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Business Essentials, 8ce Chapter 4: Entrepreneurship, Small Business, and New Venture Creation

Chapter 4 Entrepreneurship, Small Business, and New Venture Creation 4.1 Multiple-Choice Questions 1) Self-employed Canadians account for about ________ percent of the workforce. A) 3 B) 5 C) 16 D) 22 E) 34 Answer: C Diff: 3 Type: MC Page Ref: 75 Skill: Knowledge Objective: 4.1 2) Approximately how many new businesses are started each day in Canada? A) 25 B) 100 C) 250 D) 380 E) 500 Answer: D Diff: 3 Type: MC Page Ref: 75 Skill: Knowledge Objective: 4.1 3) Individuals who both recognize and seize opportunities are referred to as A) speculators. B) franchisees. C) entrepreneurs. D) intrapreneurs. E) independents. Answer: C Diff: 1 Type: MC Page Ref: 76 Skill: Knowledge Objective: 4.1

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Business Essentials, 8ce Chapter 4: Entrepreneurship, Small Business, and New Venture Creation

4) Entrepreneurs often have more than one goal for starting a business and becoming selfemployed. Which of the following reasons is probably the least common goal of entrepreneurs? A) To seek independence and be their own boss B) To earn a comfortable living for a period of time C) To grow and expand a current business D) To meet community or social obligations E) To provide for their financial needs Answer: D Diff: 1 Type: MC Page Ref: 76 Skill: Knowledge Objective: 4.1 5) A new firm is A) one that has been in business for 5 years or less. B) one that has not yet opened for business. C) one with less than 10 years' experience. D) one that has become operational within the previous 12 months. E) one that opened its doors within the past 6 months. Answer: D Diff: 2 Type: MC Page Ref: 76 Skill: Comprehension Objective: 4.1 6) How are intrapreneurs different from entrepreneurs? A) The former are women and the latter are men. B) The former are older than the latter. C) The former work within an existing business while the latter start their own business. D) The former earn less money than the latter. E) There is not difference between the two terms. Answer: C Diff: 1 Type: MC Page Ref: 76 Skill: Comprehension Objective: 4.1 7) A small business is an owner managed business with less than ________ employees. A) 25 B) 50 C) 10 D) 500 E) 100 Answer: E Diff: 2 Type: MC Page Ref: 75 Skill: Knowledge Objective: 4.1

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Business Essentials, 8ce Chapter 4: Entrepreneurship, Small Business, and New Venture Creation

8) What percentage of Canada's GDP is contributed by small businesses? A) 7 percent B) 13 percent C) 19 percent D) 30 percent E) 41 percent Answer: D Diff: 3 Type: MC Page Ref: 77 Skill: Knowledge Objective: 4.1 9) Which of the following is correct with regard to small business? A) Various measures might be used to define a small business, including the number of people the business employs, the company's sales revenue, the size of the investment required, or the type of ownership structure the business has. B) Since the Business Register tracks businesses and the Labour Force Survey tracks individuals, these sources of information are not useful in defining the term "small business." C) To be included in the Business Register, a business must have at least five paid employees. D) In the Business Register, a goods-producing company is considered small if it has fewer than 500 employees, while a service-producing business is considered small if it has fewer than 100 employees. E) All of these are correct. Answer: A Diff: 3 Type: MC Page Ref: 75 Skill: Comprehension Objective: 4.1 10) According to Industry Canada there are about ________ people who are "self- employed" and about ________ "business establishments." A) 1.2 million; 1.2 million B) 5 million; 500 000 C) 2.7 million; 2.2 million D) 725 000; 500 000 E) 225 000; 225 000 Answer: C Diff: 3 Type: MC Page Ref: 75 Skill: Knowledge Objective: 4.1

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Business Essentials, 8ce Chapter 4: Entrepreneurship, Small Business, and New Venture Creation

11) In the Business Register, a goods-producing business is considered small if it has fewer than ________ employees, and a service-producing business is considered small if it has fewer than ________ employees. A) 1000; 500 B) 500; 1000 C) 100; 50 D) 500; 250 E) 250; 500 Answer: C Diff: 2 Type: MC Page Ref: 75 Skill: Knowledge Objective: 4.1 12) In the 2015 Heritage Foundation index of economic freedom, the top three countries were ________; Canada ranked ________. A) Australia, Japan, and Singapore; 25th B) the United States, Germany, and Japan; 8th C) the United States, Ireland, and Germany; 11th D) Hong Kong, Singapore, and New Zealand; 6th E) China, Japan, and South Vietnam; 37th Answer: D Diff: 3 Type: MC Page Ref: 76 Skill: Knowledge Objective: 4.1 13) The Heritage Foundation's "index of economic freedom" measures A) how well command economies are performing compared to market economies. B) the extent to which entrepreneurs have freedom to pursue new business opportunities. C) how well entrepreneurs are performing in advanced industrialized countries compared to developing economies. D) how much profit entrepreneurs are making in command economies compared to market economies. E) the economic freedom entrepreneurs have in various countries, using the United States as the comparison point. Answer: B Diff: 2 Type: MC Page Ref: 76 Skill: Comprehension Objective: 4.1

