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B&E Chapter 6 test

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

 1. 
Scrubbles laundry detergent has been on the market for years. The manufacturer of Scrubbles recently added a new ingredient to give the detergent extra cleaning power. This is an example of an
a.
improvement.
b.
invention.
c.
innovation.
d.
opportunity cost.
 

 2. 
Small businesses account for ____ of the U.S. gross domestic product each year.
a.
about 10 percent
b.
almost a quarter
c.
nearly half
d.
about 75 percent
 

 3. 
Most of the money needed to start a new business comes from
a.
the sale of stock.
b.
credit given by businesses that sell products and services to the new business.
c.
bank loans.
d.
the entrepreneur and his/her family and friends.
 

 4. 
Entrepreneurs
a.
must have a very low tolerance for ambiguity.
b.
almost always own their first business while in their teens.
c.
come from all age categories and educational backgrounds.
d.
must have a business degree to be successful.
 

 5. 
Successful entrepreneurs tend to have all of the following characteristics EXCEPT
a.
energetic.
b.
goal-oriented.
c.
creative.
d.
hesitant.
 

 6. 
Which of the following is probably the LEAST important factor in becoming an entrepreneur?
a.
living in a major U.S. city
b.
having special skills and abilities
c.
having a real desire to be your own boss
d.
developing a good initial business plan
 

 7. 
In the United States, about how many women own their own businesses?
a.
0.5 million
b.
6 million
c.
14 million
d.
22 million
 

 8. 
About how many new businesses are created in the U.S. every year?
a.
0.5 million
b.
6 million
c.
14 million
d.
22 million
 

 9. 
Which of the following does NOT describe a typical small business?
a.
The owner is usually the manager.
b.
It is dominant in its field.
c.
It serves a small market.
d.
It operates in one or very few locations.
 

 10. 
Small business owners
a.
usually get direct information from their customers about what they like and dislike.
b.
have less frequent contact with their customers than large businesses.
c.
rely heavily on consumer research to gather information.
d.
typically focus on products and services that meet the needs of a large group of customers.
 

 11. 
According to the Small Business Administration, a small business is an independent business with fewer than ____ employees.
a.
10
b.
50
c.
100
d.
500
 

 12. 
Of all new businesses,
a.
about one-third are profitable, one-third do not make a profit but continue to operate, and one-third lose money.
b.
about one-half are profitable, one-quarter do not make a profit but continue to operate, and one-quarter lose money.
c.
about three-quarters are profitable and one-quarter lose money.
d.
about one-quarter are profitable and three-quarters lose money.
 

 13. 
Short-term financing is obtained for a period of less than
a.
three months.
b.
six months.
c.
one year.
d.
two years.
 

 14. 
Small businesses have an advantage over big businesses when customers
a.
are willing to buy standard products.
b.
want more individual attention.
c.
prefer low cost and efficient delivery.
d.
all of the above
 

 15. 
The first step in developing a business plan is to
a.
identify alternative plans for production and marketing.
b.
write the introductory section.
c.
develop the “game plan.”
d.
gather and review information.
 

 16. 
Which element of a business plan discusses the entrepreneur’s short- and long-term goals for the business?
a.
financial plans
b.
description of the competition
c.
description of the business
d.
customer analysis
 

 17. 
Location is important to small retail businesses because
a.
most retailers need good customer traffic to survive.
b.
many potential customers will stay away if the business is not easy to find.
c.
customers generally do not want to travel long distances to find what they need.
d.
all of the above
 

 18. 
The most successful small business owners
a.
establish good working relationships with professionals such as bankers, lawyers, and accountants.
b.
have never worked for anyone else before.
c.
do not need to choose employees carefully because they will be the ones giving orders.
d.
understand that a written business plan is a waste of time and money.
 

 19. 
If you start a new business, you need information about
a.
competitors.
b.
government regulations.
c.
customers.
d.
all of the above
 

 20. 
Which of the following would NOT be discussed in the operations plan section of a business plan?
a.
organization of the company
b.
sales forecasts
c.
human resource plans
d.
analysis of resources needed
 

Completion
Complete each sentence or statement.
 

 21. 
A(n) ____________________ is an invention or creation that is brand new.
 

 

 22. 
A(n) ____________________ is someone who takes a risk in starting a business to earn a profit.
 

 

 23. 
A designed change that increases the usefulness of a product, service, or process is called a(n) ____________________.
 

 

 24. 
____________________ capital is money provided by large investors to finance new products and new business that have a good chance to succeed.
 

 

 25. 
The Small Business ____________________ is a U.S. government agency that helps small business owners obtain financing and other support for their companies.
 

 

 26. 
Members of the Service Corps of Retired ____________________ are retired local businesspeople who volunteer their services to counsel and mentor new business owners.
 

 

 27. 
Most business plans are developed for ____________________ year(s).
 

 

 28. 
____________________ financing is money needed for the main resources of a business that will last for many years.
 

 

 29. 
A business ____________________ is a written description of a business idea and how it will be carried out.
 

 

 30. 
The amount of money needed to open a business is called ____________________ financing.
 

 

 31. 
The majority of small business owners are over ____________________ years old.
 

 

 32. 
Products or raw materials a business keeps on hand to do business are referred to as ____________________.
 

 

 33. 
Money needed to pay for the current operating activities of a business is referred to as ____________________ financing.
 

 

 34. 
The source of owner-supplied money depends on the business’s ownership structure. In a(n) ____________________, one person will supply the money.
 

 

Short Answer
 

 35. 
Over a ten-year period, about how many new businesses will be discontinued? Give at least five reasons why businesses started by entrepreneurs commonly close.
 

 36. 
Why should all small business owners develop business plans, even if they are not required to obtain financing?
 



 
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