9th Edition Test Bank Answers Learning Entrepreneurship

Management, 9e (Kinicki)

Learning Module 1: Entrepreneurship

1) Which of following statements regarding business start-ups and exits in the United States is false?

A) The number of start-up businesses has been shrinking steadily since the year 2000.

B) A business exits the market when it remains closed for one year and has no employees.

C) Starting a new business requires taking risks and embracing change.

D) The growth of new businesses is adding net new jobs to the U.S. economy.

E) New businesses demand long hours and a certain amount of financial uncertainty.

2) You work as an advisor at the Small Business Administration. Sally Sheridan has come to you seeking your advice. She is an aesthetician who is just thinking about starting her own business. She wants to own a beauty-services salon that provides manicures, pedicures, massages, hair styling, make-up, and other services. What is the best piece of advice you can give her?

A) Quit your current job so that you can devote all of your time to researching and planning the type of business you want to open.

B) At the start, plan to hire only friends and family—the people most likely to help your business become successful.

C) Learn the importance of budgeting and understand how to read a balance sheet and income statement.

D) As you begin to think about your business, your key long-term goal should be to have as many employees as possible.

E) Assume that the local market wants and needs the service that you plan to offer; the fact that you see a need for that service means that the community does, too.

3) ________ means the taking of risks to create a new enterprise. It can also increase the standard of living around the world.

A) Economic growth

B) Investment

C) Issuing stock

D) Intrapreneurship

E) Entrepreneurship

4) Many companies start with the founder's ________. For example, Jeff Bezos, the founder of Amazon.com and the world's wealthiest man, has said that he intends for Amazon to be "Earth's most customer-centric company" and to be "a place where people can come to find and discover anything they might want to buy online."

A) desire to work for a large corporation

B) vision and goals

C) academic background

D) family wealth

E) ethical framework

5) What is not a core component of entrepreneurship?

A) recognizing opportunities to create new ventures

B) using existing products and services as starting points for new product offerings

C) uncovering opportunities to create new types of value

D) deciding to take advantage of market-driven opportunities

E) taking advantage of market opportunities in order to create value and earn a profit or contribute to society

6) Who would be considered an intrapreneur?

A) Siobhan, who loves dogs; she realizes that dog lovers need a way to keep track of their pets' health care, so she sets out to create a cell phone-based app that helps pet lovers keep track of their pets' health needs.

B) Jamal, a biology lab manager at a major university; he hears many of the scientists complaining that the lab's chemicals constantly ruin their shoes, so he sets out to invent and sell a protective shoe covering that scientists can use when they're working in labs.

C) Marisol, who works for 3M Corporation; she is a huge fan of the company's Post-It Notes, and she thinks that the company can greatly expand its Post-It Notes line by customizing them for people who work in different types of organizations, such as sports teams.

D) Ahmad, who works as a certified public accountant; he realizes that the Arab American community in Detroit needs more people who speak Arabic to help them prepare their taxes, so he starts a firm that specializes in working with members of the Arab American community.

E) Sheila, who is a professional chef; she works in an upscale restaurant and realizes guests love exotic ingredients that they've never heard of before, so she starts a business in which she purchases exotic ingredients from abroad. She then travels among the restaurants in her state, talking to the chefs and selling them those ingredients for a profit.

7) Who is least likely to describe himself or herself as self-employed and most likely to self-identify as an entrepreneur?

A) a freelance editor who sells his services to various publishing companies

B) a scientist who has developed a process for converting the garbage in landfills into useful energy, thereby decreasing pollution and reducing society's reliance on fossil fuels

C) an electrician who owns his own business and who specializes in outdoor lighting

D) an accountant who goes to people's homes to help them prepare their income tax returns

E) a hair stylist who rents a chair at a salon and sees about 20 clients per week, who pay her directly

8) Unlike self-employed people, entrepreneurs tend to

A) hire people who have expertise that the entrepreneurs do not.

B) stay in one geographic area.

