Canadian Entrepreneurship and Small Business Management Wesley Balderson 10th Edition – Test Bank
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Sample Test
Chapter 03
Evaluation of a Business Opportunity
Multiple Choice Questions
1. The
entrepreneurial process outlined in the text includes:
A.management
of the business.
B. finding partners.
C. developing a relationship with major competitors.
D. developing quality of life goals.
Difficulty: Medium
Learning Objective: 03-01
List the four stages of the entrepreneurial process.
Topic: 03-01
Entrepreneurial Process
2. All
businesses start with:
A.a large sum of funds.
B. an
idea.
C. strong relationships.
D. a mature marketplace.
Difficulty: Easy
Learning Objective: 03-01
List the four stages of the entrepreneurial process.
Topic: 03-02 Ideas
3. The
stages in the entrepreneurial process proceed:
A.simultaneously.
B. in whatever order makes the most sense in the circumstances.
C. sequentially.
D. based on the entrepreneur’s strengths.
Difficulty: Hard
Learning Objective: 03-01
List the four stages of the entrepreneurial process.
Topic: 03-01
Entrepreneurial Process
4. A
focus group involves:
A.asking questions to solicit participant responses.
B. focusing a group of interested consumers on a new product.
C. a discussion among lenders and customers focused on pricing and payment
terms.
D. an
open, in-depth discussion.
Difficulty: Hard
Learning Objective: 03-02
Identify the various sources of ideas for new ventures.
Topic: 03-03 Sources of
New Ideas
5. Normally,
before writing a full business plan, entrepreneurs will:
A.ensure that they have enough funding to be successful.
B. perform
an opportunity assessment.
C. hire key position employees.
D. visit a banker.
Difficulty: Medium
Learning Objective: 03-02
Identify the various sources of ideas for new ventures.
Topic: 03-04 Assessment of
Business Opportunities
6. One
of the best ways to develop a new idea is to:
A.withdraw from your daily work and relax.
B. discuss with family and friends what they think you should do for a
business.
C. explore your own hobbies and areas of interest.
D. think
about consumer habits and demands.
Difficulty: Easy
Learning Objective: 03-02
Identify the various sources of ideas for new ventures.
Topic: 03-02 Ideas
7. Which
is not a source of new ideas indicated in the textbook?
A.Lifestyles
B. Occupations
C. Hobbies
D. Observations
Difficulty: Medium
Learning Objective: 03-02
Identify the various sources of ideas for new ventures.
Topic: 03-03 Sources of
New Ideas
8. Qualitative
assessments look at:
A.non-quantitative
factors.
B. how well sales are doing for a particular product.
C. market dominance metrics.
D. cash flow numbers.
Difficulty: Easy
Learning Objective: 03-03
Summarize the non-quantitative aspects of evaluating business opportunities.
Topic: 03-05 Qualitative
Assessment
9. Two
important capabilities that an owner manager ought to have are:
A.pleasant personality and talent.
B. industry connections and knowledge.
C. good
health and expertise in the fundamentals of management.
D. public image and banking contacts.
Difficulty: Hard
Learning Objective: 03-03
Summarize the non-quantitative aspects of evaluating business opportunities.
Topic: 03-05 Qualitative
Assessment
10.
A business opportunity assessment includes consideration of:
A.impact on the entrepreneur’s home life.
B. competitive
advantage.
C. the entrepreneur’s ability to manage people.
D. the possibilities for family succession.
Difficulty: Hard
Learning Objective: 03-03
Summarize the non-quantitative aspects of evaluating business opportunities.
Topic: 03-06 Opportunity
Assessment
11.
One of the major causes of business failure is:
A.unbalanced
experience.
B. lack of family support.
C. wide ranging interests.
D. strong imagination.
Difficulty: Easy
Learning Objective: 03-03
Summarize the non-quantitative aspects of evaluating business opportunities.
Topic: 03-05 Qualitative
Assessment
12.
Offering a totally new product is:
A.is a sure way to succeed.
B. generally a low-risk gamble.
C. one
way to enter a market.
D. the best way to dominate a market in the long term.
Difficulty: Medium
Learning Objective: 03-04
Describe the methods by which an entrepreneur can enter a market with a product
or service.