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Business Essentials, 8ce Chapter 4: Entrepreneurship, Small Business, and New Venture Creation

14) At Telus, the redesign of the company's website was the result of ________ in a large firm. A) product refinement B) intrapreneurship C) entrepreneurship D) starting a business from scratch E) marketing research Answer: B Diff: 2 Type: MC Page Ref: 76 Skill: Comprehension Objective: 4.1 15) The part of the economy that is made up of companies and organizations not owned or controlled by the government is called A) crown corporations. B) split sector. C) legislated corporations. D) public sector. E) the private sector. Answer: E Diff: 2 Type: MC Page Ref: 77 Skill: Knowledge Objective: 4.2 16) According to Industry Canada, small businesses account for over two thirds of employment in all of the following except A) other services. B) construction. C) accommodation and food. D) manufacturing. E) non-institutional health care. Answer: D Diff: 2 Type: MC Page Ref: 77 Skill: Knowledge Objective: 4.2 17) What percentage of businesses in Canada have less than 100 employees? A) 98 B) 58 C) 88 D) 78 E) 28 Answer: A Diff: 2 Type: MC Page Ref: 77 Skill: Knowledge Objective: 4.2

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Business Essentials, 8ce Chapter 4: Entrepreneurship, Small Business, and New Venture Creation

18) During the period from 2002 to 2012, small businesses created ________ percent of all the jobs in Canada. A) 8 B) 15 C) 28 D) 43 E) 77 Answer: E Diff: 2 Type: MC Page Ref: 77 Skill: Knowledge Objective: 4.2 19) Women account for ________ of all new businesses that are formed, and they lead ________ percent of the small- and medium-sized businesses that export goods and services. A) About one-fifth; 6 B) about one-quarter; 18 C) about one-third; 18 D) more than one-half; 12 E) two-thirds; 24 Answer: D Diff: 2 Type: MC Page Ref: 77 Skill: Knowledge Objective: 4.2 20) What are the three key elements in the entrepreneurial process? A) The entrepreneur, the opportunity, and the marketing plan B) The marketing plan, the production plan, and the finance plan C) The product (or service) plan, the entrepreneur, and luck D) The entrepreneur, the opportunity, and the resources E) The financing plan, the product (or service) plan, and luck Answer: D Diff: 2 Type: MC Page Ref: 78 Skill: Knowledge Objective: 4.3 21) Which is the most common source of ideas for a new venture? A) Brainstorming B) Family C) Work experiences D) Children E) Magazines Answer: C Diff: 1 Type: MC Page Ref: 78 Skill: Knowledge Objective: 4.3

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Business Essentials, 8ce Chapter 4: Entrepreneurship, Small Business, and New Venture Creation

22) Which of the following is correct with regard to the issue of where new ideas for a business come from? A) The most important source of ideas for a new venture arise as the result of a conscious search for new venture ideas. B) About half of all new venture ideas come from insights gained or skills learned at a previous job. C) Personal hobbies or interests are the most important source of ideas for a new venture. D) Suggestions from family members are an important (but not the most important) factor in coming up with new venture ideas. E) There is no particular pattern in the development of ideas for a new venture. Answer: B Diff: 3 Type: MC Page Ref: 78-79 Skill: Comprehension Objective: 4.3 23) Sam has always been interested in starting his own business but, as a recent graduate, is not certain where he can get ideas. Which of the following is a good reliable source for information needed to make the decision to start a new business? A) Experience in industry before starting a new business B) Parents C) Teachers D) Bankers E) Business analysts Answer: A Diff: 2 Type: MC Page Ref: 78-79 Skill: Comprehension Objective: 4.3 24) When screening ideas, an entrepreneur would ask all of the following questions except A) is the idea marketable? B) does this idea have a high entrance cost? C) does this idea create or add value for the customer? D) does the idea provide a sustainable competitive advantage? E) is the idea financially viable? Answer: B Diff: 1 Type: MC Page Ref: 79-80 Skill: Comprehension Objective: 4.3