C) seek to influence markets, industries, and large numbers of people.

D) do most of the work themselves.

E) avoid risk.

9) Unlike entrepreneurs, self-employed people tend to

A) hire people who will work with them to implement their vision for the company.

B) stay in one geographic area.

C) seek to influence markets, industries, and large numbers of people.

D) delegate responsibilities to people they trust, who are smarter than and more experienced than they are in particular areas.

E) take the risks necessary to grow the business and make an impact on society.

10) What is not a key difference between self-employed people and entrepreneurs?

A) When a self-employed person retires or quits, the business generally closes; an entrepreneur's company continues even if the entrepreneur dies or moves on.

B) Self-employed people tend to work virtually and avoid taking risks; entrepreneurs tend to take risks, and they think on a global scale.

C) The self-employed are experts who do much of the work themselves; entrepreneurs realize they can't do everything themselves, so they hire and delegate responsibilities to people they trust.

D) Self-employed people can incorporate or organize as sole proprietors; entrepreneurs have a broader set of legal requirements, along with insurance and tax considerations.

E) Self-employed people have broad aspirations aimed at influencing industries and markets; entrepreneurs are more focused on operating a business in a specific geographic area and market.

11) Rick has met with the Small Business Administration, which analyzed his entrepreneurial skills and provided him with a summary of the results. Out of these findings of the SBA, what might challenge Rick in his quest to become a successful entrepreneur?

A) Rick has an external locus of control.

B) Rick is comfortable with a moderate level of risk, and he has the confidence to act decisively.

C) Rick has a high need for autonomy and wants to shape his own destiny.

D) Rick is conscientious and emotionally stable.

E) Rick has some tolerance for ambiguity because he knows he is trying to do things that haven't been done before.

12) Research has uncovered several important differences between managers and entrepreneurs. One of these differences is that

A) managers possess a greater need for autonomy than entrepreneurs do.

B) entrepreneurs tend to be more agreeable than managers.

C) managers tend to have a stronger internal locus of control than managers do.

D) managers are more motivated by promotions and organizational perks than entrepreneurs are.

E) managers are generally more innovative and creative than entrepreneurs.

13) According to the Global Entrepreneurship and Development Index, which country ranks first in terms of the environment for cultivating entrepreneurship?

A) India

B) China

C) the United States

D) the United Kingdom

E) Sweden

14) Which example best fits the definition and expectations of a start-up company?

A) NoConcussion, a company that manufactures equipment to be placed inside football players' helmets to prevent concussions

B) MeID, a company that uses sophisticated blockchain technology to provide ID verification for all human beings based on their individual physiological (biometric) characteristics, such as fingerprints and eyeball scans

C) A New Leash on Life, which creates and sells diamond-studded leashes for dogs owned by the world's wealthiest people

D) Live or Die, a vacation company that specializes in dropping people off in remote locations with no supplies, and forcing them to life off the land or die trying

E) Umbi, a small company that offers a kit that allows new parents to preserve their babies' umbilical cords for life

15) Marvella has created a high-frequency buzzer that prevents dogs from barking. The moment dogs hear the buzzer's high-pitched squeal, they stop barking. Extensive market testing has shown Marvella that the buzzer works across all breeds and on dogs of all ages. This product can be a lifesaver for people who live in apartment buildings and whose neighbors complain about barking dogs! Marvella should immediately apply for a

A) patent.

B) copyright.

C) trademark.

D) government-sponsored monopoly.

E) noncompete clause.

16) Small businesses in the United States

A) have fewer than 500 employees, according to the Small Business Administration.

B) hold only about 10 percent of U.S. patents.

C) have struggled with sales and profitability in recent years.

D) employ approximately 75 percent of all U.S. employees.

E) comprise only 10 percent of U.S. firms.

17) ________ is the level of necessaries, comforts, and luxuries that a person is accustomed to enjoying.