Topic: 03-07 Evaluating
how to Break into the Market
13.
If a business wishes to offer a product or service similar to
one that is already in the market, they should:
A.try to make their product of service look the same as the existing product or
service.
B. forget about this idea because it rarely works out well.
C. try to compete on the basis of price.
D. try
to create a competitive advantage over the existing product or service.
Difficulty: Hard
Learning Objective: 03-04
Describe the methods by which an entrepreneur can enter a market with a product
or service.
Topic: 03-07 Evaluating
how to Break into the Market
14.
Businesses selling fad or novelty type products can succeed
because these types of products:
A.are usually inexpensive.
B. satisfy
emotional needs.
C. have interesting operating characteristics.
D. are usually packaged in an appealing way.
Difficulty: Medium
Learning Objective: 03-04
Describe the methods by which an entrepreneur can enter a market with a product
or service.
Topic: 03-07 Evaluating
how to Break into the Market
15.
In order to be successful, a business should ensure that it has:
A.a monopoly position.
B. ergonomic product design.
C. environmentally friendly aspects.
D. a
competitive advantage.
Difficulty: Easy
Learning Objective: 03-05
Recognize the ways that an entrepreneur can develop a strategic competitive
advantage.
Topic: 03-08 Developing a
Strategic Competitive Advantage
16.
Typically, in a service business, a major factor in generating
revenue is:
A.equipment in good working condition.
B. a suitable accounting system.
C. the
expertise of the owner.
D. office layout.
Difficulty: Easy
Learning Objective: 03-05
Recognize the ways that an entrepreneur can develop a strategic competitive
advantage.
Topic: 03-08 Developing a
Strategic Competitive Advantage
17.
A recent report suggested that future growth in the following
areas would provide a good chance for success in the future:
A.services
for small businesses.
B. recreational campground development.
C. bookstores.
D. supermarkets.
Difficulty: Easy
Learning Objective: 03-05
Recognize the ways that an entrepreneur can develop a strategic competitive
advantage.
Topic: 03-09 The Right
Business
18.
Some aspects of business that are more difficult for small
businesses are:
A.flexibility and innovation.
B. customer service and product quality.
C. price
and location.
D. innovation and location.
Difficulty: Hard
Learning Objective: 03-05
Recognize the ways that an entrepreneur can develop a strategic competitive
advantage.
Topic: 03-08 Developing a
Strategic Competitive Advantage
19.
Which is not a natural advantage for a small business?
A.Innovation
B. Supplier
volume
C. Customer service
D. Product quality
Difficulty: Medium
Learning Objective: 03-05
Recognize the ways that an entrepreneur can develop a strategic competitive
advantage.
Topic: 03-10 The Right
Aspect of the Business
20.
Two general types of information available to prospective small
business owners are:
A.paid data and free data.
B. primary
data and secondary data.
C. high-quality data and empirical data.
D. micro data and macro data.
Difficulty: Hard
Learning Objective: 03-06
Discuss the types of information available to assist in the quantitative
analysis of selecting a small business and illustrate how that information can
be used.
Topic: 03-12 Sources of
Information
21.
Most provincial and territorial governments use _____ to assist
small businesses.
A.small
business consultants
B. online chat facilities
C. case studies
D. Skype
Difficulty: Easy
Learning Objective: 03-06
Discuss the types of information available to assist in the quantitative
analysis of selecting a small business and illustrate how that information can
be used.
Topic: 03-13 Secondary
Data
22.
Test marketing involves:
A.asking potential customers how much they would pay for the product.
B. putting product into an existing outlet.
C. sending surveys to a significant number of customers in the industry.
D. simulating
an actual market situation.
Difficulty: Medium
Learning Objective: 03-06
Discuss the types of information available to assist in the quantitative
analysis of selecting a small business and illustrate how that information can
be used.
Topic: 03-14 Primary Data
23.
Which is not a form of primary data?
A.Observation
B. Internet surveys
C. Personal interviews
D. Statistics
Canada labour market surveys
Difficulty: Medium
Learning Objective: 03-06
Discuss the types of information available to assist in the quantitative
analysis of selecting a small business and illustrate how that information can
be used.
