Essentials of Entrepreneurship and Small Business Management

1. One of the most significant economic business

developments in recent business D) creates a new business concept for the
history relates to the ________. purpose of achieving profit and
A) growth of blue-chip corporations growth by assembling the necessary
B) development of Pacific Rim countries resources to capitalize on identified
C) entrepreneurial spirit opportunities
D) additional employment opportunities Answer: D
offered by government institutions
Answer: C 5. All of the following are
characteristics of the typical
2. The recent number of job losses in entrepreneur except ________.
large corporations compared to the A) confidence in his/her ability to
jobs created by small business has succeed
changed the perception of ________ B) value of money over achievement
for launching a new business. C) desire for immediate feedback
A) prestige D) a future orientation
B) risk Answer: B
C) financing opportunities
D) short-term potential 6. Entrepreneurs are characterized by
Answer: B ________.
A) skill at organizing
3. The profile of an entrepreneur B) desire for immediate feedback
includes ________. C) high energy levels
A) a desire for responsibility and D) All of the above
moderate risk Answer: D
B) confidence in the ability to succeed
and determination 7. Entrepreneurs who repeatedly start
C) a high level of energy, a desire for businesses and grow to a sustainable
immediate feedback and a future size before striking out again are
orientation known as ________ entrepreneurs.
D) All the above A) opportunistic
Answer: D B) persistent
C) serial
4. An entrepreneur is one who D) classic
________. Answer: C
A) is willing to attempt to implement a
business concept and then give up if 8. Entrepreneurs typically possess
it does not meet immediate ________.
expectations A) the ability to easily access capital
B) understands the process of B) a set of unique skills that is usually
developing an idea and does not need accompanied by advanced degrees in
to understand what it means to bring several areas
that idea to a viable business concept C) a high level of commitment, have a
C) knows that the concept they are about tolerance for ambiguity, are flexible
to develop will result in a profitable and tenacious
 D) specialized technical abilities B) Employees
Answer: C C) Suppliers
D) All of the above are stakeholders.
9. Entrepreneurs who start businesses Answer: D
because they cannot find work any
other way are ________. 14. is a branch of philosophy that
A) necessity entrepreneurs studies and creates theories about the
B) serial entrepreneurs basic nature of right and wrong, duty,
C) opportunity entrepreneurs obligation, and virtue.
D) corporate cast-offs A) Semantics
Answer: A B) Ethics
C) Religion
10. In addition to the opportunity to D) History
create their own destiny and enjoy Answer: B
what they do, entrepreneurs also 15. responsibility is how an
benefit from the ability to ________. organization responds to the needs of
A) earn tremendous wealth without risk the many elements in society.
and uncertainty A) Moral
B) make a difference in an area B) Investor
important to them and be recognized C) Social
for those efforts D) Ethical
C) create wealth without providing true Answer: C
value
D) exploit the opportunities that the free 16. consists of the
enterprise system offers fundamental moral values and
Answer: B behavioral standards that form the
foundation for the people of an
11. Ethical behavior is doing what is organization as they make decisions
. and interact with
A) "right" stakeholders.
B) "profitable" A) Business ethics
C) "credible" B) Social obligation
D) All of the above C) Mission
Answer: A D) Vision
Answer: A
12. The various groups and individuals
who affect and are affected by a 17. is/are the narrowest level of
business are called ethical standards.
. A) The law
A) stockholders B) Organizational policies and
B) stakeholders procedures
C) owners C) Social responsibility
D) managers D) The moral stance
Answer: B Answer: A

13. Which of the following is not a 18. The three parts of the triple bottom
stakeholder for an organization? line are .
A) Creditors A) processes, profits, and people
 B) profit, people, and planet Answer: B
C) processes, profit, and predominance
D) profit, processes, and planet 24. Harvard’s Theodore Levitt says that
Answer: B creativity is new things, and
innovation is new things.
19. sets behavioral boundaries for A) thinking; doing
decision makers. B) doing; thinking
A) The strategic plan C) seeing; doing
B) Strategy D) thinking; applying
C) Ethics Answer: A
D) The financial plan
Answer: C