A) Economic development

B) HDI (human development index)

C) GDP (gross domestic product)

D) Capital accumulation

E) Standard of living

18) If you were giving an aspiring entrepreneur advice, which statement would you avoid?

A) "Identify a need for an opportunity, and then fill that need."

B) "Avoid risk, don't rock the boat, and think conservatively."

C) "Study customer complaints, and a find a way to solve to them."

D) "Identify a problem or frustration, and then develop a solution."

E) "Identify your skills, talents, or passions, and use them as the basis for your business."

19) In 2007, Joe Gebbia and Brian Chesky realized they could not afford the rent on their pricey San Francisco apartment, so they decided to put an air mattress in their living room and offer people an alternative to an expensive hotel room. This is the story of how Airbnb got started. In other words, Airbnb began when Gebbia and Chesky ________; the company grew because it ________.

A) identified their passions; was technologically based

B) studied consumer complaints; was based on idealism

C) broke the law; successfully lobbied to get the laws changed

D) identified a problem or frustration; identified an opportunity or need

E) sought to put their competitors out of business; was based on their desire to change the world

20) A business plan will likely not answer this question.

A) "How will I fund my business?"

B) "What opportunities will my business take advantage of?"

C) "What is my vision?"

D) "What resources does my business require?"

E) "What types of office supplies (staples, paper clips) will I use in my office?"

21) In general, a company that starts with a business plan is ________ to succeed than a company that does not start with a business plan.

A) much less likely

B) somewhat less likely

C) much more likely

D) somewhat more likely

E) equally likely

22) Your name is Joanne Warren, and you are writing a business plan for a coffee house that you plan to open in the downtown district of your city. Your business will be called A Cup of Joanne, and you plan to distinguish yourself from your competitors by offering blends from all around the world. You will also sponsor international coffee tastings and sell one-pound bags of freshly ground fair-trade coffee. The bank from which you are seeking to borrow $20,000 has asked you for a full business plan. ________ is/are not required in your business plan.

A) A market analysis

B) Interior decoration plans and merchandising

C) Sales strategies

D) Funding requirements and financial projections

E) A business description and organization

23) The following is an excerpt from a business plan: "To open our new upscale toy store, We R Toys, we require a total of $225,000. The owners will be providing $100,000 of this amount from their own savings, and their friends and families have promised an additional $25,000. Therefore, We R Toys requires a bank loan of $100,000."

In which section of We R Toys' business plan would this information be found?

A) Executive Summary

B) Funding Requirements

C) Market Analysis

D) Sales Strategies

E) Financial Projections

24) A ________ is a legal structure that can sell rights of ownership in the form of stocks or shares.

A) sole proprietorship

B) general partnership

C) corporation

D) limited liability company (LLC)

E) limited partnership

25) Vincenzo Martin and Sasha Boudrakis have started a new firm, The Fan Base. Vincenzo is a well-known marketing guru who advises major league sports franchises on how to maximize the revenue from their teams' brands and logos. Sasha, meanwhile, is mostly silent in the operation. He has invested $2 million to get The Fan Base off the ground, and in return he receives 25% of the firm's annual profits. The Fan Base is organized as a

A) sole proprietorship.

B) general partnership.

C) corporation.

D) limited liability company (LLC).

E) limited partnership.

26) We Are the World is an importing company that specializes in importing hand-made arts and crafts from crafters and artisans around the world. The company has about $4 million worth of stock outstanding. Due to its desire to avoid double taxation, it is structured so that its individual shareholders pay taxes on all of the company's income. The shareholders report the flow-through of income and losses on their personal tax returns and are assessed at their individual tax rates. We Are the World is a(n)

A) C corporation.

B) G corporation.

C) S corporation.

D) limited liability company (LLC).

E) investment trust.

27) Although estimates vary widely, it seems reasonable to suggest that start-up costs for the average business are approximately

A) $10,000–$80,000.

B) $25,000–$100,000.

C) $250,000.

D) $300,000–$500,000.

E) over $1 million.