Topic: 03-14 Primary Data
24.
The breakdown method refers to:
A.testing a product for incidence of breakdowns.
B. eliminating
a demographic.
C. quality control.
D. impact of a product on customer relationships.
Difficulty: Medium
Learning Objective: 03-07
Identify a systematic way to quantitatively assess an industry and evaluate the
financial feasibility of a specific small business opportunity.
Topic: 03-16 Preparing The
Feasibility Analysis
25.
The purpose of calculating market potential is:
A.to
arrive at a dollar or unit sales estimate for the total market.
B. to estimate the percentage of the total market potential the proposed
business will obtain.
C. to estimate the total amount of selling space in the market devoted to
the merchandise the new business will sell.
D. to calculate the market share based on selling space.
Difficulty: Hard
Learning Objective: 03-07
Identify a systematic way to quantitatively assess an industry and evaluate the
financial feasibility of a specific small business opportunity.
Topic: 03-17 Step 1:
Calculate Market Potential
26.
Market share means:
A.the dollar volume of sales by the major business in a market.
B. the social responsibility of an industry with the communities in which
it operates.
C. ease of entry into a market by a new business.
D. percentage
of total market which a business controls.
Difficulty: Medium
Learning Objective: 03-07
Identify a systematic way to quantitatively assess an industry and evaluate the
financial feasibility of a specific small business opportunity.
Topic: 03-18 Step 2:
Calculate Market Share
27.
An important part of a feasibility analysis for a manufacturing
business is:
A.the ease of the manufacturing process.
B. the total dollars invested by owners.
C. the
financial break-even point.
D. the relative newness of the product.
Difficulty: Hard
Learning Objective: 03-07
Identify a systematic way to quantitatively assess an industry and evaluate the
financial feasibility of a specific small business opportunity.
Topic: 03-19 Step 3:
Calculate Net Income and Cash Flow
Chapter 05
Buying a Business and Franchising
Multiple Choice Questions
1. It is
argued in the text that the most significant advantage of buying a business is:
A.it has already been registered with the authorities.
B. it has inventory.
C. it
has an established image and track record.
D. to avoid being sued.
Difficulty: Easy
Learning Objective: 05-01
Describe the advantages and disadvantages of purchasing an ongoing business
compared with the other methods of small business ownership.
Topic: 05-02 Advantages of
Purchasing
2. According
to the text, most businesses that are for sale:
A.are
only marginally successful.
B. have valuable locations to transfer to a new owner.
C. provide a steady base on which it can be expanded.
D. have solid banking arrangements in place.
Difficulty: Easy
Learning Objective: 05-01
Describe the advantages and disadvantages of purchasing an ongoing business
compared with the other methods of small business ownership.
Topic: 05-03 Disadvantages
of Purchasing
3. Goodwill:
A.is the process of extending credit to needy customers.
B. measures the added value of a product.
C. always exists so long as a business operates.
D. is
essentially a business’s favourable reputation.
Difficulty: Medium
Learning Objective: 05-01
Describe the advantages and disadvantages of purchasing an ongoing business
compared with the other methods of small business ownership.
Topic: 05-03 Disadvantages
of Purchasing
4. Common
sources of businesses for sale include:
A.supermarket ad boards.
B. trade
journals.
C. yellow pages (hard copy or web-based).
D. FAQ pages.
Difficulty: Easy
Learning Objective: 05-02
Identify the sources of businesses that are for sale.
Topic: 05-04 Sources of
Businesses for Sale
5. If a
business is not listed as being for sale:
A.its privacy should be respected.
B. then it won’t be for sale.
C. it’s not worth investigating it.
D. a
prospective purchaser can ask the owner if they would be interested in selling.
Difficulty: Medium
Learning Objective: 05-02
Identify the sources of businesses that are for sale.
Topic: 05-04 Sources of
Businesses for Sale
6. Government
departments:
A.are not likely to be aware of business for sale.
B. are never connected with individual businesses.
C. may
be aware of businesses for sale.
D. often act as brokers in connecting purchasers and sellers of
businesses.
