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Stage 01 - Assessing Your Potential for an Entrepreneurial Career Stage 01 Assessing Your Potential for an Entrepreneurial Career Multiple Choice Questions 1. The higher is your n...

Stage 01 - Assessing Your Potential for an Entrepreneurial Career Stage 01 Assessing Your Potential for an Entrepreneurial Career Multiple Choice Questions 1. The higher is your number of most desirable responses on the Entrepreneurial Quiz then: A. The less your responses agree with those of successful entrepreneurs. B. The more your responses agree with those of successful entrepreneurs. C. The less likely you are to become a successful entrepreneur. D. The more likely you are to abort your attempts at an entrepreneurial venture because of anxiety. High levels of agreement indicate that you may have the "right stuff" to succeed in an entrepreneurial career. Difficulty: Medium Learning Objective: 01-01 Evaluate your potential for becoming an entrepreneur through self-assessment quizzes. Topic: 01-01 The Entrepreneurial Personality 2. Despite scoring high on the Entrepreneurial Quiz, your venture is unlikely to succeed if you fail to demonstrate: A. People prowess B. Technical savvy C. Commitment, determination, and perseverance D. Financial independence Anything less than total commitment to your venture, and considerable determination and perseverance, will likely result in failure, regardless of the degree to which you may possess other important attributes. Difficulty: Medium Learning Objective: 01-01 Evaluate your potential for becoming an entrepreneur through self-assessment quizzes. Topic: 01-01 The Entrepreneurial Personality 1-1 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 3. In a study of inductees into the Babson University Academy of Distinguished Entrepreneurs, the three attributes and behaviours cited as the principal reasons for entrepreneurial success are: A. Openness to change, personal initiative, and perseverance. B. Commitment, dedication, and perseverance. C. Positive attitude, social savvy, and intellectual intelligence. D. Emotional intelligence, social intelligence, mathematical intelligence. There are the three behaviours/attributes identified in this particular study. They are: Openness to change, personal initiative, and perseverance. Other research has uncovered different lists of common learnable attributes. Difficulty: Easy Learning Objective: 01-02 Identify the attitudes and behaviours that will help turn your business dream into a reality. Topic: 01-03 Attitudes and Behaviours 4. One of the common themes resulting from research into the common attributes shared by successful entrepreneurs is that: A. Those attributes can be learned. B. Those attributes cannot be learned, an individual is either born with them or they are not. C. Those attributes are always the same - confidence, determination, and perseverance are always at the top of the list. D. There are no "common" set of attributes - each entrepreneurial success story is unique. While there is no single list, research indicates that many of the attributes are common and, more importantly, can be learned. Difficulty: Easy Learning Objective: 01-01 Evaluate your potential for becoming an entrepreneur through self-assessment quizzes. Topic: 01-01 The Entrepreneurial Personality 5. Entrepreneurs are driven by an immense desire to achieve the goals they initially set for themselves and then to aim for even more challenging standards. This makes them: A. Profit-oriented B. Goal-oriented C. Success-oriented D. Challenge-oriented Success orientation describes entrepreneurs who driven by the desire to achieve the goals they set for themselves and then to reach for more challenging goals in the future. Difficulty: Medium Learning Objective: 01-02 Identify the attitudes and behaviours that will help turn your business dream into a reality. Topic: 01-03 Attitudes and Behaviours 1-2 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 6. Successful entrepreneurs are _______ people; they want to start producing results immediately. A. Success-oriented B. Action-oriented C. Goal-oriented D. Challenge-oriented They like to take the initiative and get on with doing it, today. Difficulty: Medium Learning Objective: 01-02 Identify the attitudes and behaviours that will help turn your business dream into a reality. Topic: 01-03 Attitudes and Behaviours 7. The best entrepreneurs have a keen sense of their own strengths and weaknesses and of the competitive environment in which they operate. This makes them _______ -oriented. A. Success B. Action C. Goal D. Reality They know when they are in trouble and have the strength to admit when they are wrong. This reality orientation allows them to avoid continuing on an ill-advised course of action. Difficulty: Hard Learning Objective: 01-02 Identify the attitudes and behaviours that will help turn your business dream into a reality. Topic: 01-03 Attitudes and Behaviours 8. Most entrepreneurs are found to be ____ listeners and _____ learners. A. Poor; quick B. Good; quick C. Poor; slow D. Good; slow Most entrepreneurs are found to be good listeners and quick learners. Difficulty: Hard Learning Objective: 01-02 Identify the attitudes and behaviours that will help turn your business dream into a reality. Topic: 01-03 Attitudes and Behaviours 1-3 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 9. The three types of reaction identified by Robinson et al. are: A. Cognition, Affect, and Behaviour B. Cognition, Intelligence, and Emotion C. Empathy, Confusion, and Clarity D. Passion, Avoidance, and Ignorance The EAO focuses specifically on "business" activities and considers what you think or believe about those activities (cognition), how you feel about those activities (affect), and how you might tend to behave regarding business activities (behaviour). Difficulty: Medium Learning Objective: 01-02 Identify the attitudes and behaviours that will help turn your business dream into a reality. Topic: 01-03 Attitudes and Behaviours 10. Which of the following did Robinson et al. define as the predisposition of the individual to respond in a generally favourable or unfavourable manner with respect to innovation? A. Character B. Personality C. Empathy D. Attitude Attitudes, represent the way we interact with the world around us. Difficulty: Hard Learning Objective: 01-02 Identify the attitudes and behaviours that will help turn your business dream into a reality. Topic: 01-03 Attitudes and Behaviours 11. All of the following are subscales in Robinson's EAO Model, except: A. Achievement in business B. Innovation in business C. Desire for personal control D. Desire for retribution The fourth subscale is your sense of self-worth or self-esteem relative to business affairs. Difficulty: Hard Learning Objective: 01-02 Identify the attitudes and behaviours that will help turn your business dream into a reality. Topic: 01-03 Attitudes and Behaviours 1-4 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 12. Which of the following entrepreneurial types prefer to identify themselves by their craft first, and as business owners only as an afterthought? A. Freedom Fighters B. Craftspeople C. Lifestyle Business D. Empire Building They say "I'm a plumber", for example, or mechanic, film maker, vet, farmer, or grocer, before they say "I'm a business owner." Difficulty: Medium Learning Objective: 01-03 Analyze the three different types