28) Businesspeople who start new businesses sometimes say that part of their initial funding was "love money." Who are the usual sources of love money?

A) the business owner himself or herself

B) parents, friends, and other relatives

C) charitable organizations

D) the SBA (Small Business Association)

E) venture capitalists

29) Accel, Greylock Partners, Sequoia Capital, Benchmark, and Andreessen Horowitz are all in the business of providing funds to new businesses in exchange for an ownership share in the company. These companies are all seeking a high return on their investment, and they tend to be drawn to technology and biotechnology companies. Accel, Greylock, Sequoia, Benchmark, and Andreessen are all

A) business incubators.

B) for-profit arms of the SBA.

C) commercial banking organizations.

D) C corporations.

E) venture capital firms.

30) Sequoia Capital is a venture capital firm that invests in promising new start-ups that have a high potential for strong profitability over a fairly short period of time. In one day, Sequoia's management team hears presentations from five businesspeople who are looking for a $5 million investment for their new firm. Based on Dr. Lakshmi Balachandra's research, ________ is mostly likely to receive the $5 million funding from Sequoia.

A) Amy, who is a very genuine person who demonstrates great sensitivity and warmth as she makes her presentation,

B) Balki, whose two fraternity brothers, Biff and Chip, are on the board of directors at Sequoia Capital,

C) Craig, who wants to start a clown college, who dresses up in an elaborate costume and sprays seltzer in the faces of Sequoia's management team during his presentation,

D) Danielle, who has run a successful business in the past but who has been called out on social media for possible ethical breaches,

E) Eriq, who makes a solid presentation but whom the management team finds lacking in humor,

31) How does organizational culture and design develop in a start-up company?

A) The founders of start-up companies typically spell out a plan for their organizational culture and design in their initial business plan.

B) Once a start-up has received funding, its investors typically dictate the type of organizational culture and design that they require.

C) In the early days of the business, the owners hire people they like and trust, but as the business grows, they hire outside people and need to develop a more explicit organizational culture and design.

D) Because most start-up companies are sole proprietorships and partnerships, most new companies have no need to identify a mission or to create an organizational culture because the owners are synonymous with the company's goals and mission.

E) Most new companies begin operations with a strong sense of their organizational culture and design, but as the company grows, these guiding principles are no longer needed and are therefore abandoned in the quest for profit.

32) Think about a company or a business that you might like to start. You need not have a grand idea for a multinational corporation; you might decide, for example, that you want to start a company in which you mow people's lawns in the summer and shovel their sidewalks after snowstorms. Or you might decide to learn how to be a tattoo artist and then become a "mobile" tattoo artist who goes to people's homes to give them tattoos. For your chosen business, explain how you would follow the advice given by the authors:

1. Identify your motives.

2. Build clients.

3. Practice humility. (This is more about self-development. Explain how you would practice humility).

4. Surround yourself with the right people.

5. Learn the basics of accounting.

If you cannot think of a business you would like to start, use the lawn mowing/snow shoveling business to answer this question.

33) Explain the difference between an entrepreneur and an intrapreneur. Name at least one successful entrepreneur and the company he or she founded.

34) Identify and explain at least three ways in which self-employment differs from entrepreneurship. How might self-employment be the first step on the road to entrepreneurship?

35) What are the "Big Five" personality dimensions? In general, how do entrepreneurs rate on each of these dimensions? That is, what does research show to be the personality characteristics of successful entrepreneurs?

36) This question has two parts; be sure to answer both. First, list the nine characteristics that researchers find most important to successful entrepreneurs, providing a brief description of each. Then perform a self-analysis in which you rate yourself on each characteristic in terms of a business that you might like to start. (If you cannot think of a business idea, choose from one of the following: a landscaping service, a food delivery service, an elder care service—all of these options are open to you as a college student.) To save time, you may place your self-assessment immediately after your summary of each characteristic.

