Question 1

Cost of goods sold is located on which financial statement?

Statement of
cash flows

Balance sheet

Income statement

All of the
above

Question 2

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

timeliness

efficiency

stability

profitability

liquidity

Question 3

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

owner’s
equity

current
portion of real estate mortgage

real estate mortgage

accrued
expenses

accounts
payable

Question 4

Which of the financial statements used by businesses to keep
track of their financial affairs is the most similar to an ordinary person’s
end-of-the month bank statement?

statement of
cash flows

balance sheet

statement of
ratio analysis

income statement

statement of
owners’ equity

Question 5

A firm’s working capital is its:

total assets
minus its total liabilities

cash and cash
equivalents minus its current liabilities

accounts
receivable minus its total accounts payable

inventory and
accounts receivable minus its current liabilities

current assets minus its current liabilities

Question 7

________ reflect past performance and are usually prepared on a
quarterly and annual basis.

Pro forma
financial statements

Ad-hoc
financial statements

Concurrent
financial statements

Historical financial statements

Chronological
financial statements

Question 8

________ are an estimate of a firm’s future income and expenses,
based on its past performance, its current circumstances, and its future plans.

Forecasts

Calculation
statements

Prediction
statements

Financial
statements

Statements of
cash flow

Question 9

The strength and vigor of a firm’s overall financial posture is
referred to as:

profitability

liquidity

efficiency

effectiveness

Stability

Question 10

Jamie Diehl has spent the
past several days pouring over her historical financial statements and her
projections for future sales periods based on forecasts. Jamie’s objective is
to develop a set of financial statements that she can show to an investor,
which will reflect the projected financial status of her firm for the next
two-three years. Jamie is working on creating a set of ________ financial
statements.

ad-hoc

investor

pro forma

simulated

concurrent

Question 11

Which of the following statements about pro forma financial
statements is incorrect?

Pro forma
financial statements are projections for future periods based on forecasts.

Pro forma
financial statements are typically completed for two to three years into the
future.

Pro forma financial statements are required by
the SEC.

Pro forma
financial statements are strictly planning tools.

Most companies
consider their pro forma financial statements to be confidential and reveal
them to outsiders only on a “need to know basis.”

Question 12

Analyzing financial ratios could alert a business owner to which
of these problems?

Too much debt

Overextending
credit

Excessive
inventory

All of the above

Question 13

Thomas has a growing and
profitable Surfboard manufacturing business. Last month he received orders from
two large chains. They will purchase a total of 900 boards. These orders are
much larger than usual. But the retailers will require terms of 5% down and net
90 and a refund on all unsold boards is required. Thomas has been paying his
vendors at the time of purchase. He does not have a lot of cash in the bank. If
he takes the orders what is the danger he needs to be concerned about that can
put him out of business?

A
loss of his line of credit

A
cash gap in his cash
flow

A
cash profit loss on the income statement

A
loss of owners equity on the balance sheet

A
cash loss in inventory

Question 14

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.

intermediate
term assets

temporary
assets

other assets

fixed assets

current assets

Question 15

Many entrepreneurs go about the task of raising capital
haphazardly because:

they haven’t
completed a feasibility analysis or business plan

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

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

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

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

Question 16

Which of the following was not
identified (in class or in the book) as a common (and sound) bootstrapping
strategy?

obtain
payments in advance from customers

hire
interns

buy equipment rather than lease
equipment

coordinate
purchases with other businesses

minimize
personal expenses

Question 17

A(n) ________ is an institution, such as Credit Suisse First
Boston, that acts as an underwriter or agent for a firm engaged in an initial
public offering.

public bank

statutory bank

investment bank

fiduciary bank

venture bank

Question 18

Which of the following
statement is not correct regarding business angels?

Business
angels are valuable because of their willingness to make relatively small
investments.

Business
angels are easier to find today than in the past.

Business
angels are accreditited investors.

The number of angel investors has
decreased dramatically over the past 5 years.

Business
angels invest in more startups on a yearly basis than venture capitalists.

Question 19

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:

startup
funding

seed funding

second-stage
funding

mezzanine
financing

first-stage
funding

Question 20

Entrepreneurs have access to two different types of capital,
________ and ________ .

layered;
equity

debt;
leveraged

debt; retained

debt; equity

Question 21

The seed money that gets a company off the ground typically
comes from:

commercial
banks

governmental
agencies

the founders of the firm

angel
investors

venture
capitalists

Question 22

A brief carefully constructed statement that outlines the merits
of a business opportunity is called a(n):

bootstrap
speech

teaser speech

elevator speech

sway speech

subway speech

Question 23

The main difference between the
SBIR and the STTR programs is that the STTR program requires the participation
of:

researchers
working at universities or other research institutions

a
certified public accountant

a
venture capitalist

a
government agency in
conducting the research

an
attorney

Question 24

Entrepreneurs needing between $100,000 and $3 million in the
current financial environment will likely find acquiring financing to be:

attainable.

easy.

challenging.

confusing.

