Small Business Management Study Guide
Questions
Course Introduction
Small Business Management explores the fundamental principles and practices involved in launching, operating, and growing a small enterprise. The course covers topics such as business planning, financing, marketing, legal structures, human resource management, and day-to-day operations, emphasizing the unique challenges and opportunities faced by small business owners. Through case studies, practical exercises, and real-world examples, students gain the knowledge and skills necessary to make effective decisions, innovate, and ensure sustainability and profitability in a competitive marketplace.
Recommended Textbook
Entrepreneurship Successfully Launching New Ventures 3rd Edition by Bruce R. Barringer
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15 Chapters
1125 Verified Questions
1125 Flashcards
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Page 2
Chapter 1: Introduction to Entrepreneurship
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Sample Questions
Q1) Kendall Toms recently launched a medical startup. He is very excited about the business because he strongly believes that the products his firm is working on will make a positive differences in peoples' lives. Kendall's excitement results from which of the following characteristics of entrepreneurs?
A) passion for the business
B) tenacity despite failure
C) desire to be his own boss
D) desire to be on the cutting edge of technological change
E) desire to gain financial rewards
Answer: A
Q2) Entrepreneurs are usually moderate, rather than high, risk-takers.
A)True
B)False
Answer: True
Q3) According to reliable statistics, 9 out of 10 businesses fail in their first few years of existence.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Recognizing Opportunities and Generating Ideas
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Sample Questions
Q1) Most entrepreneurs believe they are more "alert" than others.
A)True
B)False
Answer: True
Q2) Curves International, which was founded in 1992 by Gary Heavin, is a fitness center just for women. At the time Curves was founded, most fitness centers targeted fitness enthusiasts and included a number of amenities, ranging from showers and towel service to swimming pools. Rather than competing head-to-head against these centers, Heavin opened a fitness center targeted towards what he felt was an ignored part of the marketplace: women who wanted to lose weight. The best way to describe how Heavin's business idea was recognized is:
A) brainstorming
B) talking to consumers
C) reading industry reports
D) observing trends
E) finding a gap in the marketplace
Answer: E
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Chapter 3: Feasibility Analysis
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Sample Questions
Q1) What is gumshoe research and why is it important?
Answer: Gumshoe research is simply doing what it takes to collect sufficient information to assess the target market feasibility of a product idea. A gumshoe is a detective or an investigator that scrounges around for information or clues wherever they can be found. This type of research can take creative forms. For example,if your idea is to sell educational toys,you might spend a week volunteering at a day care center and watch how children interact with toys. Similarly,you might spend some time browsing through a toy store and observing the types of toys that get the most attention. Gumshoe research is simply being inventive in regard to the activities that can be undertaken to better understand your industry and target market's attractiveness.
Q2) ________ is the process of determining whether a business idea is viable.
A) Feasibility analysis
B) Opportunity recognition
C) Likelihood analysis
D) Achievability analysis
E) Scenario analysis
Answer: A
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Page 5
Chapter 4: Writing a Business Plan
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Sample Questions
Q1) According to the textbook, the marketing plan portion of a business plan is arguably the most important section of the plan.
A)True
B)False
Q2) According to the textbook, in the first meeting investors typically focus on whether the management team has the skills and experience to pull off the venture and:
A) whether the new venture is properly structured
B) whether the new venture has intellectual property
C) legal and tax issues
D) whether a real opportunity exists
E) industry and competitor analysis
Q3) A competitor analysis, which is a detailed analysis of a firm's competitors, should be included in the market analysis section of its business plan.
A)True
B)False
Q4) What are the two main reasons for writing a business plan.
Q5) What is a business plan?
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Chapter 5: Industry and Competitor Analysis
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Sample Questions
Q1) Industry analysis is business research that focuses on the potential of an industry.
A)True
B)False
Q2) According to the textbook, the first step in a competitor analysis is to:
A) develop a marketing plan
B) develop the strategic plan
C) study the strength of the industry
D) study the external environment
E) determine who the competition is
Q3) The two trends that are most important to focus on in an industry analysis are business trends and environmental trends.
