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Test Bank of business essentials 8th Canadian Edition By Ronald J. Ebert
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.
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?
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
Answer: C
Diff: 1 Type: MC Page Ref: 76
Skill: Knowledge
Objective: 4.1
4) Entrepreneurs often have more than one goal for starting a business and becoming self-employed. Which of the following reasons is probably the least common goal of entrepreneurs?
Answer: D
Diff: 1 Type: MC Page Ref: 76
Skill: Knowledge
Objective: 4.1
5) A new firm is
Answer: D
Diff: 2 Type: MC Page Ref: 76
Skill: Comprehension
Objective: 4.1
6) How are intrapreneurs different from entrepreneurs?
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.
Answer: E
Diff: 2 Type: MC Page Ref: 75
Skill: Knowledge
Objective: 4.1
8) What percentage of Canadas GDP is contributed by small businesses?
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?
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.
Answer: C
Diff: 3 Type: MC Page Ref: 75
Skill: Knowledge
Objective: 4.1
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.
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 ________.
Answer: D
Diff: 3 Type: MC Page Ref: 76
Skill: Knowledge
Objective: 4.1
13) The Heritage Foundations index of economic freedom measures
Answer: B
Diff: 2 Type: MC Page Ref: 76
Skill: Comprehension
Objective: 4.1
14) At Telus, the redesign of the companys website was the result of ________ in a large firm.
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
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
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?
Answer: A
Diff: 2 Type: MC Page Ref: 77
Skill: Knowledge
Objective: 4.2
18) During the period from 2002 to 2012, small businesses created ________ percent of all the jobs in Canada.
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.
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?
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?
Answer: C
Diff: 1 Type: MC Page Ref: 78
Skill: Knowledge
Objective: 4.3
22) Which of the following is correct with regard to the issue of where new ideas for a business come from?
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?
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
Answer: B
Diff: 1 Type: MC Page Ref: 79-80
Skill: Comprehension
Objective: 4.3
25) With regard to the process of screening possible ideas for a new idea, which of the following is 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?
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
Answer: C
Diff: 2 Type: MC Page Ref: 79-80
Skill: Comprehension
Objective: 4.3
28) Franchising is a contract between a(n) ________ and a(n) ________ that stipulates how ________ or ________ will be sold.
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
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.
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?
Answer: B
Diff: 2 Type: MC Page Ref: 81
Skill: Comprehension
Objective: 4.3
32) Bootstrapping means
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
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
Answer: E
Diff: 2 Type: MC Page Ref: 82
Skill: Knowledge
Objective: 4.3
35) Which one of the following statements is correct?
Answer: E
Diff: 2 Type: MC Page Ref: 82
Skill: Comprehension
Objective: 4.3
36) Bootstrapping involves all of the following actions except
Answer: C
Diff: 1 Type: MC Page Ref: 82
Skill: Knowledge
Objective: 4.3
37) Venture capitalists
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
Answer: E
Diff: 2 Type: MC Page Ref: 82
Skill: Comprehension
Objective: 4.3
39) With respect to the financing of a business, which one of the following statements is accurate?
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?
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?
Answer: A
Diff: 2 Type: MC Page Ref: 82
Skill: Knowledge
Objective: 4.3
42) Trade credit is
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 ________.
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.
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
Answer: A
Diff: 2 Type: MC Page Ref: 82
Skill: Knowledge
Objective: 4.3
46) Which of the following is correct with regard to collateral?
Answer: C
Diff: 2 Type: MC Page Ref: 82
Skill: Comprehension
Objective: 4.3
47) Which of the following statements is accurate?
Answer: D
Diff: 2 Type: MC Page Ref: 82
Skill: Comprehension
Objective: 4.3
48) The ________ fit involves determining if the resources needed to capitalize on the opportunity can be acquired.
Answer: D
Diff: 2 Type: MC Page Ref: 84
Skill: Knowledge
Objective: 4.3
49) Judy is a graduate from a denturist program. Normally, graduates start up their own business, much like dentists and doctors. She has the choice of starting on her own or buying an existing practice. What is an advantage for her of starting a new business from scratch?
Answer: A
Diff: 1 Type: MC Page Ref: 85
Skill: Comprehension
Objective: 4.4
50) Which of the following is the most significant disadvantage of starting a business from scratch?