37) List at least four positive effects of entrepreneurship (including small firms and start-ups) on society. For each positive effect, choose a company that illustrates that effect. You do not have to give specific numbers; a discussion of the general effects will suffice. (You may use the same company more than once; you may even choose to use that company for all four effects. Choose the examples that best make your point.)

38) To answer this question, you must put yourself in the position of an aspiring entrepreneur. Below are the four steps required in uncovering a business idea. Work your way through each of these steps to identify and build on an idea for a business you would like to start. If you have not thought about starting a business, imagine that your dream is to own a "doggie daycare" service in which you take care of people's dogs during the day while they are at work, and at night and on weekends when they are away on business or on vacation. Be sure to answer each of the following questions:

1. Identify your passions, skills, and talents.

2. Identify a problem or frustration.

3. Identify an opportunity or need.

4. Brainstorm, suggest, or identify customer complaints.

39) Briefly explain each of the seven key components of a business plan and what you should include in each.

40) Explain the similarities and differences among the types of legal structures: sole proprietorships, general and limited partnerships, C and S corporations, and limited liability companies. Identifies the benefits and drawbacks of each.

41) List and explain at least four possible sources of funding for start-ups.

42) The following are three excerpts from a business plan for The Beautiful Dog, a food truck that serves gourmet hot dogs (including vegetarian options) on a public thoroughfare near a high-enrollment college campus. Identify which section of the business plan each excerpt comes from, and explain your reasoning.

Excerpt #1:

The Beautiful Dog will be a welcome addition to the College Avenue community, which already sees 8 to 10 food trucks lined up on a typical day, include Bodacious Burgers, Terrific Tacos, Very Vegetarian, Tantalizing Thai, Perfect Pizza, and Champ's Chunkalicious Chicken. The Beautiful Dog will have a strong market position as the only food truck that serves hot dogs, which national market research has shown is the third most popular fast food in the United States. Our ideal customers are students, faculty members, and other members of the college community who need a quick bite to eat in between classes and on their way to their other responsibilities. Because our hot dogs are boiled, we will be able to serve people much more quickly than our competitors who cook their food to order, such as Bodacious Burgers and Tantalizing Thai.

Excerpt #2:

The Beautiful Dog has a very strong position with regard to pricing. The fast-food market expects to pay higher prices for hamburgers and chicken; moderate prices for pizza; and low prices for tacos and hot dogs. We will therefore be priced at the low end of the scale, making our products more affordable to college students, who are often on tight budgets. We have already begun tweeting at @TheBeautifulDog, and our Facebook page is up and running. We are gaining hundreds of new followers per day, and we will use the Facebook page not only to advertise our special "Dog of the Day" but also to reward our followers with special deals that they can get by saying the "Magic Dog Word of the Day."

Excerpt #3:

We expect that The Beautiful Dog will have an operating loss for the first three months as we purchase equipment and get the food truck up and running. In months three to six, we expect to break even as we pay off some of our start-up costs. By month seven, we expect to turn a profit of $8,000 per month. Thereafter, we expect profits as follows: $9,000 per month during the months that school in session full time (January through May, September through November); $5,000 per month during the summer, when there are fewer students on campus (June through August); and $2,000 in December, when the cold weather and the holiday break combine to greatly lower foot traffic past the food truck.

43) The following is an excerpt from a business plan:

Cake Walk is an upscale new bakery whose baked goods reflect what's happening in the news today. For example, during Oscar week, our windows will show cakes of the nominees for Best Actor and Best Actress. During Super Bowl week, we'll offer baked football-oriented treats, such as football-shaped cookies and cupcakes, and we'll offer edible cake jerseys of the competing teams. The principals of Cake Walk will be Francesca Miller, who has run a successful New York City bakery for more than ten years, and her business partner Daryce Livingston, a Wharton-educated MBA who has worked at a major Manhattan investment firm since 2004. The firm is organized as a partnership between Miller and Livingston.

In which section of Cake Walk's business plan would this information be found? Explain.