A)True
B)False
Q4) The best industry to enter is an industry where the threat of each of Porter's five forces is high.
A)True
B)False
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Chapter 6: Developing an Effective Business Model
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Sample Questions
Q1) ________ are anything rare and valuable that a firm owns.
A) Tactical assets
B) Tactical properties
C) Deliberate assets
D) Strategic assets
E) Operational assets
Q2) Fulfillment and support describes:
A) how a firm manages its customer relationships
B) the way a firm's product or service "goes to market" or how it reaches its customers
C) how a firm manages its employees
D) the products and markets on which a firm will compete
E) how a firm competes relative to its competitors
Q3) The four components of an effective business model include: core strategy, strategic resources, partnership network, and customer interface.
A)True
B)False
Q4) Their is a standard business model that most startups follow.
A)True
B)False
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Chapter 7: Preparing the Proper Ethical and Legal Foundation
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Sample Questions
Q1) RealKidz, the company profiled in the opening feature for Chapter 7, experienced one particularly startling legal challenge early in the life of the firm. What was the challenge?
A) It did not obtain the proper business licenses.
B) It hired an employee who misrepresented the company in a contract negotiation.
C) It got into a legal dispute with an investor.
D) It hired an accountant who stole money from the firm.
E) It contracted with a clothing designer who turned out to be a scam artist.
Q2) A founders' agreement is a written document that deals with issues such as the relative split of the equity among the founders of the firm.
A)True
B)False
Q3) Describe what is meant by a "general partnership" and a "limited partnership." Describe the major difference between the two.
Q4) A subchapter S corporation combines the advantages of a partnership and a C corporation.
A)True
B)False
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Chapter 8: Assessing a New Venture's Financial Strength and Viability
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Sample Questions
Q1) In the context of computing the cost of sales, the common way to do this is to use the percent-of-sales method, which is a method for expressing:
A) each expense item as a percentage of net sales
B) each expense item as a percentage of gross profit
C) each expense item as a percentage of net income
D) each expense item as a percentage of operating income
E) each expense item as a percentage of cost of sales
Q2) Which of the following statements about pro forma financial statements is incorrect?
A) Pro form financial statements are projections for future periods based on forecasts.
B) Pro forma financial statements are typically completed for two to three years in the future.
C) Pro forma financial statements are required by the SEC.
D) Most companies consider their pro forma financial statements to be confidential and reveal them to outsiders only on a "need to know basis."
E) Pro forma financial statements are strictly planning tools.
Q3) What is ratio analysis? Why is it important?
Q4) Describe each of the four primary financial objectives of firms.
Page 10
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Chapter 9: Building a New Venture Team
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Sample Questions
Q1) Similar to a board of directors, an advisory board possesses legal responsibility for the firm.
A)True
B)False
Q2) A board of directors has three formal responsibilities: appoint the officers of the firm, oversee the affairs of the corporation, and:
A) conduct the annual meeting
B) provide funding for the firm
C) submit the firm's annual report to the stockholders
D) declare dividends
E) write the firm's strategic plan
Q3) Consultants fall into two categories: paid consultants and consultants who are made available for free or at a reduced rate through a nonprofit or government agency. A)True
B)False
Q4) What is a skills profile and what is it used for?