Answer: E
Diff: 1 Type: MC Page Ref: 85
Skill: Comprehension
Objective: 4.4
51) Harolds father owns a plumbing business, which Harold will likely take over. However, Harold needs to know the problems that beset family businesses. Which of the following is not a problem in a family business?
Answer: D
Diff: 2 Type: MC Page Ref: 85
Skill: Comprehension
Objective: 4.4
52) Jody is a young graduate from a business program. She can either help out in the family business or work with another organization. Which of the following is not a typical advantage associated with a family business?
Answer: A
Diff: 1 Type: MC Page Ref: 85
Skill: Comprehension
Objective: 4.4
53) Ted is about to take over a family business. The issues of which he should be aware include all of the following except
Answer: C
Diff: 1 Type: MC Page Ref: 85
Skill: Comprehension
Objective: 4.4
54) Margaret has an opportunity to buy an existing business. She should be knowledgeable about all of the following issues except
Answer: B
Diff: 1 Type: MC Page Ref: 85
Skill: Comprehension
Objective: 4.4
55) About one-third of all new businesses owners
Answer: A
Diff: 2 Type: MC Page Ref: 85
Skill: Comprehension
Objective: 4.4
56) To start up a new business by operating under a license issued by a parent company to local entrepreneurs who own and manage the business is known as
Answer: E
Diff: 1 Type: MC Page Ref: 86
Skill: Comprehension
Objective: 4.4
57) Roger has made a list of what he considers to be advantages of buying a franchise. You tell him that one item on his list is not an advantage. Which one is it?
Answer: E
Diff: 2 Type: MC Page Ref: 86
Skill: Comprehension
Objective: 4.4
58) What is the most significant disadvantage of owning a franchise?
Answer: A
Diff: 2 Type: MC Page Ref: 86
Skill: Comprehension
Objective: 4.4
59) Which of the following is not likely to be provided by the seller of a franchise?
Answer: B
Diff: 2 Type: MC Page Ref: 86-87
Skill: Comprehension
Objective: 4.4
60) Which of the following is considered an advantage for both the franchisee and the franchisor?
Answer: D
Diff: 2 Type: MC Page Ref: 86-87
Skill: Comprehension
Objective: 4.4
61) The benefits of franchising the franchiser enjoys include all of the following except
Answer: C
Diff: 2 Type: MC Page Ref: 86-87
Skill: Comprehension
Objective: 4.4
62) In a franchise agreement, the ________ is purchasing the right to sell the products of the ________.
Answer: A
Diff: 2 Type: MC Page Ref: 86-87
Skill: Knowledge
Objective: 4.4
63) Molly believes that success is almost guaranteed when one buys a franchise. You point out that she should consider the costs such as
Answer: E
Diff: 1 Type: MC Page Ref: 86
Skill: Comprehension
Objective: 4.4
64) Which of the following is not one of the disadvantages of owning a franchise?
Answer: A
Diff: 2 Type: MC Page Ref: 86-87
Skill: Comprehension
Objective: 4.4
65) Which of the following is an advantage for the franchisee?
Answer: B
Diff: 2 Type: MC Page Ref: 86-87
Skill: Comprehension
Objective: 4.4
66) Viola wants to be a business owner and is contemplating whether to start her own business or open a franchise. Which of the following, if true, would be a compelling reason for Viola to open a franchise rather than start a new business?
Answer: A
Diff: 2 Type: MC Page Ref: 86-87
Skill: Application
Objective: 4.4
67) Franchising accounts for about ________ percent of retail sales in Canada and ________ percent of GDP.
Answer: C
Diff: 3 Type: MC Page Ref: 86
Skill: Knowledge
Objective: 4.4
68) Olivia has found a viable business, a small furniture store, she is interested in purchasing. She has learned that the store is supplied by reliable vendors and has a steady stream of local and online buyers. What should be Olivias next step at this point?
Answer: A
Diff: 2 Type: MC Page Ref: 85
Skill: Application
Objective: 4.4
69) Which of the following is a key contributing factor to the success of a small business?
Answer: A
Diff: 1 Type: MC Page Ref: 87
Skill: Comprehension
Objective: 4.5
70) Which is the most important reason for the failure of small business?