20. sets behavioral boundaries for

decision makers. 25. Creativity often involves creating
A) The strategic plan something from nothing. However, it
B) Strategy is more likely to result in:
C) Social responsibility A) elaborating on the present.
D) The financial plan B) putting old things together in new
Answer: C ways.
C) taking something away to create
21. What is the entrepreneurial “secret” something simpler or better.
for creating value in the marketplace? D) All of the above.
A) Applying Creativity and Innovation Answer: D
to Solve Problems
B) Creating New Products and Services 26. Entrepreneurship is a constant
C) Learning by Doing process that relies on:
D) Applying Lessons Learned from A) creativity, innovation, and profit.
History B) the ability to win over the consumer.
Answer: A C) creativity, innovation, and
application in the marketplace.
22. The ability to develop new ideas and D) intellectual property rights.
to discover new ways of looking at Answer: C
problems and opportunities is called:
A) entrepreneurship 27. When developing creative solutions
B) innovation to modern problems, entrepreneurs
C) creativity must:
D) creative thinking A) go beyond merely using whatever
Answer: C has worked in the past.
B) limit the creative process to only
23. The ability to apply creative solutions profitable ventures.
to problems and opportunities to C) remember what has worked in the
enhance or to enrich people’s lives is past.
called: D) pay attention to limiting factors.
A) entrepreneurship Answer: A
B) innovation
C) creativity
D) creative thinking
 28. A(n) is a preconceived idea of what 32. The strongest of the five forces in most
the world is, what it should be like, industries is:
and how it should operate. A) rivalry among companies competing in
A) innovation the industry.
B) entrepreneur B) bargaining power of buyers.
C) paradigm C) threat of new entrants to the industry.
D) profitable vision D) threat of substitute products or services.
Answer: C Answer: A

29. Research shows that anyone can learn 33. Switching costs, the number of buyers,
to be creative. The problem is: and if the items represent a relatively
A) many organizations fail to foster an small portion of the cost of finished
environment that encourages products are key considerations
creativity. regarding the:
B) most people never tap into their A) threat of new entrants to the industry.
pools of innate creativity. B) rivalry among companies competing in
C) most people have never been taught the industry.
to be creative. C) bargaining power of suppliers.
D) All of the above. D) bargaining power of buyers.
Answer: D Answer: D

30. The process of determining whether 34. Low capital requirements, cost
an entrepreneur's idea is a viable advantages that are not related to
foundation for creating a successful company size, and the lack of brand
business is known as a: loyalty are considerations regarding the:
A) business plan. A) threat of new entrants to the industry.
B) strategic analysis. B) threat of substitute products.
C) industry analysis. C) bargaining power of buyers.
D) feasibility analysis. D) rivalry among companies competing in
Answer: D the industry.
Answer: A
31. Porter's five forces model assesses
industry attractiveness by surveying 35. Products or services that may be sought
these five factors: as alternative solutions-such as
A) potential entrants, suppliers, buyers, purchasing tax planning software rather
substitutes, and rivalry among existing than paying a CPA to assist with
firms. preparing your taxes-are referred to as:
B) potential entrants, suppliers, buyers, A) buyers products.
similar products, and rivalry among existing B) rivalry products.
firms. C) substitute products.
C) potential entrants, suppliers, raw D) competitive alternatives.
materials, substitutes, and rivalry among Answer: C
existing firms.
D) potential entrants, competitors, buyers, 36. The force from the five forces model that
substitutes, and rivalry among existing considers economies of scale, initial
firms. capital requirements, cost advantages
Answer: A relevant to company size, and lack of
brand loyalty is the:
A) bargaining power of suppliers. 41. ________ involves developing a
B) threat of new entrants. game plan to guide a company as it
C) threat of substitute products or services. strives to accomplish its mission,
D) rivalry among companies competing. goals, and objectives to keep it on its
Answer: B desired course.
A) Competitive advantage
37. The primary purpose of the five forces B) Mission
matrix is to: C) Strategic management
A) assign values to each of the five elements. D) Market segmentation
B) provide a graphic. Answer: C
C) list the five forces in rank order.
D) assess the five forces as compared to a 42. The aggregation of factors that sets a
standard value. company apart from its competitors
Answer: A and gives it a unique position in the
market, superior to its competition, is
38. The process in which entrepreneurs test its:
their business models on a small scale A) mission statement.
before committing serious resources to B) competitive advantage.
launch a business that might not work is C) competitive profile.
known as: D) strategic plan.
A) business modeling. Answer: B
B) business prototyping.
C) business planning. 43. Which of the following was not
D) product or service feasibility analysis. identified as a way for the typical
Answer: B small business to establish a
competitive advantage?
39. An analysis that determines the degree to A) Lowering prices
which a product or service idea appeals B) Providing higher quality goods or services
to potential customers and identifies the C) Improving customer service
resources necessary to produce the D) Doing whatever the company does for its
product or provide the service is referred customers better than its competitors
to as: Answer: A
A) product or service feasibility analysis.
B) business prototyping. 44. ________ are a unique set of
C) business plan analysis. capabilities that a company develops
D) financial feasibility analysis. in key operational areas-such as
Answer: A service, innovation, and others-that
allow it to potentially vault past its
40. Which of the following is not one of competitors.
the three components of intellectual A) Core competencies
capital? B) Opportunities
A) Human C) Key success factors
B) Structural D) Mission statements
C) Competitor Answer: A
D) Customer
Answer: C
 45. The relationship between core reliability and creativity of the resulting plan.
competencies and competitive D) It should allow for flexibility and not be
advantage is best described by which overly structured.
statement? Answer: B
A) Strengthening a company's competitive
advantage strengthens its core competencies. 49. A clearly defined vision helps a
B) A company's core competencies become company in which of the following
the nucleus of its competitive advantage. ways?
C) As a company's core competencies A) Provides direction
become stronger, its competitive advantage B) Determines decisions
becomes weaker. C) Motivates people
D) There is no relationship between core D) All of the above
competencies and competitive advantage. Answer: D
Answer: B
50. A small company's mission
46. The key to entrepreneurial success statement:
over time is to build a ________ A) establishes its purpose in writing.
competitive advantage. B) gives the business and everyone in it a
A) defensible sense of direction.
B) sustainable C) defines what the company is, why it exists,
C) coherent and its reason for being.
D) random D) All of the above
Answer: B Answer: D