Difficulty: Medium
Learning Objective: 05-02
Identify the sources of businesses that are for sale.
Topic: 05-04 Sources of
Businesses for Sale
7. Industry
analysis may not be required if:
A.a
buyer has considerable experience in the industry.
B. the cost to do so would be prohibitive.
C. there is no information readily available.
D. the industry is not dominated by one large business.
Difficulty: Medium
Learning Objective: 05-03
Explain how to evaluate a business that is for sale.
Topic: 05-06 Industry
Analysis
8. When
purchasing a business, non-liquid assets:
A.should be considered not to have any value.
B. should
be subjected to an independent appraisal.
C. should by ignored for business planning purposes.
D. should be valued at 20% of total fixed assets.
Difficulty: Hard
Learning Objective: 05-03
Explain how to evaluate a business that is for sale.
Topic: 05-08 Financial
Condition of the Business
9. Strong
customer relations is usually an indicator:
A.of a market with few competitors.
B. of a high-demand product or service.
C. of
good management and employees.
D. of low pricing.
Difficulty: Hard
Learning Objective: 05-03
Explain how to evaluate a business that is for sale.
Topic: 05-10 External
Relationships–Suppliers And Customers
10.
Market value is:
A.the
price where demand and supply meet.
B. the lowest amount that a seller will accept in the market.
C. the average of the three most recent sales transactions in an industry.
D. the net realizable value of a business’s fixed assets.
Difficulty: Hard
Learning Objective: 05-04
Describe the methods used in determining the price to pay for a business.
Topic: 05-13 Market Value
11.
The times earnings method is also called:
A.productivity velocity method.
B. return on investment accelerator.
C. efficiency measure.
D. price-earnings
ratio.
Difficulty: Easy
Learning Objective: 05-04
Describe the methods used in determining the price to pay for a business.
Topic: 05-15 Earnings Value
12.
An offer to purchase will most likely be made:
A.to the seller’s CEO.
B. by
the buyer or through a realtor or lawyer.
C. by the buyer’s banker on behalf of the buyer.
D. anonymously (until accepted).
Difficulty: Hard
Learning Objective: 05-04
Describe the methods used in determining the price to pay for a business.
Topic: 05-17 The Purchase
Transaction
13.
One of the attractive benefits of being a franchisee is:
A.future income is a high certainty.
B. it
can replace a lost job.
C. there is no need to learn about an industry in depth.
D. the total freedom of owning your own business.
Difficulty: Medium
Learning Objective: 05-05
Discuss the significance of franchising in the Canadian economy.
Topic: 05-19 History and
Background of Franchising
14.
According to research, traditional franchise businesses include:
A.hotels.
B. construction.
C. retailing.
D. soft
drink companies.
Difficulty: Easy
Learning Objective: 05-05
Discuss the significance of franchising in the Canadian economy.
Topic: 05-19 History and
Background of Franchising
15.
The fastest growing sector in the Canadian economy is:
A.the
service sector.
B. the professional sector.
C. the manufacturing sector.
D. the import/export sector.
Difficulty: Easy
Learning Objective: 05-05
Discuss the significance of franchising in the Canadian economy.
Topic: 05-19 History and
Background of Franchising
16.
Under a franchising arrangement:
A.a franchisor owns an outlet.
B. both the franchisor and the franchisee operate an outlet.
C. a
franchisee owns an outlet.
D. a franchisee develops the best system for their outlet.
Difficulty: Easy
Learning Objective: 05-06
Explain the various types of franchises available for small business.
Topic: 05-20 What is
Franchising?
17.
________ is a type of franchise.
A.Manufacturer-retailer-directed
B. Wholesaler-retailer-directed
C. Retailer-service depot
D. Service-retailer depot
Difficulty: Medium
Learning Objective: 05-06
Explain the various types of franchises available for small business.
Topic: 05-20 What is
Franchising?
18.
A franchise system can best be characterized as:
A.a
voluntary chain.
B. a money-making machine.
C. a business excellence strategy.
D. an approach to market dominance.
Difficulty: Hard
Learning Objective: 05-06
Explain the various types of franchises available for small business.
