Business Exam 100 Multiple Choice Questions 2015 Answers

    QUESTION 1In limited partnerships:The liability for any loss incurred is borne by the company.The sponsoring company acts as the general partner.There is no special tax benefit for partners.The sponsoring company does not retain rights to use any base technology to develop other products.1.8 pointsQUESTION 2_____ financing involves using any possible methods for conserving cash.BootstrappingSBIRPrivate placementFloor planning1.8 pointsQUESTION 3The most frequently used source of short-term funds when collateral is available is:SBA MicroloansSBA 7(a) loansR&D limited partnershipsCommercial bank loans1.8 pointsQUESTION 4During Phase II of an SBIR grant up to _____ can be awarded.$100,000$500,000$750,000$1,000,0001.8 pointsQUESTION 5The maximum amount that can be borrowed under an SBA 7(a) loan is:$750,000$1,000,000$1,500,000$2,000,0001.8 pointsQUESTION 6Research and development limited partnerships provide funds for entrepreneurs in high-tech fields through:Debt from lendersEquity from present ownersInvestors looking for tax sheltersCash from internal operations1.8 pointsQUESTION 7Typically, debt financing requires:An asset as collateralA degree of ownership in the firmReduction of short-term assetsReduction of working capital1.8 pointsQUESTION 8The most frequently used source of funds for start-ups is:Capital from savingsBank loansCredit cardsSBA loans1.8 pointsQUESTION 9Which of the following is not a form of cash flow financing?Trust receiptCharacter loanLine of creditInstallment loan1.8 pointsQUESTION 10Which of the following statements is true?Rule 505 permits the sale of $10 million of unregistered securities in the private offering in any 12-month period.Rule 504 and 505 permit no general advertising or solicitation through public media.Rule 506 provides the first exemption to a company seeking to raise a small amount of capital from numerous investors.The entrepreneur issuing the private offering is spared the burden of proving that the exemptions granted have been met.1.8 pointsQUESTION 11Which of the following types of credit does not require the pledging of an individual’s collateral or a cosigner?Line of creditCharacter loanTrust receiptsMortgage loan1.8 pointsQUESTION 12Obtaining funds from private investors:Is inappropriate for new venturesIs a public offeringIs covered by Regulation DInvolves a great deal of time and expense1.8 pointsQUESTION 13A bank may finance up to _____ of a company’s accounts receivable.50%60%70%80%1.8 pointsQUESTION 14When using equity financing from family and friends:Business arrangements should be in good faith.Details such as terms of the investment and rights of the investor need not be in writing.Investors usually are more patient in desiring a return on investment.Since the amount of money is usually small, they do have an ownership position in the venture.1.8 pointsQUESTION 15Most established R&D limited partnerships:Allow a minimum amount of equity dilutionAre successfulIncrease, to some extent, the risks involved in the ventureHave weak financial statements due to lack of outside capital1.8 pointsQUESTION 16Private offerings:Must comply with Regulation DInvolve more time and expense than public offeringsDo not involve the SECAre not a viable option for new ventures1.8 pointsQUESTION 17Funds obtained from _____ are the least expensive in terms of cost and control.the entrepreneur’s personal resourcesfriends and familycommercial banksprivate placement1.8 pointsQUESTION 18Which of the following is not true about the costs and benefits of R&D limited partnerships?Most are not successful.Risk is reduced.Costs can be high to create the partnership.Most take at least 3 months to establish.1.8 pointsQUESTION 19When inventory is the asset base for a loan:A trust receipt is not generally used.Factoring may be arranged.About 50 percent of it can be financed.All of the inventory can be financed.1.8 pointsQUESTION 20Mortgage financing is another term for:Large equipment asset-based financingReal-estate asset-based financingSale-leaseback financingUnsecured financing1.8 pointsQUESTION 21The least liquid current asset, _____, is eliminated when calculating the acid test ratio.cashaccounts receivableinventoryland1.8 pointsQUESTION 22The waiting period is the time between:Hiring an underwriter and waiting to file the registration statementFiling the registration statement and the SEC’s reviewing to determine the adequacy of the disclosureThe initial filing of the registration statement and its effective dateAfter the initial public offering has been sold and before the listing1.8 pointsQUESTION 23Under the _____, reporting requirements are increased and due dates of reports to the SEC are accelerated.Sarbanes-Oxley Actblue sky lawsSecurities Regulation ActSocial Security Act1.8 pointsQUESTION 24The _____ is calculated by dividing accounts receivable by average daily sales.current ratioaverage collection perioddebt ratioreturn on investment1.8 pointsQUESTION 25The _____ is calculated by dividing liabilities by total assets.debt ratiocurrent ratioinventory turn overnet profit margin1.8 pointsQUESTION 26The largest percentage