of entrepreneurs. Topic: 01-08 What Kind of Entrepreneur Are You Likely to Be? 13. You can usually identify __________ by the fact that their companies grow by more than 30 percent annually. A. Venture Capitalists B. Freedom Fighters C. Institutional Developers D. Empire Builders They are growth-oriented business owners who are motivated almost solely by achievement, usually measured in terms of company growth. Difficulty: Easy Learning Objective: 01-03 Analyze the three different types of entrepreneurs. Topic: 01-08 What Kind of Entrepreneur Are You Likely to Be? 14. These entrepreneurs go on to build larger companies through hiring and delegation of authority. A. Team builders B. Pattern multipliers C. Independent innovators D. Deal-to-dealers Team builders are a sub type of entrepreneurs, which go on to build larger companies through hiring and delegation of authority (identified in Vesper's typology). Difficulty: Easy Learning Objective: 01-03 Analyze the three different types of entrepreneurs. Topic: 01-08 What Kind of Entrepreneur Are You Likely to Be? 1-5 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 15. Which type of entrepreneur takes advantage of the fact that unit costs tend to shrink as volume expands? A. Capital aggregators B. Economy-of-scale exploiters C. Pattern multipliers D. Deal-to-dealers This has been practiced principally by entrepreneurs in the discount retail merchandising business. Difficulty: Medium Learning Objective: 01-03 Analyze the three different types of entrepreneurs. Topic: 01-08 What Kind of Entrepreneur Are You Likely to Be? 16. Arranging financing, handling credit, and budgeting are all considered skills under which broad entrepreneurial skill set? A. Managing people B. Managing inventory C. Managing capital D. Managing money See Table 1.1-Breakdown of entrepreneurial business skills. Difficulty: Hard Learning Objective: 01-04 Describe the skills needed by small-business owners. Topic: 01-09 Evaluating Your Business Skills 17. Purchasing supplies and raw materials, controlling inventory, and managing the physical facilities are skills which fall under which of the following broad entrepreneurial skill sets? A. Directing sales and marketing operations B. Directing business operations C. Managing people D. Setting up a business See Table 1.1-Breakdown of Entrepreneurial Business Skills. Difficulty: Hard Learning Objective: 01-04 Describe the skills needed by small-business owners. Topic: 01-09 Evaluating Your Business Skills 1-6 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 18. You are able to acquire many of the skills needed prior to considering an entrepreneurial career through all of the following means, except: A. Job experience B. Vacationing C. Organizational (or club) activities D. Managing a home While ideas may be illuminated while on vacation, it is hardly the place you would go to learn how to budget or manage inventory. Difficulty: Medium Learning Objective: 01-04 Describe the skills needed by small-business owners. Topic: 01-09 Evaluating Your Business Skills 19. The personal net worth required to start a business is generally thought to be in the range of: A. $5,000-$10,000 B. $20,000-$50,000 C. $100,000-$500,000 D. Every business opportunity has its own unique capital requirements. Since every business opportunity has its own unique capital (money) requirements, there is no specific dollar value for the personal net worth necessary to start a business. Difficulty: Easy Learning Objective: 01-04 Describe the skills needed by small-business owners. Topic: 01-09 Evaluating Your Business Skills 20. Your credit rating is based on: A. The value of your home equity. B. Your employment income only. C. Your prior history in borrowing and repaying money. D. Your overall debt load, compared to your ability to generate income. By regularly paying your bills, including credit cards, telephone bills, mortgages, lines of credit and similar debts, on time you are building your credit rating. Without a good credit rating few institutions will lend you money. Difficulty: Easy Learning Objective: 01-04 Describe the skills needed by small-business owners. Topic: 01-09 Evaluating Your Business Skills 1-7 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 21. Agencies such as Equifax Canada Inc. assemble information about how you pay your bills and then enter this information into your credit file. An individual who is always late in paying their bills is given a rating of: A. R1 B. R2 C. R3 D. R4 Some of the ratings are: Bills are being paid on time (R1), or late (R4) or have not been paid and been placed with an agency for collection (R9). Difficulty: Medium Learning Objective: 01-04 Describe the skills needed by small-business owners. Topic: 01-09 Evaluating Your Business Skills 22. Social entrepreneurship seeks: A. Social change B. Financial profit C. Welfare management D. Social media business opportunities This can be thought of as the discovery, evaluation and pursuit of opportunities for social change. Difficulty: Easy Learning Objective: 01-05 Explain the importance of social entrepreneurship, ethics, and being socially responsible in business. Topic: 01-19 The Concept of Social Entrepreneurship 23. Well-known social entrepreneurs include all of the following, except: A. Shannon Tessier and Zack Patterson B. Craig and Mark Kielburger C. Jeff Skoll D. Kenneth Lay Kenneth Lay was associated with the Enron scandal that ruined the lives of so many investors. Difficulty: Medium Learning Objective: 01-05 Explain the importance of social entrepreneurship, ethics, and being socially responsible in business. Topic: 01-19 The Concept of Social Entrepreneurship 1-8 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 24. Which of the following is not among the three questions to address when confronted with an ethical problem? A. What will others think? B. Is it balanced? C. Is it legal? D. How will it make you feel about yourself? What others think is not among the three questions. Difficulty: Easy Learning Objective: 01-05 Explain the importance of social entrepreneurship, ethics, and being socially responsible in business. Topic: 01-19 The Concept of Social Entrepreneurship 25. A ________ should be a formal statement of a business's values concerning ethics and social issues. A. Code of behaviour B. Code of ethics C. Mission statement D. Vision statement A code of ethics commonly speaks to acceptable norms of behaviour within an organization. Difficulty: Easy Learning Objective: 01-05 Explain the importance of social entrepreneurship, ethics, and being socially responsible in business. Topic: 01-19 The Concept of Social Entrepreneurship 26. A code of ethics should be guided by all of the following areas of concern, except: A. Citizenship B. Responsibility C. Integrity D. Competition The others include: honesty, respect, and trust. Difficulty: Medium Learning Objective: 01-05 Explain the importance of social entrepreneurship, ethics, and being socially responsible in business. Topic: 01-19 The Concept of Social Entrepreneurship 1-9 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 27. All of the following are included in the triple bottom line assessment, except: A. Financial performance B. Global equality C. Environmental impact D. Social well-being Global equality is not included in the triple bottom line assessment. Difficulty: Medium Learning Objective: 01-05 Explain the importance of social