Midterm Exam 1 Questions & Answers IT364 Entrepreneurship and Innovation
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Midterm Exam 1 Questions & Answers IT364 Entrepreneurship and Innovation

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Questions and Answers

What method is used for determining the value of a business by using the price/earnings ratios of similar businesses?

  • Balance Sheet Technique
  • Marketing Approach
  • Asset Approach
  • Earnings Approach (correct)
  • Which pair of terms correctly describes the process of thinking new things and doing new things?

  • Creativity, Innovation
  • Innovation, Creativity (correct)
  • Invention, Creativity
  • Creativity, Invention
  • What term refers to a business that employs less than 100 people?

  • Small Business (correct)
  • Medium Business
  • Mid-market
  • Startup
  • Which of the following is NOT a benefit of owning a small business?

    <p>Opportunity to be more stressed.</p> Signup and view all the answers

    Which form of business ownership is designed for a business owned and managed by one individual?

    <p>Sole Proprietorship</p> Signup and view all the answers

    What does 'Intellectual capital' refer to in a business context?

    <p>Intellectual Capital</p> Signup and view all the answers

    In a partnership, the co-owners legally share a business’s assets, liabilities, and profits according to what?

    <p>Partnership agreement</p> Signup and view all the answers

    What does UPA stand for in the context of business?

    <p>Uniform Partnership Act</p> Signup and view all the answers

    Which type of competitors offer some of the same products and services?

    <p>Direct competitors</p> Signup and view all the answers

    What do you call a corporation that conducts business in the state where it is incorporated?

    <p>Domestic corporation</p> Signup and view all the answers

    What are the key methods for preparing an advertising budget?

    <p>Affordable, competitor matching, percentage of sales, objective-and-task</p> Signup and view all the answers

    What factors play a role in determining the right price for a product or service?

    <p>Cost structure, market assessment, desired image</p> Signup and view all the answers

    What is the purpose of promotion in marketing?

    <p>To inform consumers about a product or service and influence them to make a purchase</p> Signup and view all the answers

    What differentiates a small business from its competitors and gives it a unique position in the market?

    <p>Competitive advantage</p> Signup and view all the answers

    Which type of information is commonly used in data mining?

    <p>Geographic, Demographic, and Psychographic</p> Signup and view all the answers

    What can be a disadvantage of buying an existing business?

    <p>Paying for 'ill will'</p> Signup and view all the answers

    In franchising, what do semi-independent business owners receive in return for paying fees and royalties to a parent company?

    <p>Right to use trademark, sell products, and use business format</p> Signup and view all the answers

    What can be an advantage of buying an existing business according to the text?

    <p>Leverage the experience of the previous owner</p> Signup and view all the answers

    What should a company consider when selecting advertising media?

    <p>Trading area size, customer characteristics</p> Signup and view all the answers

    Which structure features elements of a partnership and a corporation?

    <p>Limited liability company (LLC)</p> Signup and view all the answers

    What is a natural part of the creative process?

    <p>Innovation</p> Signup and view all the answers

    What areas should a business plan presentation cover?

    <p>The problem your product or service solves</p> Signup and view all the answers

    What is a distinction made only for federal income tax purposes?

    <p>S corporation</p> Signup and view all the answers

    What is a road map an entrepreneur draws up to fulfill a company's mission?

    <p>Business plan</p> Signup and view all the answers

    What is a potential drawback of owning a small business related to income?

    <p>Uncertainty of income</p> Signup and view all the answers

    Which drawback of owning a small business is associated with the risk of losing all invested capital?

    <p>Risk of losing invested capital</p> Signup and view all the answers

    What potential drawback involves the need for long hours and hard work in small business ownership?

    <p>Lower quality of life</p> Signup and view all the answers

    Which drawback is related to the lower quality of life until a small business becomes profitable?

    <p>Long hours and hard work</p> Signup and view all the answers

    Which potential drawback of owning a small business involves always being under pressure to succeed?

    <p>High levels of stress</p> Signup and view all the answers

    What potential drawback highlights the fact that small business owners are liable for all debts, losses, and lost capital if the business fails?

    <p>Complete responsibility</p> Signup and view all the answers

    Study Notes

    Advantages and Disadvantages of Buying an Existing Business

    • One advantage of buying an existing business is leveraging the experience of the previous owner
    • A disadvantage of buying an existing business is paying for “ill will”

    Types of Business Ownership

    • Corporation: a corporation conducts business in the state in which it is incorporated
    • Partnership: co-owners (partners) legally share a business’s assets, liabilities, and profits according to the terms of an established partnership agreement
    • Joint Venture: semi-independent business owners pay fees and royalties to a parent company in return for the right to become identified with its trademark, to sell its products or services, and often to use its business format and system
    • Sole Proprietorship: a business owned and managed by one individual

    Marketing and Advertising

    • The purpose of promotion in marketing is to inform consumers about a product or service and influence them to make a purchase
    • Factors that determine the right price for a product or service include cost structure, market assessment, and desired image
    • Methods for preparing an advertising budget include affordable, competitor matching, and percentage of sales

    Entrepreneurship and Innovation

    • Creativity refers to thinking new things, and innovation refers to doing new things
    • Intellectual capital refers to the knowledge and information a company acquires and uses to create a competitive advantage in its market segment
    • Failure is a natural part of the creative process

    Business Planning

    • A business plan is a road map an entrepreneur draws up of the actions necessary to fulfill a company's mission, goals, and objectives
    • Areas that a business plan presentation should cover include the problem your product or service solves

    Types of Franchising

    • Franchising: a method of distributing products or services where a franchiser grants a franchisee the right to operate a business using the franchiser's business system and trademark
    • Pure franchising (or comprehensive franchising or business format franchising): a franchisee gets the ability to use the brand name, products, and complete business system of the franchiser

    Drawbacks of Owning a Small Business

    • Uncertainty of income
    • Risk of losing entire invested capital
    • Long hours and hard work
    • Lower quality of life until the business gets established
    • High levels of stress
    • Complete responsibility
    • Discouragement

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    Description

    This quiz contains multiple choice questions and true/false statements related to entrepreneurship and partnership agreements, focusing on topics like co-ownership, business assets, liabilities, profits, and legal structures. Test your knowledge on concepts like Uniform Partnership Act.

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