Topic: 05-20 What is
Franchising?
19.
Established franchises can provide:
A.guaranteed cash flow.
B. franchisee success.
C. instant
brand recognition.
D. healthy opportunities for franchisee creativity.
Difficulty: Hard
Learning Objective: 05-07
List the relative strengths and weaknesses of franchising as a method of
starting a small business.
Topic: 05-21 Advantages of
Franchising
20.
Franchisee training is most likely to involve:
A.Internet research.
B. personal industry reading.
C. competitor research.
D. site
visits.
Difficulty: Medium
Learning Objective: 05-07
List the relative strengths and weaknesses of franchising as a method of
starting a small business.
Topic: 05-21 Advantages of
Franchising
21.
Potential franchisees will usually have to provide:
A.the names of relatives who have succeeded in business.
B. collateral.
C. a current health certificate.
D. their
work history.
Difficulty: Easy
Learning Objective: 05-07
List the relative strengths and weaknesses of franchising as a method of
starting a small business.
Topic: 05-23 Finding a
Franchise
22.
Which is not a common franchise agreement restriction?
A.Product or service offered
B. Line forcing
C. Exaggeration
of financial success
D. Remodelling clauses
Difficulty: Medium
Learning Objective: 05-07
List the relative strengths and weaknesses of franchising as a method of
starting a small business.
Topic: 05-22 Potential
Disadvantages of Franchising
23.
Which is not a potential disadvantage of franchising?
A.Proven
dispute resolution methods
B. Saturation of the market
C. Cost of the franchise
D. Lack of security
Difficulty: Medium
Learning Objective: 05-07
List the relative strengths and weaknesses of franchising as a method of
starting a small business.
Topic: 05-22 Potential
Disadvantages of Franchising
24.
A proven franchise offers:
A.greater opportunity and more freedom.
B. small market share and weaker competition.
C. lower
risk and higher financial investment.
D. higher returns and reduced employee turnover.
Difficulty: Medium
Learning Objective: 05-08
Explain how to evaluate a franchise opportunity.
Topic: 05-24 Evaluation of
a Franchise Opportunity
25.
Of the following elements, a potential franchisor should be
concerned most about:
A.supply chains.
B. renewal
and termination terms.
C. hours of business operation.
D. future Canadian/US dollar exchange rates.
Difficulty: Hard
Learning Objective: 05-08
Explain how to evaluate a franchise opportunity.
Topic: 05-24 Evaluation of
a Franchise Opportunity
26.
Franchises with territorial protection:
A.are
the most desirable.
B. are increasing in frequency.
C. are generally not possible.
D. are illegal due to non-competition laws.
Difficulty: Medium
Learning Objective: 05-08
Explain how to evaluate a franchise opportunity.
Topic: 05-24 Evaluation of
a Franchise Opportunity
27.
Becoming a franchisor:
A.is a retirement strategy.
B. is a way of reducing one’s management pressures.
C. is inevitable in a successful business.
D. is
a form of entrepreneurship.
Difficulty: Medium
Learning Objective: 05-09
Discuss how to organize a franchising system.
Topic: 05-25 The
Entrepreneur as Franchisor
28.
Secret shoppers:
A.refers to customers who pretend not to be interested in making a purchase.
B. means asking someone else to make your purchase in their name.
C. is
a strategy used by some franchisors.
D. are used by government agencies to detect tax fraud.
Difficulty: Hard
Learning Objective: 05-09
Discuss how to organize a franchising system.
Topic: 05-27 How Does One
Become a Franchisor?
29.
Converting existing chain outlets into franchises is called:
A.mini-franchises.
B. branchising.
C. piggybacking.
D. teamchising.
Difficulty: Medium
Learning Objective: 05-09
Discuss how to organize a franchising system.
Topic: 05-28 Franchising
in the Future
30.
Future growth of franchising will:
A.reduce employment numbers.
B. make
competition more difficult for small businesses in certain industries.
C. result in less competition.
D. lead to more monopolies.
Difficulty: Hard
Learning Objective: 05-09
Discuss how to organize a franchising system.
Topic: 05-28 Franchising
in the Future
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