entrepreneurship, ethics, and being socially responsible in business. Topic: 01-19 The Concept of Social Entrepreneurship True / False Questions 28. Researchers are unable to identify a set of common attributes, attitudes, and experiences among entrepreneurs that appear to lead to success. FALSE Research indicates that there is a common set of attributes, attitudes, and experiences among entrepreneurs that to lead to success. Difficulty: Easy Learning Objective: 01-01 Evaluate your potential for becoming an entrepreneur through self-assessment quizzes. Topic: 01-01 The Entrepreneurial Personality 29. There is considerable evidence which suggests that the "right stuff" needed to become a successful entrepreneur can be learned. TRUE The basic thesis held by many members of the "people school" of entrepreneurship is: A person has to have the "right stuff" to become a successful entrepreneur. Evidence suggests that "right stuff" needed to become a successful entrepreneur can be learned. Difficulty: Easy Learning Objective: 01-01 Evaluate your potential for becoming an entrepreneur through self-assessment quizzes. Topic: 01-01 The Entrepreneurial Personality 1-10 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 30. Most entrepreneurs are self-confident, and with this confidence comes a strong ego. TRUE This confidence implies a strong ego, however, it is a different kind of ego-an "I know I'm going to do well" type of attitude. Difficulty: Easy Learning Objective: 01-02 Identify the attitudes and behaviours that will help turn your business dream into a reality. Topic: 01-03 Attitudes and Behaviours 31. High energy, good health, and emotional stability are thought to be some of the "not so learnable" qualities of successful entrepreneurs. TRUE These attributes are those that many experts consider to be innate and, thus, not acquirable to any great degree. Difficulty: Medium Learning Objective: 01-02 Identify the attitudes and behaviours that will help turn your business dream into a reality. Topic: 01-03 Attitudes and Behaviours 32. High intelligence and conceptual ability are two of the most "learnable" attributes of successful entrepreneurs. FALSE These are considered by experts to be largely "innate" and thus a part of the "no so learnable" qualities. Difficulty: Medium Learning Objective: 01-02 Identify the attitudes and behaviours that will help turn your business dream into a reality. Topic: 01-03 Attitudes and Behaviours 33. The Managerial Sills Inventory questionnaire can be used to develop an inventory of your skills and capabilities in the areas of financial accounting, human resources, and ethics. FALSE The Managerial Sills Inventory questionnaire can be used to develop an inventory of your skills and capabilities in each of the five areas of management outlined in this stage. For each management area, the questionnaire lists some corresponding skills. Difficulty: Medium Learning Objective: 01-02 Identify the attitudes and behaviours that will help turn your business dream into a reality. Topic: 01-03 Attitudes and Behaviours 1-11 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 34. The "typical entrepreneur" is most closely associated with the Empire Builder type of entrepreneur. TRUE The empire building is the one most generally associated in popular imagination as the "typical entrepreneur" - always busy with the next project, an insatiable thirst for growth and wealth, aiming to take over or revolutionize markets and industries. Difficulty: Easy Learning Objective: 01-03 Analyze the three different types of entrepreneurs. Topic: 01-08 What Kind of Entrepreneur Are You Likely to Be? 35. Craftspeople are a type of entrepreneur that seek financial independence above anything else and the freedom to spend their time as they wish. FALSE Craftspeople derive their sense of self-worth from their mastery of a craft or trade. They are more interested in developing their skills than in growing their revenue and generally work alone or employ one other person, often a spouse. Difficulty: Easy Learning Objective: 01-03 Analyze the three different types of entrepreneurs. Topic: 01-08 What Kind of Entrepreneur Are You Likely to Be? 36. Deal-to-dealers are small business owners which have had more than one venture, often in quite different lines of business. TRUE Vesper identified a considerable number of entrepreneurial types. Of them, deal-to-dealers are small business owners have had more than one venture, often in quite different lines of business. Difficulty: Easy Learning Objective: 01-03 Analyze the three different types of entrepreneurs. Topic: 01-08 What Kind of Entrepreneur Are You Likely to Be? 37. According to Vesper's typology, "Acquirers" are entrepreneurs that will often take over businesses that are in trouble and try to straighten them out or buy businesses that they can add value to in some way, perhaps before selling them off again. TRUE Acquirers are a type of entrepreneur that will buy a "going-concern", or struggling business. Difficulty: Hard Learning Objective: 01-03 Analyze the three different types of entrepreneurs. Topic: 01-08 What Kind of Entrepreneur Are You Likely to Be? 1-12 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 38. Many small business owners experience an immediate increase in the level of personal income they can earn. FALSE From a personal standpoint, you might also want to reconsider becoming a small business owner if you cannot afford a temporary or perhaps even a prolonged reduction in your personal income. Difficulty: Medium Learning Objective: 01-04 Describe the skills needed by small-business owners. Topic: 01-09 Evaluating Your Business Skills 39. It is estimated that the principal reason for the failure of small firms is poor cash flow. FALSE It is estimated that the principal reason for the failure of small firms is poor management. Difficulty: Medium Learning Objective: 01-04 Describe the skills needed by small-business owners. Topic: 01-09 Evaluating Your Business Skills 40. Training employees, motivating people, and evaluating workers fall under the "directing business operations" skill set. FALSE These skills fall under the "managing people" skill set. See Table 1.1 for a complete breakdown of entrepreneurial business skills. Difficulty: Easy Learning Objective: 01-04 Describe the skills needed by small-business owners. Topic: 01-09 Evaluating Your Business Skills 41. Your personal balance sheet includes a summary of all your assets-what you own that has some cash value-and your liabilities or debts. TRUE Preparing a personal balance sheet is a relatively simple process. Difficulty: Easy Learning Objective: 01-04 Describe the skills needed by small-business owners. Topic: 01-09 Evaluating Your Business Skills 1-13 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 42. Your credit rating is based on your income earning potential in a five year period. FALSE Your rating is based on your prior history in borrowing and repaying money. Difficulty: Medium Learning Objective: 01-04 Describe the skills needed by small-business owners. Topic: 01-09 Evaluating Your Business Skills 43. Equifax Canada Inc. is a venture capital firm headquartered in western Canada. FALSE Equifax Canada Inc. is one of two consumer reporting agencies in Canada. Difficulty: Easy Learning Objective: 01-04 Describe the skills needed by small-business owners. Topic: 01-09 Evaluating Your Business Skills 44. Craig and Mark Kielburger are well