Answer: B
Diff: 2 Type: MC Page Ref: 87
Skill: Comprehension
Objective: 4.5
71) A new business typically adopts one of four main organizational forms. They are
Answer: D
Diff: 2 Type: MC Page Ref: 88
Skill: Knowledge
Objective: 4.6
72) The features of a sole proprietorship include all the following except
Answer: A
Diff: 2 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
73) Which of the following is not typical for a sole proprietorship?
Answer: A
Diff: 2 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
74) Sam Clark has a custom cheesecake business that he owns and operates out of his home. Sams ownership structure likely is
Answer: E
Diff: 2 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
75) Shirley is opening a flower shop and has decided to operate as a sole proprietorship. Which of the following is not an advantage Shirley will have in operating her business?
Answer: C
Diff: 2 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
76) Tax laws permit ________ to treat the sales revenues and operating expenses of the business as part of their personal finances.
Answer: A
Diff: 1 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
77) Low start-up costs, simplicity in formation, and freedom are advantages in establishing a
Answer: B
Diff: 2 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
78) A major disadvantage of the sole proprietorship is the
Answer: C
Diff: 1 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
79) A general partnership has advantages which are similar to a sole proprietorship, such as
Answer: C
Diff: 3 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
80) A limited partnership attempts to
Answer: A
Diff: 2 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
81) Partnerships are generally more advantageous than sole proprietorships because
Answer: A
Diff: 2 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
82) Which of the following statements about partnerships is false?
Answer: D
Diff: 3 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
83) If sole proprietor Tom decided to merge his business with that of Cindy, another sole proprietor, a ________ would result.
Answer: A
Diff: 1 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
84) Low start-up costs and simplicity of operations are among the main advantages of
Answer: A
Diff: 2 Type: MC Page Ref: 88
Skill: Knowledge
Objective: 4.6
85) Many professional organizations, such as law firms and accounting firms, are formed as
Answer: B
Diff: 1 Type: MC Page Ref: 88
Skill: Knowledge
Objective: 4.6
86) The size of a partnership is
Answer: B
Diff: 2 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
87) Jeanne is not an active participant in Highline Food Company, but she has contributed a significant amount of capital as a partner to the business. Jeanne is known as a(n) ________ partner.
Answer: C
Diff: 2 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
88) There are two basic types of partners: ________ and ________.
Answer: D
Diff: 2 Type: MC Page Ref: 88
Skill: Knowledge
Objective: 4.6
89) Paul invests $50 000 in a partnership with his sister to operate a computer sales outlet. Paul is not involved in the operation of the store and has limited liability through the written partnership agreement. What kind of partner is Paul?
Answer: C
Diff: 1 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
90) Two architects are considering forming a partnership. Both want a partnership agreement. All of the following should be part of their agreement except
Answer: E
Diff: 2 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
91) Ann and David want to form a partnership. They should consider all of the following except
Answer: E
Diff: 2 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
92) Disadvantages of the general partnership form of business organization include
Answer: C
Diff: 2 Type: MC Page Ref: 88
Skill: Knowledge
Objective: 4.6
93) What is the most important advantage of general partnerships?
Answer: B
Diff: 2 Type: MC Page Ref: 88
Skill: Knowledge
Objective: 4.6
94) What do both sole proprietorships and partnerships lack?
Answer: C
Diff: 2 Type: MC Page Ref: 88
Skill: Knowledge
Objective: 4.6
95) In a partnership
Answer: D
Diff: 3 Type: MC Page Ref: 88
Skill: Comprehension
Objective: 4.6
96) Computers-B-Us is a new company. Its owners all have no personal liability for any debts of the company. All five of its owners invested the same amount and will share equally in the profits. The structure of Computers-B-Us is most likely a
Answer: A
Diff: 3 Type: MC Page Ref: 90
Skill: Comprehension
Objective: 4.6
97) What is the fundamental difference between a sole proprietorship and a corporation?
Answer: B
Diff: 3 Type: MC Page Ref: 89
Skill: Comprehension
Objective: 4.6
98) What was the largest corporation in Canada in 2014, as measured by sales revenue?
Answer: E
Diff: 3 Type: MC Page Ref: 89
Skill: Knowledge
Objective: 4.6
99) Which of the following is a private corporation?