of venture capital funding is invested in:Seed capitalStart-up capitalExpansion fundsAcquisition funds1.8 pointsQUESTION 27The _____ is used to measure the short-term solvency of a venture.return on investmentaverage collection perioddebt ratiocurrent ratio1.8 pointsQUESTION 28Which section of the prospectus is of great interest to potential purchasers?Description of the companyType of stockRisk factorsUse of proceeds1.8 pointsQUESTION 29The longest stage of the venture capital process, at 1-3 months, is:Preliminary screeningFinal approvalAgreement on principal termsDue diligence1.8 pointsQUESTION 30In the valuation of Internet companies:The book value approach is of primary importance.The replacement value approach plays a significant role.The qualitative portion of due diligence carries much more weight.The factor approach is used the overall value.1.8 pointsQUESTION 31Which type of risk-capital market is available as a funding source only for high-potential ventures?Informal risk capital marketPrivate venture capital companiesSmall business investment companiesPublic equity market1.8 pointsQUESTION 32The due diligence phase of the venture capital process includes:Outlining the principle termsA detailed review of the company’s historyPreparation of an investment memorandumA preliminary study of the business plan1.8 pointsQUESTION 33In 2008 which region received the highest level of venture capital investment?BostonSilicon ValleyNYC MetroSoutheast1.8 pointsQUESTION 34When there is a significant disparity between the offering price of the shares and the price paid for shares by officers, directors, or founding stockholder, this issue is addressed in the:Dilution sectionSection on risk factorsThe business sectionThe capitalization section1.8 pointsQUESTION 35Dividing net profit by total assets shows a firm’s:Current ratioDebt ratioNet profit marginReturn on investment1.8 pointsQUESTION 36Early stage financing is typically:Easier to obtain than expansion financingCalled seed or start-up capitalWhere venture capitalists are highly involvedUsed as working capital to support initial growth1.8 pointsQUESTION 37Venture capital firms expect returns in the range of:15-20%25-35%40-60%100%1.8 pointsQUESTION 38Business angels typically invest what amount in the businesses they finance?$50,000-$100,000$100,000-$500,000$500,000-$1,000,000$1,000,000-$5,000,0001.8 pointsQUESTION 39In the venture capital process, _____ is the longest stage absolutely essential for preliminary screening.Debt financingA business planA sales-orientationEndowment funds1.8 pointsQUESTION 40In most cases, the venture capitalist:Seeks control of the companyWould prefer to not be a part of the board of directorsIs not involved in developing strategic plansExpects the management team to run the daily operations1.8 pointsQUESTION 41In a horizontal diversification strategy, growth:Involves taking a step back (up) the value-added chainOccurs at the same level of the value-added chainInvolves taking a step forward (down) the value added chainInvolves opportunities unrelated to the existing value-added chain1.8 pointsQUESTION 42The penetration growth strategy:Focuses on developing new products for the existing marketRelies on taking market share from competitorsExpands the firm’s product offering with complementary productsAims to take new products into new markets1.8 pointsQUESTION 43Creating a positive organization culture involves:Not communicating all matters to key employeesBeing more involved in every aspect of the task, and avoiding delegationEstablishing a “we” spirit, not a “me” spirit in meetings and memorandumBeing conservative in the training process1.8 pointsQUESTION 44Using a time sheet to record usage of time is part of the principle of:DesireEffectivenessPrioritized planningAnalysis1.8 pointsQUESTION 45Acknowledgment that only a small amount of time is actually under one’s control and that most of one’s time is taken up by others is known as the:Principle of desirePrinciple of teamworkPrinciple of analysisPrinciple of prioritized planning1.8 pointsQUESTION 46Entrepreneurs who have the necessary abilities for the transition to more professional management practices and the aspiration to grow their business:Have little potential for firm growthWill achieve growth only if the entrepreneur replaces himself or herself with a professional managerAre the most likely to achieve growthUsually form lifestyle firms1.8 pointsQUESTION 47The _____ strategy focuses on selling the firm’s existing products to new groups of customers.penetrationmarket developmentproduct developmentdiversification1.8 pointsQUESTION 48Which of the following is not a benefit of time management?Improvement of esprit de corpsDecreased job satisfactionIncreased productivityLess anxiety and tension1.8 pointsQUESTION 49Conducting a(n) _____ on cash flow involves assigning a + or – probability to the estimated value.break even analysisauditdistribution analysissensitivity analysis1.8 pointsQUESTION 50A firm that manufactures washing machines starts to manufacture detergent illustrates _____ integration.backwardforwardhorizontalside1.8 pointsQUESTION 51_____ refers to a diversification