47. A strategic plan serves as a blueprint 51. ________ entrepreneurs are business
to help a company to: builders who seek innovative
A) match their company's strengths and solutions to some of society's most
weaknesses to the environment's vexing problems.
opportunities and threats. A) Social
B) accomplish its mission, goals, and B) Opportunistic
objectives. C) Serial
C) identify a company's competitive D) Necessity
advantage and set it apart from its Answer: A
competition with a unique position in the
market. 52. Which of the following is a benefit of
D) All of the above entrepreneurship?
Answer: D A) The opportunity to gain control over
your own destiny.
48. Which of the following is NOT a B) The opportunity to reach your full
characteristic of the strategic potential.
management procedure for a small C) The opportunity to do what you
company? enjoy.
A) It should use a relatively short planning D) All of the above
horizon-two years or less, typically. Answer: D
B) It should begin with an extensive
objective-setting session.
C) It should encourage the participation of
employees and even outsiders to improve the
 53. Potential drawbacks of A) Cloud computing.
entrepreneurship may include B) Mobile marketing.
________. C) The Internet.
A) uncertainty of income, risk, long D) All of the above
hours, and high stress Answer: D
B) uncertainty of income, risk, easy
hours, and frequent vacations 58. Entrepreneurs may find benefit from
C) uncertainty of income, risk, long the Internet due to its potential
hours, and the immediate ________.
accumulation of wealth A) if the organization is willing to invest
D) certainty of income, risk, long hours, millions of dollars in this effort
and high stress B) only if the entrepreneur has a high
Answer: A level of technical abilities
C) as a relatively low-cost solution to
54. Nearly ________ of entrepreneurs expand its revenue-generating
start their businesses between the abilities
ages of 20 and 44 and the number of D) to take all pressure off other attributes
Americans in that age range currently of the business venture
is ________ . Answer: C
A) one-half; 8.5 million
B) two-thirds; 85,000 59. International opportunities are
C) three-fourths; 103 million ________.
D) one-fourth; 85 million A) clearly out of reach for
Answer: C entrepreneurial businesses
B) now within the reach of
55. Factors that feed the economic boom entrepreneurial businesses and may
behind entrepreneurship include present significant opportunities
________. C) highly limited for entrepreneurs
A) demographic and economic factors D) risky and do not merit serious
B) technology and cloud computing consideration by the entrepreneur
C) the shift to a service-based economy Answer: B
and international opportunities
D) All of the above 60. Which of the following statements
Answer: D concerning small businesses and
international markets is false?
56. Which of the following is NOT one of A) Although terrorism and global
the forces driving the entrepreneurial recession have slowed the growth of
trend in our country? international trade somewhat, global
A) Shift away from a service economy. opportunities for small businesses
B) Independent lifestyle. have a long-term positive outlook.
C) International opportunities. B) Although the U.S. is an attractive
D) E-commerce and the World Wide market, approximately 95 percent of
Web. the world's population lives outside
Answer: A its borders.
C) Because exporting is so complex and
57. Which of the following technological requires a company to have so many
forces is driving the entrepreneurial international experts on staff,
trend in our nation? exporting is not feasible for small
 businesses. 66. The driving force behind immoral
D) Small companies comprise 97 management is .
percent of all businesses engaged in A) the law
exporting, yet they account for only B) culture
30 percent of the nation's export C) greed
sales. D) education
Answer: C Answer: C

