is that people tend to see their own ideas as objective and the ideas of others as irrational.
A)True
B)False
Q4) Explain why motivation by itself is not sufficient to obtain good performance.
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Chapter 13: Exit Strategies For Entrepreneurs: The
Concluding Act
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Q1) Which of the following factors is not included when calculating the opportunity costs of investing in a business when using the excess earnings method?
A) Rate of risk-free return.
B) Risk free return
C) An adjustment for inflation.
D) Risk allowance.
E) All of the above are part of opportunity costs.
Q2) Several investors are negotiating to purchase a business. To finance the purchase,they make a loan from a major bank and pledge the assets of the company that they want to buy as collateral for the loan. This is known as a
A) trust buyout.
B) stock ownership program.
C) noncompetitors buyout.
D) leveraged buyout.
E) selling memorandum.
Q3) Explain what leveraged buyout means.
Q4) Chapter 7 bankruptcy is used when a company must liquidate.
A)True
B)False
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