Answer: C
Diff: 3 Type: MC Page Ref: 90
Skill: Knowledge
Objective: 4.6
100) A public corporation is
Answer: C
Diff: 2 Type: MC Page Ref: 89
Skill: Comprehension
Objective: 4.6
101) ________ is the governing body of a corporation.
Answer: A
Diff: 2 Type: MC Page Ref: 89
Skill: Knowledge
Objective: 4.6
102) The two most widely used methods to form a corporation include
Answer: E
Diff: 2 Type: MC Page Ref: 90
Skill: Knowledge
Objective: 4.6
103) Bill is starting up a new business. In order to raise the capital needed for the business, Bill has sold shares of his company to a few close relatives. This type of structure is known as a
Answer: B
Diff: 1 Type: MC Page Ref: 90
Skill: Comprehension
Objective: 4.6
104) An organization designed to avoid paying corporate tax by distributing all or most of their earnings to their shareholders is
Answer: A
Diff: 2 Type: MC Page Ref: 90
Skill: Comprehension
Objective: 4.6
105) An outside director is
Answer: A
Diff: 2 Type: MC Page Ref: 89
Skill: Comprehension
Objective: 4.6
106) What is the difference between a public and private corporation?
Answer: E
Diff: 2 Type: MC Page Ref: 89-90
Skill: Comprehension
Objective: 4.6
107) Shareholders are ________ of a company and profits are distributed among shareholders in the form of ________.
Answer: D
Diff: 2 Type: MC Page Ref: 89
Skill: Knowledge
Objective: 4.6
108) Start-up costs and complexities are among the main disadvantages of
Answer: B
Diff: 2 Type: MC Page Ref: 90
Skill: Comprehension
Objective: 4.6
109) For the first time, Liz has decided to sell shares of her company to the public in order to raise some capital to build a new factory. Liz is launching a(n)
Answer: A
Diff: 2 Type: MC Page Ref: 90
Skill: Comprehension
Objective: 4.6
110) ________ is defined as an artificial being, invisible, intangible, and existing only in contemplation of the law.
Answer: A
Diff: 2 Type: MC Page Ref: 89
Skill: Knowledge
Objective: 4.6
111) Which type of business is legally considered a separate entity from its owners and is liable for its own debts?
Answer: B
Diff: 2 Type: MC Page Ref: 89
Skill: Knowledge
Objective: 4.6
112) A share of ownership in a corporation is referred to as
Answer: B
Diff: 1 Type: MC Page Ref: 89
Skill: Knowledge
Objective: 4.6
113) Due to his hard work and notable contributions as an employee of KB Electronics, Nori has just been elected to the board of directors of the company. He will now be expected to fulfill his obligations as both an employee and director. Nori is a(n)
Answer: D
Diff: 2 Type: MC Page Ref: 89
Skill: Comprehension
Objective: 4.6
114) Suzy is considering incorporating her financial consulting business. Of the items listed below, which one would not be a problem if she incorporates?
Answer: D
Diff: 2 Type: MC Page Ref: 90
Skill: Comprehension
Objective: 4.6
115) In the double taxation endured by some businesses, ________ is the first taxation and ________ is the second taxation.
Answer: C
Diff: 3 Type: MC Page Ref: 90
Skill: Comprehension
Objective: 4.6
116) What is double taxation in the context of a corporation?
Answer: D
Diff: 3 Type: MC Page Ref: 90
Skill: Comprehension
Objective: 4.6
117) Jonathan is upset, claiming that he is a victim of double taxation. What form of business is he involved in?
Answer: C
Diff: 1 Type: MC Page Ref: 90
Skill: Comprehension
Objective: 4.6
118) The person or people responsible for the firms overall performance is/are
Answer: B
Diff: 1 Type: MC Page Ref: 89
Skill: Knowledge
Objective: 4.6
119) Most new corporations start out as ________ corporations and then move to ________ corporations as they grow.
Answer: E
Diff: 2 Type: MC Page Ref: 90
Skill: Knowledge
Objective: 4.6
120) Gloria wants to turn her sole proprietorship into a business corporation. Among the things that she must consider are
Answer: C
Diff: 2 Type: MC Page Ref: 90
Skill: Comprehension
Objective: 4.6
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