61. The merely establishes the 67. According to the , one should
minimum standard of behavior. "choose the option that offers the
A) mission greatest good for the greatest number
B) law of people."
C) strategic plan A) television test
D) financial plan B) utilitarian principle
Answer: B C) family test
D) golden rule
62. The is the narrowest level of ethical Answer: B
standards.
A) mission 68. According to the , one should
B) law "treat other people the way you would
C) strategic plan like them to treat you."
D) financial plan A) television test
Answer: B B) utilitarian principle
C) family test
63. Actions that are legal, however, may D) golden rule
not be . Answer: D
A) ethical
B) complex 69. A company _ is a statement that
C) profitable defines the values underlying the
D) doable entire company and its ethical
Answer: A responsibilities to its stakeholders.
A) credo
64. A strong determinant of moral B) annual report
behavior is . C) vision
A) profitability D) strategic plan
B) financial success Answer: A
C) training
D) short-term success 70. A is a written statement of the
Answer: C standards of behavior and ethical
principles a company expects from its
65. Companies really are not ethical or employees.
unethical; are. A) company credo
A) goals B) company annual report
B) strategies C) company vision
C) individuals D) code of ethics
D) departments Answer: D
Answer: C
 71. The financial feasibility analysis B) is a valuable tool for convincing lenders or
takes these aspects into consideration: investors to put money into the business.
A) capital requirements, human resources, C) forces an entrepreneur to think a business
and return on investment. idea through, considering both its positive
B) capital requirements, estimated earnings, and its negative aspects.
and return on investment. D) All of the above
C) capital requirements, estimated earnings, Answer: D
and return on sales.
D) capital requirements, estimated earnings, 76. A solid business plan:
and return on owner's equity. A) forces potential entrepreneurs to look at
Answer: B their business idea in the harsh light of
reality.
72. The final aspect of the financial B) requires a potential entrepreneur to assess
feasibility analysis combines the the venture's chances of success more
estimated earnings and the capital objectively.
requirements to determine the: C) helps prove to outsiders, such as potential
A) estimated earnings. lenders and investors, that a business idea can
B) total capital requirements. be successful.
C) net profit. D) All of the above
D) rate of return on the capital invested. Answer: D
Answer: D
77. The second essential purpose for
73. The primary purpose of a business creating a business plan is:
plan is to: A) to guide the operation of the company by
A) attract lenders and investors. charting its future course and devising a
B) enable an entrepreneur to take her strategy for following it.
company public. B) to attract lenders and investors.
C) guide a company by charting its future C) to file with the SEC before a public stock
course and devising a strategy for success. offering.
D) meet SEC and other legal requirements D) to attract potential managers and
designed to protect lenders and investors. employees to run the new venture.
Answer: C Answer: B