Question 25

Bill and Megan Tempelton are
planning to open a smoothie restaurant near a large soccer complex in Greeley,
Colorado, and need $75,000 to get started. They have $15,000 of their own
money, which leaves $60,000. After getting turned down by a couple of banks,
they decided to turn to their relatives and acquaintances for help.
Fortunately, they were able to raise the money through a gift from Bill’s
grandfather, a loan from Megan’s parents, and a small investment by Bills best
friend in college, Kevin. The money that an entrepreneur raises in this manner
is referred to as:

networking
money

bootstrapping

legacy
money

friends and family

compassion
money

1.5 points

Question 26

The three most common forms of
equity funding are:

initial public offerings, business
angels, venture capitalists

friends
and family, business angels, bootstrapping

friends
and family, venture capital, bank loans

SBIR
grants, SBA guaranteed loans, bank loans

SBIR
grants, venture capital, initial public offerings

Question 27

A(n) ________ is when a company
raises capital by selling shares of its stock to the general public for the
first time.

debt
equity arrangement

venture
capital offering

private
equity offering

partnership

initial public offering

Question 28

The most notable SBA program
available to small
businesses is the:

7(A) Guaranty Program

SBA
1060 Guaranty

SBA
101 Program

Code
604 Guaranty Program

Small
Business 401 Program

Question 29

When done correctly, the due diligence process will:

rarely prove
to be beneficial.

be time
consuming and expensive.

most often
result in the purchase of the business.

reveal both the positive and negative aspects of
an existing business.

Question 30

In a ________ , a franchisee has the right to create a
semi-independent organization in a particular territory to recruit, sell, and
support other franchisees.

master
franchise

cobranding franchising

conversion
franchising

multiple-unit
franchising

Question 31

Which of the following statements is incorrect regarding
business format franchises?

Automotive
services and convenience stores are well-known examples of business format
franchises.

Arby’s sells
business format franchises.

The business format franchisor obtains the
majority of its income from selling its products to its dealers at a markup.

A business
format franchise can be very rigid and demanding.

In a business
format franchise, the franchisor provides a formula for doing business to the
franchisee along with training and other forms of support.

Question 32

Franchisors are required by law to disclose all their costs in a
document called the:

Franchise Disclosure Document

Standardized
Franchise Code

Franchise Code
of Conduct

Fairness in
Franchising Certificate

Consistent
Franchise Offering Code

Question 33

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.

product and
trademark

sales
extension

business
extension

formula driven

business format

Question 34

Franchising 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 another business in exchange for:

an initial
franchise fee and an equity position in the new business

an equity
position in the new business

a one-time
franchise fee

an initial franchise fee and an ongoing royalty

an ongoing
royalty

Question 35

Which of the following is not a
potential advantage of franchising for the franchisee?

Centralized
buying power

National
advertising program

Limited product line

Management
training and assistance

Question 36

When evaluating the financial position of a business he or she
is considering buying, an entrepreneur should examine:

its income tax
returns for the past three to five years.

its income
statements and balance sheets from the past three to five years.

the owner’s
compensation and that of relatives.

All of the above

Question 37

An ideal and often easy
source of financing the purchase of an existing business a buyer should
consider or hope for is:

Bill Gates

the Small Business Administration.

an insurance company.

a venture capitalist.

the seller of the business.

Question 38

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

Trade
name format

business format

business
extension

sales
extension

product

Question 39

Important factors to investigate regarding the business to be
purchased include:

reviewing
accounts receivable and business records.

assessing the
physical assets of the business.

reviewing
contractual arrangements and assessing intangible assets.

All of the above

Question 40

Advantages to buying an existing business that you do not have
with a startup include:

greater
access to venture capital.

inventory is in place and trade credit is
established.

the
opportunity to participate in a national advertising campaign.

easy
implementation of innovations and changes from past policies.

Question 41

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

a
predetermined fixed weekly or monthly amount

weekly or
monthly net income

the size of
the franchise outlet

the age of the
franchise outlet

weekly or monthly gross income

Question 42

Brenda Berry is thinking about
starting a computer company. After doing some research, she has decided that
the computer industry can be divided into the following product categories:
hand-held computers, laptops, PCs, minicomputers, and mainframes. She is now
trying to decide which product category she is the most interested in competing
in. The process that Brenda is going through is called:

market
separating

market
splitting

market
targeting

market segmentation

market
dividing

Question 43

The unique selling proposition (USP) focuses on:

a feature that is unlike others found in
competing products that answers the question: What is different?

a premier
priced product that answers the question: What product offers the highest
quality?

a unique
customer benefit that answers the question: What’s it in for me?

emulating the
most successful products in the industry.

Question 44

Which of the following statements concerning marketing research
is false?

Small
businesses cannot afford to miss their target markets and market research can
help them focus their efforts.

Small companies are at a distinct disadvantage
compared to larger ones when conducting market research since it is so
expensive.

Market
research is the vehicle for gathering the information that serves as the
foundation for the company’s marketing plan, helps avoid costly marketing
mistakes, and can uncover unmet customer needs the business can serve.

Market
research involves systematically collecting, analyzing, and interpreting data
pertaining to the small company’s market, customers, and competitors.

Question 45

Entrepreneurs should make sure they do not fall victim to any of
the e-commerce myths. Which of the following is not an
e-commerce myth?

If I launch a
site, customers will flock to it.

Setting up a
business on the Web is easy and inexpensive.

Making money
on the Web is easy.

Privacy and site security is an important issue
on the Web.

Question 46

Which of the following is not one of the
objectives a guerrilla marketing plan should accomplish?

Determine how
the company will be able to serve all customers.

Determine customer needs and wants through
market research.

Create a
marketing mix that meets customer needs and wants.

Analyze the
firm’s competitive advantages and build a marketing strategy around them.

Question 47

________ is