Chapter 5 - Small Business, Entrepreneurship, and Franchises
Test Yourself
Matching Questions
1.
2.
3.
4.
5.
6.
7.
I A carefully constructed guide for
the person starting a business.
E A group of retired and active
business people who volunteer their
services to small businesses through the
SBA.
K A government agency that assists,
counsels, and protects the interests of
small businesses in the United States.
A Money that is invested in small
(and sometimes struggling) firms that have
the potential to become very successful.
D Group of senior and graduate
students in business administration who
provide management counseling to small
businesses.
F A business that is independently
owned and operated for profit and is not
dominant in its field.
B A person or organization
purchasing a franchise.
8.
G A license to operate an individually
owned business as though it were a part of
a chain of outlets or stores.
9. J
The actual granting of a franchise.
10.
L An individual or organization
granting a franchise.
a. venture capital
b. franchisee
c. joint venture
d. Small-Business Institutes
(SBIs)
e. SCORE
f. small business
g. franchise
h. strategic alliance
i. business plan
j. franchising
k. SBA
l. franchisor
True False Questions
11. T F The SBA has defined a small
business as one independently owned,
operated for profit, and not dominant in its
field.
12. T F The various types of businesses
attracting small business are generally
grouped into service industries,
distribution industries, and financial
industries.
13. T F Small businesses are generally
managed by professional managers.
14. T F Small firms have traditionally added
more than their proportional share of new
jobs to the economy.
15. T F Economically, the U.S government
is not concerned with whether or not small
businesses make it.
16. T F SCORE is a group of active business
executives offering their services to small
businesses for a fee.
17. T F A small-business investment
company (SBIC) is a government agency
that provides venture capital to small
enterprises.
18. T F The purchaser of a franchise is
called the franchisor.
19. T F An agreement between two
franchisors in which the two franchisors
offer their products together is called
double franchising.
20. T F International trade will become
more important to small-business owners
in the new century.
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Multiple-Choice Questions
21.
What is the primary reason that so
many new businesses fail?
a. Owner does not work hard
enough
b. Mismanagement resulting from
lack of business know-how
c. Low employee quality for new
businesses
d. Lack of brand-name
recognition
e. Inability to compete with wellestablished brand names
22.
Businesses such as flower shops,
restaurants, bed and breakfasts, and
automobile repair are good candidates for
entrepreneurs because they
a. do not require any skills.
b. are the most likely to succeed.
c. can obtain financing easily.
d. require no special equipment.
e. have a relatively low initial
investment.
23.
An individual’s desire to create a
new business is referred to as
a. the entrepreneurial spirit.
b. the desire for ownership.
c. self-determination.
d. self-evaluation.
e. the laissez-faire spirit.
24.
What is a common mistake that
small-business owners make when their
businesses begin growing?
a. They sell more goods and
services.
b. They put too much money in
advertising.
c. They move beyond their local
area.
d. They over-expand without
proper planning.
e. They invest too much of their
own money.
25.
The fact that insulin and power
steering both originated with individual
inventors and small companies is
testimony to the power of small businesses
as providers of
a. employment.
b. competition.
c. technical innovation.
d. capital.
e. quality products.
26.
In her small retail shop, Jocelyn
knows most of her best customers by name
and knows their preferences in clothing
and shoes. This demonstrates which
advantage of a small business?
a. Ability to adapt to change
b. Independence from customer’s
desires
c. Simplified record keeping
d. Personal relationships with
customers
e. Small customer base
27.
Shonta started a graphic design firm
a year ago. The business has done well,
but it needs a lot more equipment,
computers, and employees to continue
expanding. Shonta thinks she can get all
the money she will need from her bank.
What advice might you give to her?
a. She is right—the bank is likely
to lend her as much as she
needs because banks primarily
focus on supporting small
businesses.
b. She is crazy—banks do not
lend money to small businesses
but only to well-known, wellestablished organizations.
c. She should sell her business
immediately before it fails
because most small businesses
fail during the first five years.
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d. She should not accept any new
clients so that she can end the
need to add additional
equipment and employees.
e. She should consider alternative
sources of financing because
banks provide only a portion of
the total capital to small
businesses.
28.
Volunteers for SCORE are
a. mostly university business
professors.
b. active executives from large
corporations.
c. generally either lawyers or
accountants.
d. graduate business students
working on projects.
e. retired and active
businesspeople from different
industries.
29.
An individual or organization
granting a license to operate an
individually owned business as though it
were part of a chain of outlets or stores is
a(n)
a. franchise.
b. franchisor.
c. franchisee.
d. venture capitalist.
e. entrepreneur.
30.
Manju asks for your advice in
opening a new business. She plans to
provide tax-related services to individuals
and small-business owners in her
community. Of course, she wants an
attractive means of starting and operating
her business with a reasonable hope of
succeeding in it. What will be your
advice?
a. Start your own independent
business
b. Form a partnership with a CPA
c. Consider purchasing a
franchise
d. Forget about opening the
business because it is too risky
e. First secure a loan from the
Small Business Administration
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