known for the role they played in the Ponzi scheme and eventual collapse of Enron. FALSE Craig and Mark Kielburger are well known social entrepreneurs who founded the Free the Children organization. Difficulty: Medium Learning Objective: 01-05 Explain the importance of social entrepreneurship, ethics, and being socially responsible in business. Topic: 01-19 The Concept of Social Entrepreneurship 45. A socially responsible organization behaves in such a way as to achieve a high level of financial performance, coupled with obvious efforts to act as good citizens and give something back to the societies in which they exist. TRUE Companies today are expected to go beyond just being "ethical" in their dealings with customers, employees, and other stakeholders. Difficulty: Hard Learning Objective: 01-05 Explain the importance of social entrepreneurship, ethics, and being socially responsible in business. Topic: 01-19 The Concept of Social Entrepreneurship 1-14 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 46. Social entrepreneurship refers to the discovery, evaluation, and exploitation of opportunities for financial profit. FALSE This description refers to "economic" entrepreneurship. Difficulty: Easy Learning Objective: 01-05 Explain the importance of social entrepreneurship, ethics, and being socially responsible in business. Topic: 01-19 The Concept of Social Entrepreneurship Short Answer Questions 47. Of the many attributes shared by successful entrepreneurs, which of those is believed to be the most critical to their success? Explain. More than any other single factor, a combination of perseverance and total dedication is critical. In many cases, these qualities have won out against odds considered impossible to overcome. Determination and commitment can compensate for other weaknesses you may have. Difficulty: Easy Learning Objective: 01-02 Identify the attitudes and behaviours that will help turn your business dream into a reality. Topic: 01-03 Attitudes and Behaviours 48. List and describe the "not-so-learnable" traits of an entrepreneur. The not-so-learnable traits are those which experts consider to be innate. 1. High energy, good health, and emotional stability; 2. Creativity and an innovative nature; 3. High intelligence and conceptual ability; 4. The ability to see a better future and a capacity to inspire others to see it. Difficulty: Medium Learning Objective: 01-02 Identify the attitudes and behaviours that will help turn your business dream into a reality. Topic: 01-03 Attitudes and Behaviours 1-15 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 49. Most entrepreneurs are described as having a high risk tolerance. Do you agree or disagree? Why? Despite the myth that suggests entrepreneurs are gamblers, quite the opposite is true. Effective entrepreneurs have been found, in general, to prefer taking moderate, calculated risks, where the chances of losing are neither so small as to be a sure thing nor so large as to be a considerable gamble. Difficulty: Medium Learning Objective: 01-02 Identify the attitudes and behaviours that will help turn your business dream into a reality. Topic: 01-03 Attitudes and Behaviours 50. List and briefly describe the three entrepreneurial archetypes developed by John Warrillow. Craftspeople don't think of themselves as entrepreneurs, they still have the resources and confidence to operate independently. They are more interested in developing their skills than growing their revenue and generally work alone or employ one other person, often a spouse. Freedom Fighters/Lifestyle Business seek financial independence above anything else and the freedom to spend their time as they wish. Their prime motivator isn't growth, but simply being in business for themselves. Empire Building refers to entrepreneurs who represent the 10 percent of growth-oriented business owners who are motivated almost solely by achievement, usually measured in terms of company growth. The empire building is the one most generally associated in popular imagination as the "typical entrepreneur"-always busy with the next project, an insatiable thirst for growth and wealth, aiming to take over or revolutionize markets and industries. Difficulty: Easy Learning Objective: 01-03 Analyze the three different types of entrepreneurs. Topic: 01-08 What Kind of Entrepreneur Are You Likely to Be? 1-16 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 51. In addition to the proper background, attitude, and lifestyle, what else should be considered in assessing your potential for becoming a successful entrepreneur? Possessing the necessary managerial skills is an essential ingredient to succeeding in any small venture. It is estimated that the principal reason for the failure of small firms is poor management. Businesses, whether large or small, have to perform in a number of diverse functions to operate successfully. An entrepreneur, because of the limited amount of resources (human and financial) at his or her disposal, faces a particularly difficult time. The business skills required by an entrepreneur (or some other member of the organization) can be broken down by function, as shown in Table 1.1. Difficulty: Medium Learning Objective: 01-04 Describe the skills needed by small-business owners. Topic: 01-09 Evaluating Your Business Skills 52. Outline the five steps in preparing a personal balance sheet. Step 1: Estimate the current market value of all your "assets"-the items you own that have cash value-and list them. Step 2: Add up the value of these assets. Step 3: List all your debts, also known as "liabilities." Step 4: Add up your liabilities. Step 5: Deduct your total liabilities from your total assets to find your "net worth." Difficulty: Medium Learning Objective: 01-04 Describe the skills needed by small-business owners. Topic: 01-09 Evaluating Your Business Skills 53. Summarize the basis for the argument that companies should give back to the communities in which they live. First, all firms make use of society's basic infrastructure-land, plants, animals, and so on-to earn a profit. Second, companies should reimburse society for the negative consequences their activities might create-noise, smell, traffic congestion, and toxic emissions Difficulty: Hard Learning Objective: 01-05 Explain the importance of social entrepreneurship, ethics, and being socially responsible in business. Topic: 01-19 The Concept of Social Entrepreneurship 1-17 Stage 01 - Assessing Your Potential for an Entrepreneurial Career 54. List the reasons why businesses should be concerned with being more socially responsible. Cost savings due to more efficient operations Development of a more positive organizational image and reputation Creation of a clearly identifiable market niche with consumers who are interested in health and the environment, social justice, and sustainable living Being forced to become more innovative to accommodate these values within the company's organizational strategy. Difficulty: Hard Learning Objective: 01-05 Explain the importance of social entrepreneurship, ethics, and being socially responsible in business. Topic: 01-19 The Concept of Social Entrepreneurship 55. Outline the three key questions in Blanchard and Peale's Ethics Check to help you sort out dilemmas by examining the situation at several different levels. 1. Is it legal? Will you be violating either civil law or your organization's code of ethics? 