strategy that involves taking a step back (up) on the value chain toward the raw materials.Horizontal integrationBackward integrationForward integrationConglomerate integration1.8 pointsQUESTION 52Which principle requires the entrepreneur to focus on the most important issues, even when under pressure?Principle of desirePrinciple of reanalysisPrinciple of effectivenessPrinciple of prioritized planning1.8 pointsQUESTION 53A market development strategy would not involve:Selling the existing product in new locationsOffering the same product to a different demographic groupUsing customer experience to develop new uses for the existing productSelling new products to consumers purchasing the firm’s existing products1.8 pointsQUESTION 54Which of the following would NOT be a recommended diversification strategy?Backward integrationHorizontal integrationForward integrationIntegration into markets unrelated to existing products1.8 pointsQUESTION 55A(n) _____ is a system for storing and using customer information.market gridinventorydatabasespreadsheet1.8 pointsQUESTION 56INC. magazine’s 1996 survey of fast-growing ventures from 1984 found that:About 50 percent of the original firms had gone public.Total numbers of employees fell.Less than 20 percent had failed.Successful firms represented revenue and total numbers of employees of less than the original list of firms.1.8 pointsQUESTION 57Using a large proportion of part-time workers:Provides the firm with flexibilityMakes building organizational culture easierImproves worker commitment to the organizationIncreases the overall productivity of the organization1.8 pointsQUESTION 58_____ are used to characterize potential customers based upon their income, education, age, sex, and so forth.DemographicsDevelopment strategiesDemocraciesDiversifications1.8 pointsQUESTION 59The _____ requires that the entrepreneur recognize that he or she is a time waster, that time is an important resource, and that there is a need to change personal attitudes and habits regarding the allocation of time.principle of desireprinciple of effectivenessprinciple of analysisprinciple of prioritized planning1.8 pointsQUESTION 60A computer company buys a hard-drive manufacturer. This is an example of:Backward integrationHorizontal integrationForward integrationConglomerate integration1.8 pointsQUESTION 61Which franchise below is an example of the most popular type of franchise?KFCAn automobile dealershipH&R BlockReal estate franchises1.8 pointsQUESTION 62Which of the following would be a quantitative way to ascertain the fairness of an LBO’s asking price?Price-earnings ratioBook valuePresent value of future earningsAll of the above1.8 pointsQUESTION 63Which statement about capital requirements in franchising is not true?Franchisees pool monies to lower the costs for advertising and sales promotion.Most franchisors will offer managerial assistance on the basis of need upon the start of the franchisee.Newsletters and other publications reflecting new ideas and developments are continuously sent to franchisees.The franchisee has to spend resources to establish the credibility of the business.1.8 pointsQUESTION 64In the _____ task, the mutual benefits from the relationship are explored, making the “size of the pie” larger.distributiveassessmentintegrativereservation1.8 pointsQUESTION 65Which is not a strategy that is used to elicit information about the other party in a negotiation?Take up a new negotiation at the end of the first.Ask lots of questions.Make multiple offers simultaneously.Build trust and share information.Build trust and share information.1.8 pointsQUESTION 66Which of the following would be an advantage of an acquisition over starting a new business?Established customer baseCustomer response to locationExisting employeesPeriod of acquisition deal1.8 pointsQUESTION 67Which of the following is not an advantage of franchising?No entry costAvailability of management expertiseProduct acceptanceKnowledge of the market1.8 pointsQUESTION 68The person who purchases the franchise is the:Business architectFranchisorFranchiseeFranchise1.8 pointsQUESTION 69In order to further investigate a franchise opportunity an entrepreneur can request a franchise package from the franchisor which:Is usually freeCosts between $400-$600 and is usually refundableCosts between $800-$1000 and is usually not refundableContains guarantees about expected sales revenues in years 1 and 21.8 pointsQUESTION 70A potential franchisee should seek answers to all of the following questions while assessing the financial stability of the franchisor, except:How many franchises are in the organization?Are most of the profits of the franchise a function of fees from the sale of franchises or from royalties based on profits of franchisees?What are the chances of further expansion of the company?Does the franchisor have management expertise in production, finance, and marketing?1.8 pointsQUESTION 71The _____ frequently issues guidelines for mergers.SBDCDepartment of JusticeSupreme CourtUnited States Senate1.8 pointsQUESTION 72The personnel issues related to the administrative controls of being a franchisee include all of the following except:Criteria