74. A business plan is a written summary 78. The three "tests" associated with a
of: business plan are:
A) an entrepreneur's proposed business A) reality, competitive, and value.
venture. B) competitive, profitability, and value.
B) a business venture's operational, financial, C) value, reality, and profitability.
and marketing details. D) reality, value and litmus.
C) the skills and abilities of a business Answer: A
venture's managers.
D) All of the above 79. The ________ test that a business
Answer: D plan must pass in order to attract
financing from lenders and investors
75. A business plan: involves proving that a market for the
A) is a valuable managerial tool that helps an company's product or service actually
entrepreneur focus on developing a course does exist and that the company
for the business in the future. actually can build it for the cost
 estimates included in the plan. Answer: A
A) reality
B) competitive
83. Which hemisphere of the brain is
C) value
D) profitability responsible for language, logic, and
Answer: A symbols?
A) Right Hemisphere
80. The reality test that a business plan B) Left Hemisphere
must pass in order to attract financing C) Lateral Hemisphere
from lenders and investors involves D) Intuitive Hemisphere
proving: Answer: B
A) that the company can gain a competitive
advantage over its key competitors. 84. Which hemisphere of the brain is
B) that the business venture will provide responsible for the body’s emotional,
lenders and investors a high probability of intuitive, and spatial functions?
repayment or an attractive rate of return. A) Right Hemisphere
C) that a market for the company's product or B) Left Hemisphere
service actually does exist and that the C) Vertical Hemisphere
company can actually build it for the cost D) Logical Hemisphere
estimates included in the plan. Answer: A
D) that the industry in which the business will
compete is growing faster than the overall
economy and has room for more competitors. 85. Which hemisphere of the brain
Answer: C processes information in a step-by-
step fashion?
81. The competitive test that a business A) Right Hemisphere
plan must pass in order to attract B) Left Hemisphere
financing from lenders and investors C) Lateral Hemisphere
involves proving: D) Intuitive Hemisphere
A) that the company can gain a competitive Answer: B
advantage over its key competitors.
B) that the business venture will provide
lenders and investors a high probability of 86. Which hemisphere of the brain
repayment or an attractive rate of return. processes information all at once and
C) that a market for the company's product or by relying heavily on images?
service actually does exist and that the A) Right Hemisphere
company can actually build it for the cost B) Left Hemisphere
estimates included in the plan. C) Vertical Hemisphere
D) that the industry in which the business will D) Logical Hemisphere
compete is growing faster than the overall Answer: A
economy and has room for more competitors.
87. vertical thinking is narrowly
Answer: A
focused and systematic, proceeding in
a highly logical fashion from one
82. The right brain is guided by:
point to the next.
A) kaleidoscopic, lateral thinking.
A) Left-brained
B) linear, vertical thinking.
B) Right-brained
C) asymmetrical thinking.
C) Unconventional
D) logical thinking.
 D) Intuitive D) All of the above
Answer: A Answer: C
88. lateral thinking is somewhat 93. Strengths and weaknesses are
unconventional and unstructured. ________ to the organization.
A) Left-brained A) internal factors
B) Right-brained B) external factors
C) Systematic C) internal and/or external factors
D) Logical D) factors not belonging
Answer: B Answer: A

89. In his book A Whack on the Side of 94. ________ are positive internal
the Head, Roger von Oech views a factors that contribute toward
“playful attitude” as: accomplishing the company's
A) frivolous. mission, goals, and objectives, while
B) fundamental to creative thinking. ________ are negative internal
C) a mental block. factors that inhibit the
D) limiting individual creativity. accomplishment of a firm's mission,
Answer: B goals, and objectives.
A) Strengths; weaknesses
B) Weaknesses; strengths
90. All of the following represent barriers C) Opportunities; threats
to creativity that entrepreneurs D) Threats; opportunities
impose upon themselves except: Answer: A
A) focusing on being too logical.
B) being too practical. 95. Kevin Abt noticed that people were
C) blindly following rules. cooking meals in their homes less
D) searching for more than one answer. often but wanted to avoid the hassle
Answer: D of going out to eat. They wanted to
"eat in" without cooking. Abt
launched a company, Takeout Taxi,
91. Roger von Oech believes that blindly that delivers restaurant-prepared food
following rules leads to: to his customers' homes and
A) order, which stimulates creativity. businesses. Takeout Taxi is the result
B) a clearer vision and business venture. of a(n):
C) new ways of doing things. A) strength.
D) a mental block towards creativity. B) weakness.
Answer: D C) opportunity.
D) threat.
Answer: C
92. When developing a company's
mission statement, an entrepreneur
96. Maria Sanchez is the owner of the
should remember to:
Main Street Café and a new restaurant
A) write the statement alone without anyone
opens a few blocks away. From
else's interference.
Maria's perspective, this new
B) omit statements about her values because
restaurant constitutes a(n):
they may turn some stakeholders off.
A) strength.
C) keep it short and simple.
B) weakness.
C) threat.
D) opportunity.
Answer: C

97. Every business is characterized by a

set of controllable variables that
determines the relative success (or
lack of it) of market participants
called:
A) distinctive competencies.
B) key success factors.
C) opportunities and threats.
D) competitive edge.
Answer: B

98. Gathering competitive intelligence,

such as "dumpster diving" in a
competitors trash, may raise
questions regarding:
A) the integrity of the data.
B) the competitive profile matrix.
C) a cost benefit analysis.
D) ethical standards.
Answer: D

99. Your ________ competitors offer the

same products and services, and
customers often compare prices,
features, and deals from these
competitors as they shop.
A) significant
B) direct
C) indirect
D) All of the above
Answer: B

100. An ________ competitor

offers the same or similar products of
services only in a small number of
areas, and their target customers
seldom overlap yours.
A) indirect competitor
B) direct
C) parallel
D) divergent
Answer: A