2. Is it balanced? Is it fair to all concerned in the short term as well as the long term? Does it promote win-win relationships? 3. How will it make you feel about yourself? Will it make you proud? Would you feel good if your decision was published in the newspaper? Would you feel good if your family knew about it? Difficulty: Hard Learning Objective: 01-05 Explain the importance of social entrepreneurship, ethics, and being socially responsible in business. Topic: 01-19 The Concept of Social Entrepreneurship 1-18 Stage 02 - Exploring Business Ideas and Opportunities Stage 02 Exploring Business Ideas and Opportunities Multiple Choice Questions 1. The first thing you need to start a business is: A. An idea B. Financial support C. A product or service D. A business plan See Figure 2.1. Difficulty: Easy Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 2. Which of the following approaches assumes that events such as demographic change, sociopolitical trends, or growth give rise to new business opportunities? A. Environment approach B. Societal approach C. Economic approach D. Financial approach The economic approach assumes that events occur in the economy that give rise to new opportunities. These may be conditions like demographic changes such as aging baby boomers, sociopolitical trends like the increasing recognition and acceptance of gay consumers, or the explosive growth currently taking place in certain market areas, or changes in government regulations. Difficulty: Medium Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 2-1 Stage 02 - Exploring Business Ideas and Opportunities 3. Which element in the opportunity recognition process developed by Lumpkin, Hills and Shrader refers to that part of the process where the individual contemplates an idea or a specific problem? A. Preparation B. Incubation C. Insight D. Evaluation This is typically the time when the individual is mulling over the general concept or idea unconsciously in his or her mind. Difficulty: Medium Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 4. Which element in the opportunity recognition process developed by Lumpkin, Hills and Shrader involves moving the concept forward if it survives the evaluation stage? A. Preparation B. Incubation C. Insight D. Elaboration This means continuing the process of business planning, finalizing choices regarding business strategy and structure, organizing resources, and all other activity that may be required to actually start up the venture. Difficulty: Easy Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 5. All of the following are basic elements in the opportunity recognition process developed by Lumpkin, Hills and Shrader, except: A. Incubation B. Development C. Insight D. Elaboration See Figure 2.2. Difficulty: Easy Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 2-2 Stage 02 - Exploring Business Ideas and Opportunities 6. Of the three basic categories into which most new concepts fall, which of the following types caters to consumers in new markets? A. Type A B. Type B C. Type C D. Type D Type A concepts cater to consumers in new markets. Difficulty: Medium Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 7. Of the three basic categories into which most new concepts fall, which of the following types introduces new technologies to the marketplace? A. Type A B. Type B C. Type C D. Type D Type B concepts introduce new technologies to the marketplace. Difficulty: Medium Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 8. Of the three basic categories into which most new concepts fall, which of the following types provides a product which currently exists in the market, but offers greater value? A. Type A B. Type B C. Type C D. Type D Type C concepts provide consumers with new or more benefits than competitive offerings currently available in the marketplace. Difficulty: Medium Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 2-3 Stage 02 - Exploring Business Ideas and Opportunities 9. While Pauline was vacationing in Ireland, she frequented a fantastic modern coffee shop that had childcare facilities directly attached. She enjoyed companionship with other adults, while her children played and socialized in an exciting facility right next door. Upon returning to Canada, Pauline is planning to open a similar concept café in her community. This is an example of which type of new venture concept? A. Type A B. Type B C. Type C D. Type D Type C ideas are concepts for performing old functions in new and/or better ways. Difficulty: Hard Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 10. Most "mom-and-pop" stores are considered: A. High-growth ventures B. No-growth ventures C. Lifestyle ventures D. Stable, enduring ventures Lifestyle ventures include most "one-man shows," mom-and-pop stores, and other lifestyle businesses, such as gas stations, restaurants, dry cleaning shops, and small independent retail stores. Difficulty: Medium Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 11. A key factor in starting a high-growth venture is: A. Selecting the correct location. B. Choosing the right industry to enter. C. Retaining the best leadership. D. Attracting the most investors. A key factor in starting a high-growth venture is choosing the right industry to enter. The rate of growth of the industry as a whole often plays a large role in determining the growth patterns of startups within it. Difficulty: Hard Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 2-4 Stage 02 - Exploring Business Ideas and Opportunities 12. The most common source of new venture ideas is: A. Prior work experience B. Trade shows and conventions C. Social contacts D. Magazines and other publications Prior work experience is the most common source of new business ideas. It has been estimated that as many as 85 percent of new businesses started are based on product ideas similar to those of prior employers of the founders. Difficulty: Easy Learning Objective: 02-02 Identify where to look for business ideas. Topic: 02-06 Sources of Ideas for a New Business 13. All of the following governmental organizations are available to assist entrepreneurs by means of business management seminars and courses, advice, information, and other assistance, except: A. Industry Canada B. Statistics Canada C. Business Development Bank of Canada (BDC) D. The Canadian Innovation Centre Statistics Canada is a data collection agency, not an entrepreneurial help center. Difficulty: Medium Learning Objective: 02-02 Identify where to look for business ideas. Topic: 02-06 Sources of Ideas for a New Business 14. Which of the following is not one of the evolving social trends predicted to have a major impact on Western culture, as predicted by Faith Popcorn? A. 99 Lives B. CHANCE C. Being Alive D. Anchoring CHANCE (Charity of Hope to Assist Needy Children Everywhere) was the name of the social venture developed by social change entrepreneurs Shannon Tessier and Zack Patterson. Difficulty: Medium Learning Objective: 02-02 Identify where to look for business ideas. Topic: 02-06 Sources of Ideas for a New Business 2-5 Stage 02 - Exploring Business Ideas and Opportunities 15. Which of the following is the name of the technology that enables IP address enabled sensors to perform a specific task of measuring a certain unit and potentially respond to input and create a response through other connected mechanisms? A. Radio Frequency Identification (RFID) B. Internet of Things (IoT) C. Cloud computing D. Global Positioning