Effective Small Business Management: An Entrepreneurial Approach 9th Edition, 2009 ISBN-13: 9780136152705

Norman M. Scarborough, Douglas L. Wilson, and Thomas W. Zimmerer

19Multiple Choice Questions

1. The location of the business is especially important for what type of start-up businesses?
2. service
3. manufacturing
4. retail
5. computer-based service
6. The limited liability company is most like a/an:
7. S-corporation
8. master partnership
9. sole proprietorship
10. general partnership
11. Which of the following is true about choosing a limited liability company form of ownership?
12. It is inexpensive, easy to form, and covered by little regulation due to its newness.
13. It has no disadvantages except its newness.
14. It’s an excellent conversion vehicle for existing businesses that are suffering from double 
taxation but problematic for sole proprietorships.
15. It is ideal for a new company but difficult to convert to with an existing company.
16. Typically, the franchiser controls are very tight on what the franchisee:
17. sets in terms of retail pricing and hours of operation.
18. does in terms of who they hire as employees.
19. sales in terms of the product or service they offer.
20. does with his/her net profits after fees and taxes are paid.
21. The recommended steps when buying a business are:
22. analyze your skills and abilities
23. explore a variety of financing options
24. investigate the potential acquisitions
25. all of the above
26. Using the discounted future earnings approach, the buyer estimates
27. the company’s net income for the several years
28. the company’s net income for the next six months
29. the company’s net income for several years and then discounted back to the present value
30. the company’s net asset for several years and then discounted back to the present value
31. Potential investors tend to believe that if an entrepreneur can’t develop a good plan:
32. then the entrepreneur is just like the majority of entrepreneurs and will probably do quite well
33. he/she probably lacks the discipline to run a business
34. he/she is probably the action-oriented sort of person they need running a business
35. he/she needs to hire a consultant to write the plan for him/her
36. Defining the target market’s potential and describing its characteristics is part of the:
37. marketing strategy portion of the business plan
38. competitive analysis
39. description of the product line
40. business strategy section of the business plan
41. An explanation of how the product will be distributed is contained within the:
42. business strategy section of the business plan
43. description of the product line
44. marketing strategy portion of the business plan
45. competitive analysis

Unit 2 Examination

10. A description of the key factors that will dictate the success of your business quality, price competitiveness, etc. should be contained in the ________ section of the business plan.
11. executive summary
12. market analysis
13. description of the business
14. competitor analysis
15. The marketing plan should include certain key objectives, such as:
16. determining product costs through market research
17. determining what costing strategies to use
18. pinpointing the specific target markets a small business will serve
19. discovering what the company’s ETDB index is
20. A demographic trend is like a train for the small business owner in that:
21. the small business will be “run over” if it doesn’t get out of the way and try to work with the “spin-offs” from the trend
22. he/she needs to catch it and ride it to wherever it is going
23. he/she needs to discover where it is going early and decide whether or not to get on board
24. it is a slow process that is easily caught at several points, and the small business owner

has lots of time to consider his/her options

13. To build an effective customer service program, it is important to:
14. swiftly discipline employees who mistreat customers
15. offer low prices
16. train key employees to watch for and intervene when there are problems let managers wait on d. customers occasionally
17. The cost of marketing a product is highest in the:
18. saturation stage
19. introductory stage
20. growth and acceptance stages
21. maturity stage
22. The choice of advertising medium is primarily determined by:
23. what media the competition uses
24. the unique selling proposition and budget
25. the target audience and the message
26. what media the industry focuses on
27. Radio:
28. can reach nearly any target market
29. is the one medium that customers spend the most time paying attention to
30. is the most expensive advertising medium in terms of relative costs
31. is very susceptible to “zapping”
32. When pricing products, it is important to remember that:
33. pricing is more an intuitive than a quantitative process
34. a customer orientation in price setting is most important
35. there is an ideal price that customers will pay for a given product or service
36. once the acceptable price range is found, prices should not be changed again
37. ABC manufactures computer hardware. The marketing executives, in order to increase the market share, forced a business to accept a suggested retail price and not to sell the items below the stated price. This is a violation of what?
38. As long as the manufacturer offer rebates, they can do whatever they want.
39. This practice violates the Fair Price Protection Act
40. This practice violates the Sherman Antitrust Act.
41. There is no violation. The manufacturer has the rights to tell a business at what price they

should resell the computer.

19. In regards to strategies for E-success, which goal(s) of e-commerce are no different from traditional off-line businesses?
20. boost profits
21. improve efficiency
22. to increase sales
23. all of the above

7) A SCOR filing has a number of advantages to it, such as the fact that:

it can be used by partnerships

there is no requirement for an audited financial statement if the offering is under $500,000

a company may raise between $3 and $5 million per year

it is recognized in every state

13) When a small business is refused a loan because it is not profitable and deemed a poor credit risk, the owner can usually turn to ________ as a source of short-term funds.

1. venture capital companies
2. trade credit
3. loans from insurance companies
4. stockbrokers

14) A federally-sponsored program which offers loan guarantees to create and expand businesses in areas with below-average income and high unemployment is called:

1. the Farmers Home Administration
2. the Economic Development Administration c. SBIC
3. the Small Business Administration

15) Grants to small businesses, made to strengthen the local economy in cities and towns that are considered economically distressed, are made by:

1. the Farmers Home Administration
2. a local development company
3. the Economic Development Administration
4. the Department of Housing and Urban Development

16) When a bank makes enough good SBA-guaranteed loans to become a ________ lender, the SBA promises a faster turnaround time for the loan decision–typically 3 to 10 business days.

1. LDC
2. certified c. preferred d. qualified

17) A Section 504 program has three types of lenders involved:

1. a local development company, the SBA, and a commercial finance company. b. a bank, the SBA, and a certified development company.
2. the SBA, a private placement, and an SBIC.
3. HUD, a bank, and an economic development company.

18) The average interest rates on SBA-guaranteed loans is:

1. prime-plus-2-percent
2. 2 percent
3. 7 percent
4. prime-minus-2-percent

Unit 4 Examination

19) Factoring:

1. places the risk of uncollected accounts receivable on the small business owner
2. is a type of trade credit
3. is best used as a long-term source of capital
4. is a more expensive method of financing than borrowing from a bank

20) Which of the following characteristics for selecting a city would be of greatest interest to a retail store selling fine china and collectibles?

1. Transportation
2. Population trends
3. Public services
4. Zoning

21) One advantage to locating near competitors is found in the:

1. localize all similar businesses close to each other
2. the ability to in comparison shopping
3. to keep an eye on the competitor
4. make it easy for hiring

22) The best way to determine where to place merchandise, what a store’s “hot” and “cold” spots are, is to:

1. simply observe customers in the store
2. conduct focus groups with former customers
3. hire a market research firm to study your business
4. conduct a kinesiology study

23) The value of the floor space in a retail store depends upon:

1. the merchandise in that area
2. the number of salespeople servicing the area
3. its proximity to aisles and entrances
4. the type of store and customer

Unit 4 Examination

24) What are two distinct factors are important for entrepreneurs analyzing the labor supply in a potential location?

1. Minimum wage in the area and the labor’s level of education, training and experience.
2. Minimum wage and the number of workers available in the area.