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Business Essentials, 8ce Chapter 4: Entrepreneurship, Small Business, and New Venture Creation

25) With regard to the process of screening possible ideas for a new idea, which of the following is correct? A) Determining whether or not the new idea adds value for customers is not essential at this early stage of the process. B) It is not possible to determine at this early stage whether a new idea will actually give a company a sustained competitive advantage. C) It is important to determine if sales will lead to profits. D) If the idea is not expected to result in making a profit for a number of years, exit costs are low. E) All of these are correct. Answer: C Diff: 1 Type: MC Page Ref: 79-80 Skill: Comprehension Objective: 4.3 26) Erin feels that she has a wonderful opportunity to create a new apple beverage she saw in Europe by using surplus apples grown near Georgian Bay in Ontario. At this point, which question must she answer in evaluating this opportunity? A) What interest rate will be charged for financing the purchase of capital equipment? B) What depreciation procedures will be used? C) What kind of computers should I purchase? D) Where will my business be located? E) Are there enough customers willing to buy this product? Answer: E Diff: 2 Type: MC Page Ref: 79-80 Skill: Comprehension Objective: 4.3 27) Robert wants to start a new business. At this point, he needs to ask himself all of the following questions except A) what is my competitive advantage? B) how much will the customer buy? C) what legal form should the business take? D) what value is created or added to for the customer? E) what is the marketability of this idea? Answer: C Diff: 2 Type: MC Page Ref: 79-80 Skill: Comprehension Objective: 4.3

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Business Essentials, 8ce Chapter 4: Entrepreneurship, Small Business, and New Venture Creation

28) Franchising is a contract between a(n) ________ and a(n) ________ that stipulates how ________ or ________ will be sold. A) buyer; seller; a product; a service B) retailer; outlet owner; food; a service C) manufacturer; dealer; a product; a service D) manufacturer; seller; a service; a product E) outlet owner; dealer; food; a service Answer: C Diff: 3 Type: MC Page Ref: 81 Skill: Knowledge Objective: 4.3 29) A financial forecast includes all of the following items except A) a cash budget. B) an estimate of start-up costs. C) an income statement. D) a listing of potential customers. E) a balance sheet. Answer: D Diff: 3 Type: MC Page Ref: 80 Skill: Comprehension Objective: 4.3 30) A ________ typically includes a company description, product description, marketing analysis and plan, operating plan, financial plan, and other supporting information. A) bank loan application B) business plan C) tax application D) partnership agreement E) grant application Answer: B Diff: 2 Type: MC Page Ref: 81 Skill: Knowledge Objective: 4.3 31) Which of the following is correct with regard to business planning? A) A business plan is a good thing to have, but it is generally not a requirement for securing resources for the proposed new venture. B) If market conditions are changing rapidly, the benefits gained from extensive research and planning will diminish quickly. C) If the product is highly innovative, research is particularly important. D) Planning should be completed before action is taken. E) All things considered, it is probably best to plan to start as a franchise. Answer: B Diff: 2 Type: MC Page Ref: 81 Skill: Comprehension Objective: 4.3 Copyright © 2017 Pearson Canada Inc.

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Business Essentials, 8ce Chapter 4: Entrepreneurship, Small Business, and New Venture Creation

32) Bootstrapping means A) doing more with less. B) selling shares. C) designing new products. D) preparing a business plan. E) creating new ideas. Answer: A Diff: 3 Type: MC Page Ref: 82 Skill: Knowledge Objective: 4.3 33) Assets that a borrower uses to secure a loan or other credit are referred to as A) financed assets. B) tangible assets. C) fixed assets. D) collateral. E) assignments. Answer: D Diff: 1 Type: MC Page Ref: 82 Skill: Knowledge Objective: 4.3 34) One popular source of equity capital is informal capital from private investors who are known as A) private loaners. B) traditional lenders. C) pseudo loaners. D) off-the-books financers. E) angels. Answer: E Diff: 2 Type: MC Page Ref: 82 Skill: Knowledge Objective: 4.3 35) Which one of the following statements is correct? A) Love money is a form of debt financing. B) Suppliers typically provide long-term financing. C) Debt financing refers to money invested by the owner in the company. D) Borrowing money reduces the potential for higher returns when a business is performing well. E) Banks are typically risk averse. Answer: E Diff: 2 Type: MC Page Ref: 82 Skill: Comprehension Objective: 4.3