Satellite (GPS) Other terms such as Internet of Everything, Internet of Devices, and so on, are just variations of the main term IoT. Difficulty: Easy Learning Objective: 02-02 Identify where to look for business ideas. Topic: 02-06 Sources of Ideas for a New Business 16. The first step in the opportunity selection process is to: A. Identify your business and personal objectives. B. Learn more about your favourite industries. C. Identify promising industry segments. D. Observe market trends and study industry reports. The first step is to identify your business and personal objectives. Difficulty: Easy Learning Objective: 02-03 Evaluate your business idea. Topic: 02-19 Evaluating Your Ideas 17. If you are looking at catering to the _______ market(s), you must look at demographic and psychographic factors. A. Commercial B. Industrial C. Electronics D. Consumer If you are looking at the consumer market, identify what this prospect will look like in terms of demographic factors such as age, gender, location, income, family size, education, and so on, and in terms of psychographic and other factors such as interests, values, lifestyle, leisure activities, and buying patterns. Difficulty: Easy Learning Objective: 02-03 Evaluate your business idea. Topic: 02-19 Evaluating Your Ideas 2-6 Stage 02 - Exploring Business Ideas and Opportunities 18. If you are looking at catering to the _______ market, use company size, industry, geographic location, and number of employees to identify a segment. A. Consumer B. Retail C. Industrial D. Services If you are looking at a commercial/industrial market, use company size, industry, geographic location, number of employees, and so on to identify promising industry segments. Difficulty: Medium Learning Objective: 02-03 Evaluate your business idea. Topic: 02-19 Evaluating Your Ideas 19. After you have learned more about your favourite industries, the next step in the six step opportunity selection process is: A. Identify promising industry segments. B. Identify problem areas, and brainstorm solutions. C. Compare possible solutions with your objectives and opportunities in the marketplace. D. Focus on the most promising opportunities. Learning more about your favourite industries is step two. Step three involves identifying promising industry segments. Difficulty: Hard Learning Objective: 02-03 Evaluate your business idea. Topic: 02-19 Evaluating Your Ideas 20. The "ideal" business, according to Richard Buskirk, involves all of the following, except: A. Provides 100 percent gross margin B. Has a recognized, measurable market C. Requires no labour force D. Is government regulated The ideal business has no government regulation according to Buskirk's framework. Difficulty: Easy Learning Objective: 02-03 Evaluate your business idea. Topic: 02-19 Evaluating Your Ideas 2-7 Stage 02 - Exploring Business Ideas and Opportunities 21. Which of the following entry strategies allows the owner to bypass the costly startup phase? A. Buying a franchise B. Developing an e-business C. Buying an existing business D. Incorporation You also acquire a location, customers, established trade relationships, and a number of other positive elements. Difficulty: Medium Learning Objective: 02-04 Choose what business model suits your idea. Topic: 02-27 Deciding How to Proceed 22. All of the following are possible disadvantages when you purchase an existing business, except: A. Established clientele B. The cost of "goodwill" C. Inheriting a bad image D. Labour difficulties Inheriting an established clientele is one of the benefits when you purchase an existing business. Difficulty: Hard Learning Objective: 02-04 Choose what business model suits your idea. Topic: 02-27 Deciding How to Proceed 23. The individual who designs and develops a business, and then sells the rights to operate that business to others is called: A. A franchisor B. A franchisee C. A franchise D. A franchiseship Under a franchise agreement, an established company, the franchisor, with one or more successful businesses operating in other locations, provides assistance to a new firm in breaking into the marketplace. Difficulty: Easy Learning Objective: 02-04 Choose what business model suits your idea. Topic: 02-27 Deciding How to Proceed True / False Questions 2-8 Stage 02 - Exploring Business Ideas and Opportunities 24. During the opportunity recognition process, elaboration involves moving the concept forward if it survives the evaluation stage. TRUE This means continuing the process of business planning, finalizing choices regarding business strategy and structure, organizing resources, and all other activity that may be required to actually start up the venture. Difficulty: Easy Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 25. While an idea is at the center of every opportunity, not every idea represents an opportunity to start a viable business. TRUE Ideas that succeed are difficult to find and evaluate, but they are critical to the entire process. Difficulty: Easy Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 26. The opportunity recognition process is linear. FALSE The process in this model appears linear; it isn't. There is constant iteration and feedback during the process. Difficulty: Medium Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 27. The Canadian Innovation Centre has a program to help inventors and entrepreneurs crystallize their ideas and commercialize and market the resulting products. TRUE The cost (in most cases) is nominal. Difficulty: Medium Learning Objective: 02-02 Identify where to look for business ideas. Topic: 02-06 Sources of Ideas for a New Business 2-9 Stage 02 - Exploring Business Ideas and Opportunities 28. Brainstorming occurs where a group of people get together and focus on a single problem and come up with as many deliberately unusual solutions as possible. TRUE The idea is to come up with distinctly creative solutions. There is no criticism of ideas, and the goal is to break down any previously held preconceptions about the limits of the problem. The results of the session can then be explored and evaluated using other analysis techniques. Difficulty: Easy Learning Objective: 02-02 Identify where to look for business ideas. Topic: 02-06 Sources of Ideas for a New Business 29. In order for group brainstorming to be effective, all members of the group should be considered equal, there should be no leader, manager, or facilitator. FALSE Group brainstorming requires a leader to take control of the session, encourage participation by all members, and keep the dialogue focused on the problem to be resolved. Difficulty: Medium Learning Objective: 02-02 Identify where to look for business ideas. Topic: 02-06 Sources of Ideas for a New Business 30. Maintaining wellness is an emerging theme that will create a growing demand for a variety of fitness and health-related products. TRUE People are focusing on experiencing a better quality of life by shaping up and healing their minds and bodies. Difficulty: Easy Learning Objective: 02-02 Identify where to look for business ideas. Topic: 02-06 Sources of Ideas for a New Business 31. The "ideal" business model designed by Richard Buskirk of the University of Southern California consists of three distinct factors that affect the chances of success for any new business: independence, competitiveness, and sustainability. FALSE The model includes 19 characteristics. See Table 2.2: Characteristics of the "Ideal" Business. Difficulty: Medium Learning Objective: 02-03 Evaluate your business idea. Topic: 02-19 Evaluating Your Ideas 2-10 Stage 02 - Exploring Business Ideas and Opportunities 32. In order to determine the which ideas you should evaluate Knowles and Bilyea suggest that you think of the process of selecting the right opportunity for yourself a huge funnel equipped with a series of filters. TRUE You pour everything into this funnel-your vision, values, long-term goals, short-term objectives, personality, problems, and so on-and a valuable business idea drains out the bottom. Difficulty: Hard Learning Objective: 02-03 Evaluate your business idea. Topic: 02-19 Evaluating Your Ideas 33. Once you have a thorough understanding of one or more industry situations you are now in a position to identify possible market segments and profile your typical target customer. TRUE Your typical target customer is a person or business who needs a particular product or service you could provide. Difficulty: Medium Learning Objective: 02-04 Choose what business model suits your idea. Topic: 02-27 Deciding How to Proceed 34. Demographic factors include lifestyle, leisure activities, and buying patterns. FALSE These are considered psychographic and other factors. Demographic factors include age, gender, location, income, family size, and education. Difficulty: Hard Learning Objective: 02-04 Choose what business model suits your idea. Topic: 02-27 Deciding How to Proceed 35. Fashion products usually have extremely long life cycles. FALSE Fashion products usually have extremely short life cycles. Difficulty: Hard Learning Objective: 02-04 Choose what business model suits your idea. Topic: 02-27 Deciding How to Proceed 2-11 Stage 02 - Exploring Business Ideas and Opportunities 36. The failure rate of franchised businesses is reported to be the same as that for independently established firms. FALSE The failure rate of franchised businesses is reported to be lower than that for independently established firms. Difficulty: Easy Learning Objective: 02-04 Choose what business model suits your idea. Topic: 02-27 Deciding How to Proceed Short Answer Questions 37. Describe, with an example, each of the three basic categories into which new entrepreneurial concepts fall. Type A ideas typically provide customers with a product or service that does not exist in their market but already exists somewhere else. This could be something as simple as a bar or restaurant concept that you observed while on a trip and thought would be well received in your home market area. Type B ideas involve a technically new product or process. Software you have developed to solve some business problem or a new invention or innovation that provides a better way of performing certain functions. Type C ideas are concepts for performing old functions in new and/or better ways. They probably account for the largest number of new startups. These are often "me too" kind of ideas that try to differentiate themselves from other businesses by offering better service, higher quality, better performance, or lower cost. Difficulty: Medium Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 38. List and briefly describe the five basic elements in the opportunity recognition process developed by Lumpkin, Hills, and Shrader. See Figure 2.2 Difficulty: Easy Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 2-12 Stage 02 - Exploring Business Ideas and Opportunities 39. Summarize the two basic approaches to understanding how entrepreneurs recognize opportunities. The economic approach assumes that events occur in the economy that give rise to new opportunities. These may be conditions such as demographic changes, for example, aging baby boomers; sociopolitical trends, such as the increasing recognition and acceptance of gay consumers or the explosive growth currently taking place in certain market areas; or changes in government regulations. The second major approach to opportunity recognition views it as a multi Chapter and often very complex process. One of the more comprehensive was developed by Lumpkin, Hills, and Shrader. They viewed the opportunity recognition process as a type of creativity consisting of five basic elements-preparation, incubation, insight, evaluation, and elaboration. This framework is illustrated in Figure 2.2. Difficulty: Hard Learning Objective: 02-01 Explain the process of an entrepreneurial opportunity. Topic: 02-01 Recognizing the Opportunity 40. Discuss the conflict that may arise when your hobby turns into an entrepreneurial venture. Hobbies are typically activities that you and others are prepared to do at your own expense. This can exert downward pressure on the likely profitability of your business. As a result, margins are quite low in such areas as the production of arts and crafts; small-scale farming; trading in stamps, coins, and other collectibles; antique automobile restorations; and similar hobby-based operations. Difficulty: Medium Learning Objective: 02-02 Identify where to look for business ideas. Topic: 02-06 Sources of Ideas for a New Business 2-13 Stage 02 - Exploring Business Ideas and Opportunities 41. How do new business ventures arise from casual observation? Provide an example. Often, ideas for a new product or service result from chance observation of daily living situations. This commonly occurs when people travel and observe product or service concepts being provided that are not yet available in the United States, Canada, or, perhaps, the person's local market area. Restaurant themes and concepts, such as Thai, Mexican, health food, and salads, typically are established in most cities only after they have proven successful somewhere else. Sporting trends, such as wakeboarding and rollerblading, and fashion colours and styles are also usually imported from outside the country. For this type of observation to yield results, you have to recognize the need for a new type of product or service offering and then work out some kind of solution. Difficulty: Easy Learning Objective: 02-02 Identify where to look for business ideas. Topic: 02-06 Sources of Ideas for a New Business 42. List five of the best business opportunities for 2016. Food trucks, cloud consulting, senior services, drones, kid friendly app development, freelancing, mobile repair, custom made festival gifts, search engine optimization (SEO) Consultant, training Difficulty: Medium Learning Objective: 02-02 Identify where to look for business ideas. Topic: 02-06 Sources of Ideas for a New Business 43. Outline the six steps in the opportunity selection process. The opportunity selection process contains six steps: 1. Identify your business and personal objectives. 2. Learn more about your favourite industries. 3. Identify promising industry segments. 4. Identify problem areas, and brainstorm solutions. 5. Compare possible solutions with your objectives and opportunities in the marketplace. 