Q5) Most boards of advisers have between 5 and 15 members. A)True B)False
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Chapter 10: Getting Financing or Funding
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Sample Questions
Q1) In regard to the stages (or rounds) of venture capital funding, the stage of funding that occurs when an investment is made very early in a venture's life to fund the development of a prototype and feasibility analysis is referred to as:
A) seed funding
B) second-stage funding
C) first-stage funding
D) mezzanine financing
E) start-up funding
Q2) The three most common forms of equity funding are:
A) friends and family, venture capital, bank loans
B) SBIR grants, SBA guaranteed loans, bank loans
C) initial public offerings, business angels, venture capitalists
D) friends and family, business angels, bootstrapping
E) SBIR grants, venture capital, initial public offerings
Q3) There are two common types of loans:
A) single-purpose loans and multiple-purpose loans
B) single-purpose loans and lines of credit
C) multiple-purpose loans and venture capital
D) private placements and lines of credit
E) one-time-purpose loans and venture capital
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Chapter 11: Unique Marketing Issues
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Sample Questions
Q1) The Savvy Entrepreneurial Firm feature in Chapter 10 provides several examples of firms that created positive awareness of its product of service by producing cleaver video spots. According to the feature, the firms were utilizing:
A) viral marketing techniques
B) echo marketing techniques
C) nontraditional marketing techniques
D) spot marketing techniques
E) guerrilla marketing techniques
Q2) Yelp's phrase "Real People. Real Reviews" is an example of a:
A) tagline
B) grabline
C) notice-line
D) catchline
E) grabline.
Q3) The proper sequence in selecting a target market and positioning strategy is (1) craft a unique positioning strategy, (2) select a target market, and (3) segment the market.
A)True
B)False
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Page 13
Chapter 12: The Importance of Intellectual Property
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Sample Questions
Q1) 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:
A) copyright extension patents
B) utility patents
C) business process protection patents
D) trademark extension patents
E) business method patents
Q2) There are three basic requirements for a patent to be granted. The subject of the patent application must be:
A) useful, difficult to copy, and novel in relational to prior arts in the field
B) based on cutting edge science or technology, not obvious to a person of ordinary skill in the filed, and rare
C) useful, novel in relation to prior arts in the field, and not obvious to a person of ordinary skill in the field
D) rare, difficult to copy, and not obvious to a person of ordinary skill in the field
E) useful, scientific, and novel in relation to prior arts in the field
Q3) What is a trademark? Why are trademarks important?
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Chapter 13: Preparing for and Evaluating the Challenges of Growth
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Sample Questions
Q1) According to Penrose, ________ generate new market, product and service ideas, while ________ administer the routine functions of the firm and facilitate the profitable execution of new opportunities.
A) managerial services, entrepreneurial services
B) administrative services, business services
C) entrepreneurial services, managerial services
D) business services, commercial services
E) commercial services, administrative services
Q2) Economies of scale occur when:
A) increasing production lowers the average cost of each unit produced
B) increasing production increases the average cost of each unit produced
C) decreasing production lowers the average cost of each unit produced
D) decreasing production increases the average cost of each unit
E) increasing production increases the fixed cost of doing business
Q3) Adverse selection 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.
A)True
B)False
Page 15
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Chapter 14: Strategies for Firm Growth
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Sample Questions
Q1) Which of the following was not identified as one of the keys to effective new product and service development?
A) focus on a specific target market
B) get quality and pricing right
C) resist the temptation to conduct ongoing feasibility analysis
D) develop products that add value
E) find a need and fill it
Q2) Pam Ryan owns a store that sells running shoes and related products. Pam is currently trying to increase sales through endorsements by famous runners and former Olympic athletics. Pam is pursuing a:
A) strategic alliance strategy
B) licensing strategy
C) market penetration strategy
D) geographic expansion strategy
E) improving an existing product or service strategy
Q3) Internal growth strategies involve efforts taken within the firm itself, such as new product development, other product-related strategies, and international expansion.
A)True
B)False
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Page 16
Chapter 15: Franchising
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Sample Questions
Q1) The document that consummates the sale of a franchise is called the:
A) Franchise Disclosure Document
B) franchise agreement
C) license agreement
D) Uniform Franchise Licensing Code
E) franchise circular
Q2) A management concept called agency theory refutes the value of franchising for organizations with multiple units, like restaurant chains.
A)True
B)False
Q3) According to the textbook, which of the following is not a cost that is typically associated with buying a franchise?
A) intellectual capital fees
B) capital requirements
C) continuing royalty payment
D) advertising fees
E) initial franchise fee
Q4) How can a person tell if franchising is right for them?
Q5) List and explain three of the common misconceptions about franchising.
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