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Business Essentials, 8ce Chapter 4: Entrepreneurship, Small Business, and New Venture Creation

36) Bootstrapping involves all of the following actions except A) acquiring resources such as people and equipment. B) doing more with less. C) purchasing as many resources as possible. D) using other people's resources. E) borrowing materials. Answer: C Diff: 1 Type: MC Page Ref: 82 Skill: Knowledge Objective: 4.3 37) Venture capitalists A) require collateral for all transactions. B) are risk averse lenders. C) invest funds from professionally managed pools of investor money. D) offer loans with a maximum 90-day payback period. E) are individuals in the United States who are willing to loan money to Canadians who want to start a business. Answer: C Diff: 2 Type: MC Page Ref: 82 Skill: Comprehension Objective: 4.3 38) Karen is trying to assess whether she can start her own small business. But, as with many small businesses, money is a problem. She asks for your help. You indicate that the most likely source of money for starting up a small business is A) family investment. B) lottery winnings. C) banks. D) credit unions. E) personal savings. Answer: E Diff: 2 Type: MC Page Ref: 82 Skill: Comprehension Objective: 4.3

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Business Essentials, 8ce Chapter 4: Entrepreneurship, Small Business, and New Venture Creation

39) With respect to the financing of a business, which one of the following statements is accurate? A) Love money is the most popular form of debt financing. B) Suppliers typically provide long-term financing. C) Debt financing refers to money invested by the owner in the company. D) Borrowing money reduces the potential for higher returns when a business is performing well. E) Banks are typically risk averse. Answer: E Diff: 2 Type: MC Page Ref: 82 Skill: Comprehension Objective: 4.3 40) Which of the following statements is (are) correct with respect to financing a business? A) Debt financing refers to money that is borrowed, while equity financing refers to money that is invested in the business by investors in return for a share of the ownership of the company. B) The most common source of debt financing is venture capitalists. C) Choosing between debt and equity financing involves trade-offs with regard to immediate vs. long-term profitability. D) Most new venture founders prefer equity financing because they are reluctant to give up any control to outsiders. E) All these statements are correct. Answer: A Diff: 1 Type: MC Page Ref: 82 Skill: Comprehension Objective: 4.3 41) Which source of capital is identified as a group of small investors who are willing to invest money into the new firm in exchange for an ownership share? A) Venture capital firm B) Foreign investors C) Stockbroker syndicate D) Silent domestic partner E) Banks Answer: A Diff: 2 Type: MC Page Ref: 82 Skill: Knowledge Objective: 4.3

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Business Essentials, 8ce Chapter 4: Entrepreneurship, Small Business, and New Venture Creation

42) Trade credit is A) the selling of bonds or debentures. B) reinvested in the enterprise. C) paid to the owners in the form of dividends. D) derived from funds generated from the operation of the business. E) delayed payment terms offered by suppliers. Answer: E Diff: 2 Type: MC Page Ref: 82 Skill: Comprehension Objective: 4.3 43) An example of a debt source of funds is ________ and an example of an equity source of funds is ________. A) family and friends; venture capitalists B) private lenders; family and friends C) private lenders; trade credit D) venture capitalists; private lenders E) family and friends; private lenders Answer: B Diff: 3 Type: MC Page Ref: 82 Skill: Comprehension Objective: 4.3 44) A business is normally at its riskiest point during the ________ phase. A) preliminary B) growth C) start-up D) maturity E) conception Answer: C Diff: 2 Type: MC Page Ref: 82 Skill: Knowledge Objective: 4.3 45) All of the following are common sources of equity for new ventures except A) banks. B) personal savings. C) love money. D) private investors. E) venture capitalists. Answer: A Diff: 2 Type: MC Page Ref: 82 Skill: Knowledge Objective: 4.3

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Business Essentials, 8ce Chapter 4: Entrepreneurship, Small Business, and New Venture Creation

46) Which of the following is correct with regard to collateral? A) It refers to business (but not personal) assets that a borrower uses to secure a loan or other credit. B) It consists of tangible assets like buildings as well as intangible assets like goodwill. C) Collateral can be seized by the lender if the loan is not repaid according to specified terms. D) It refers to personal (but not business) assets that a borrower uses to secure a loan or other credit. E) Banks are most impressed with debt investment. Answer: C Diff: 2 Type: MC Page Ref: 82 Skill: Comprehension Objective: 4.3 47) Which of the following statements is accurate? A) Love money is a form of debt financing. B) Borrowing money reduces the potential for higher returns when a business is performing well. C) Debt financing refers to money invested by t...