for hiring/firingSchedulingGrowthTraining1.8 pointsQUESTION 73In order for a joint venture to be successful:The expectations of the results must be reasonable.There should be symmetry between the partners.The timing must be right.All of the above1.8 pointsQUESTION 74Joint ventures are sometimes called:MergersStrategic alliancesAcquisitionLeveraged buyout1.8 pointsQUESTION 75Franchisees usually contribute _____ of sales to an advertising pool.None, each franchisee pays for their own advertising.1-2%4-5%8-10%1.8 pointsQUESTION 76The concept that “the whole is greater than the sum of its parts” is known as:The price earnings ratioSynergyThe bargaining zoneIntegration1.8 pointsQUESTION 77Which of the following is not a qualitative technique an entrepreneur can use to evaluate the asking price of an LBO?The competitive position of the firmThe uniqueness of the firm’s offeringsPrice-earnings ratioThe abilities of management and other key personnel1.8 pointsQUESTION 78The bootstrap purchase of assets:Is a direct purchase of the entire assets of a firmMeans the entrepreneur purchases a small percentage of a firm for cashFrequently results in a long-term capital gain to the sellerResults in double taxation1.8 pointsQUESTION 79The _____ is the price at which the entrepreneur is indifferent about whether to accept the agreement or choose an alternative.break even pricefranchise pricebargaining zonereservation price1.8 pointsQUESTION 80Joint ventures can involve a wide variety which include:UniversitiesNot-for-profit organizationsTraditional businessesAll of the above1.8 pointsQUESTION 81An ESOP:Is a device to transfer the business to a small group of key loyal employeesEliminates the need to perform a complete valuation of the ventureMotivates employees because they realize they are working for themselvesRemoves the need for a continuous performance appraisal1.8 pointsQUESTION 82The market plan helps the entrepreneur prepare for _____ and control their day-to-day activities.Environmental changesFinancial changesGeopolitical changesContingencies1.8 pointsQUESTION 83About _____ of firms that file for Chapter 11 make it through the process.5-10%20-25%50-60%80-85%1.8 pointsQUESTION 84The early signs of bankruptcy are most often:Apparent to the entrepreneurInterrelatedOccur in isolated instancesUnavoidable1.8 pointsQUESTION 85Which methods of bankruptcy require the entrepreneur to come up with a payment plan?Chapters 11 and 13Chapters 7 and 11Chapters 7 and 13Chapters 7, 11, and 131.8 pointsQUESTION 86From the chapter on the characteristics of an entrepreneur, we know that after the failure of a business entrepreneurs are likely to:Continue starting new venturesLook for a position working for someone elseGo to work for the governmentTry again and fail1.8 pointsQUESTION 87The most common method of harvesting a venture is through:Direct sale of the businessAn IPOLiquidationEmployee stock ownership program1.8 pointsQUESTION 88According to the Small Business Administration, the failure rate of new businesses within the first few years is:Less than 25%About 70%50%About 33%1.8 pointsQUESTION 89The U.S. Commerce Department indicates that about _____ of successful ventures never make it to the second generation of ownership.50%60%70%80%1.8 pointsQUESTION 90Given the cultural climate of the U.S., business failure and bankruptcy:Mean the entrepreneur can never hope to start overCarry such a stigma that the entrepreneur is disgraced and ostracizedDo not have to be the end for the entrepreneurMeans that there would be a change in the outlook of the people1.8 pointsQUESTION 91The early signs of bankruptcy include all of the following except:Key personnel leave the companyPayroll taxes are not paidSuppliers demand payment in cashAll of the above are early signs of bankruptcy1.8 pointsQUESTION 92In 2008 approximately 19% of business filings were:Chapter 11Chapter 13Chapter 7Chapter 141.8 pointsQUESTION 93About 69% of the filings are of this variety:Chapter 7Chapter 13Chapter 11Chapter 181.8 pointsQUESTION 94The purpose of the Bankruptcy Act of 1978 is to:Ensure a fair distribution of assets to creditorsProtect debtors from unfair depletion of assetsProtect debtors from unfair demands by creditorsProtect creditors from undue delay of money1.8 pointsQUESTION 95Which of the following is not an exit strategy?An IPOPrivate sale of stockLiquidationSell out1.8 pointsQUESTION 96Chapter 11 is the type of bankruptcy that results in:Extended time paymentsLiquidationReorganizationTurn around time1.8 pointsQUESTION 97Currently ESOPs account for _____ of the private sector workforce.5%10%15%20%1.8 pointsQUESTION 98Around _____ of businesses make it to the third generation.5%14%22%50%1.8 pointsQUESTION 99Stress points are created as a result of:SalesThe need for new key personnelMajor capital investmentLack of time1.8 pointsQUESTION 100Which of the following is not a leading cause of failure in transferring a business to a family member?Insufficient estate planningLack of funds to pay estate taxesLack of skill by the family member taking over the businessFailure to plan for the transition1.8 points

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