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Chapters Five & Six, Exam One

If you want to go into business for yourself, the easiest way is a sole proprietorship.
A. True
B. False
A, True, Forming a sole proprietorship is easy and inexpensive because of the simple management structure, the low cost of permits and the lack of lawyer involvement
Jane has discovered that she is bored working for others. She wants to open a business in which she will have maximum control and the least interference from government regulation. Which business form should she use?
A. Joint venture
B. Cooperative
C. Corporation
D. Partnership
E. Sole proprietorship
: E, A sole proprietorship is easy and inexpensive to form, it has the greatest degree of secrecy, all profits belong to the owner, it has complete control, it has the most freedom from government regulation, the owner pays one income tax and the business can be easily dissolved
In a general partnership, each partner is liable only for the debts he or she incurs.
A. True
B. False
B, False, In a general partnership, each partner has unlimited liability for the debts of the business.
The biggest advantage of the corporate form of ownership may be the limited liability of its owners.
A. True
B. False
A. True, The biggest advantage of a corporation is limited liability because the corporation’s assets and liabilities are separate from its owners’
When two companies combine to form a new company, it is called a(n)
A. merger.
B. acquisition.
C. tender offer.
D. leveraged buyout.
E. white knight.
: A, A merger occurs when two companies, usually corporations, combine to form a new company
Any business that is independently owned and operated can be classified as a small business.
A. True
B. False
B, False, A small business is independently owned and operated that is not dominant in its competitive area and does not employ more than 500 employees
. In recent years, small businesses generated very few new jobs in the U.S.
A. True
B. False
B, False, In the last decade, 60 to 80 percent of net new jobs annually were created by small businesses
In the context of starting a new business, a retailer differs from a manufacturer in that the retailer is less likely to make a heavy investment in
A. equipment and distribution systems.
B. space.
C. bookkeeping.
D. stationery.
E. advertising.
A, An entrepreneur opening a new retailing store does not have to spend the large sums of money for the equipment and distribution systems that a manufacturing business requires
Targeting small niches or product needs is a dangerous strategy for a small business to follow.
A. True
B. False
B. False, By targeting small niches or product needs, small businesses sometimes can avoid fierce competition from larger firms, helping them grow into stronger companies.
Managerial inexperience can lead to business failure.
A. True
B. False
A. True, Three major causes of small business failure are undercapitalization, managerial inexperience or incompetence and inability to cope with growth
Small business success
A. rarely lasts more than two years.
B. is not guaranteed.
C. is not really attainable.
D. happens only in the United States.
E. is a sure thing.
: B, Nearly 70 percent of small businesses fail within the first ten years but the ones that do succeed sometimes become multinational corporations such as Google and Dell
A precise statement of the rationale for a business and a step-by-step explanation of how it will achieve its goals is a
A. mission statement.
B. corporate charter.
C. business plan.
D. corporate statement.
E. balance sheet.
C, The business plan is a key component of a business’s success that is a detailed explanation of how it will achieve its goals
The money used to start a business and keep it running is also called
A. capital.
B. trade.
C. currency.
D. leverage.
E. stock.
A, Capital is the wealth, owned or employed, in a business by an individual or firm.
Venture capitalists are an example of
A. debt financing.
B. owners’ equity.
C. preferred stockholders.
D. equity financing.
E. none of the above.
D, equity financing includes investors such as venture capitalists, friends, families in which the owner sells stock in the business
Which segment of the population is probably the wealthiest in the U.S.?
A. Echo boomers
B. Generation Y
C. Baby boomers
D. Millennials
E. Generation Z
C, America’s Baby Boom generation, the wealthiest segment in the U.S., began in 1946 and ended in 1964
Forming a sole proprietorship is easy and inexpensive because
of the simple management structure, the low cost of permits and the lack of lawyer
In a general partnership, each partner has
unlimited liability for the debts of the business.
The biggest advantage of a corporation is
limited liability because the corporation’s assets and liabilities are separate from its owners’
A merger occurs when
two companies, usually corporations, combine to form a new company
A small business is
-Independently owned and operated that is not dominant in its competitive area
-Does not employ more than 500 employees
In the last decade, 60 to 80 percent of net new jobs annually were created by
small businesses
An entrepreneur opening a new retailing store does not have to spend the large sums of money for
the equipment and distribution systems that a manufacturing business requires
By targeting small niches or product needs, small businesses sometimes can avoid
fierce competition from larger firms, helping them grow into stronger companies.
Three major causes of small business failure are
1) Undercapitalization
2) Managerial Inexperience or Incompetence
3) Inability to Cope With Growth
Nearly 70 percent of small businesses fail within the first
ten years but the ones that do succeed sometimes become multinational corporations such as Google
The business plan is a key component of a business’s success that
is a detailed explanation of how it will achieve its goals
Capital is
the wealth, owned or employed, in a business by an individual or firm.
equity financing includes investors such as venture capitalists, friends, families in which
the owner sells stock in the business
America’s Baby Boom generation, the wealthiest segment in the U.S., began in
1946 and ended in 1964

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