6. Focus on the most promising opportunities. Difficulty: Medium Learning Objective: 02-03 Evaluate your business idea. Topic: 02-19 Evaluating Your Ideas 2-14 Stage 02 - Exploring Business Ideas and Opportunities 44. Why is the "ideal business" one that requires no labour force? Once you hire an employee, you have a lot of government paperwork to deal with relating to Employment Insurance, Canada Pension Plan contributions, and other legal requirements. You are also subject to a broad range of regulations concerning such things as occupational health and safety, human rights, and pay equity. Few small business operators enjoy dealing with these requirements, as these can be quite time consuming. If your business demands the hiring of additional employees, you must be prepared to take on the responsibility for managing these people effectively. Difficulty: Hard Learning Objective: 02-03 Evaluate your business idea. Topic: 02-19 Evaluating Your Ideas 45. Describe the Venture Opportunity Screening Model (VOSM), including the five constructs on which the model is based. The VOSM is intended to give you a clearer idea of the relative attractiveness of a number of new venture opportunities you may be considering. The model is based on a series of constructs identified by entrepreneurs as being important in their venture selection process. It aims to distinguish between high value opportunities that are worthy of exploration and low value opportunities less likely to be worth pursuing. These constructs have been clustered into a number of categories to facilitate their assessment. These include: > The assessment of the market opportunity > The role of innovation > Strategic potential > The investment, risk, and return situation > The effectiveness of the people involved in the venture Difficulty: Hard Learning Objective: 02-03 Evaluate your business idea. Topic: 02-19 Evaluating Your Ideas 2-15 Stage 02 - Exploring Business Ideas and Opportunities 46. Describe how the franchisor may provide assistance and support to the franchisee. The assistance provided by the franchisor can take many forms, such as: The right to use the franchisor's brand names and registered trademarks The right to sell products and services developed by the franchisor The right to use operating systems and procedures developed by the franchisor Training in how to run the business Plans for the layout of the business facilities and the provision of specialized equipment A regional or national advertising program Centralized purchasing and volume discounts Research and development support Difficulty: Hard Learning Objective: 02-04 Choose what business model suits your idea. Topic: 02-27 Deciding How to Proceed 2-16 Stage 03 - Market Feasibility Study Stage 03 Market Feasibility Study Multiple Choice Questions 1. The first comprehensive plan you need in contemplating any new venture is called: A. A profit-loss statement B. A financial projection report C. A feasibility study D. A business plan If the feasibility study indicates that the business idea has potential, then you can proceed to write a business plan. Difficulty: Easy Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 2. A typical feasibility study includes all of the following areas, except: A. The concept for your venture B. The technical feasibility of your idea C. The supply situation D. International trade regulations The other main areas are: cost-profit analysis, your plans for future action, and an assessment of your market. Difficulty: Medium Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 3-1 Stage 03 - Market Feasibility Study 3. A fully developed concept includes all of the following, except: A. A description of the proposed pricing strategy B. Distribution plans C. Proprietary aspects D. A prototype At the concept Chapter the prototype is not required. Difficulty: Medium Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 4. A microprocessor used to control a single-person car is an example of a product that is: A. A new invention B. Highly innovative C. Moderately innovative D. Slightly innovative Examples include microprocessors used to control various automobile systems or single-person cars. Difficulty: Easy Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 5. Cloud computing is an example of a product that is: A. A new invention B. Highly innovative C. Moderately innovative D. Slightly innovative Examples are mobile apps, near field communication, cloud computing, wide-ranging consumer products incorporating GPS technology, and non-invasive testing techniques for various kinds of cancer. Difficulty: Easy Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 3-2 Stage 03 - Market Feasibility Study 6. Wireless technologies are generally considered to be: A. New inventions B. Highly innovative C. Moderately innovative D. Copycatting Examples include fibre optics, electric cars, bionic prostheses for replacement arms and legs, diagnostic and research tools, and wireless technologies. Difficulty: Easy Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 7. Which part of the feasibility study contains information about the nature of your competition? A. Marketing plan B. Technical feasibility C. Market assessment D. Profit assessment See Figure 3.2 A Typical Feasibility Study. Difficulty: Medium Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 8. Which part of the feasibility study contains information about the distribution channels for your product? A. Marketing plan B. Technical feasibility C. Market assessment D. Profit assessment See Figure 3.2 A Typical Feasibility Study. Difficulty: Medium Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 3-3 Stage 03 - Market Feasibility Study 9. ________ is the level of return or compensation that you might expect for assuming the risks associated with investing in this business. A. Profit potential B. Return on investment C. Risk analysis D. Capital appreciation Profit potential is the level of return or compensation that you might expect for assuming the risks associated with investing in this business. Difficulty: Medium Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 10. Other firms and businesses in your community and across the country are considered to be part of the: A. B2C market B. institutional market C. industrial market D. government market This is also part of the B2B market. Difficulty: Hard Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 11. Organizations such as hospitals, personal care homes, schools, and universities, are considered part of: A. The B2C market B. The institutional market C. The industrial market D. The government market This is also part of the B2B market. Difficulty: Hard Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 3-4 Stage 03 - Market Feasibility Study 12. This process of breaking down large, heterogeneous consumer or industrial markets into more homogeneous groups is known as: A. Market segmentation B. Market diversification C. Market augmentation D. Market differentiation Most markets can be segmented on the basis of a number of variables including geographic, demographic, or psychographic factors. Difficulty: Easy Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 13. A condo developer has determined that his target market consists of financially independent, unattached singles between the ages of 40-50. He has segmented the market based on _____ factors. A. Psychographic B. Sociological C. Demographic D. Geographic Demographic description, such as age, gender, marital status, family size, race, religion, education level, income, and occupation. Difficulty: Easy Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 14. _________ data comprise information that others have put together relating to your industry and/or your customers. A. Primary B. Secondary C. Internal D. External Secondary data can come from a tremendous variety of sources. Often they may not exist in the exact form you require but by combining data from a number of secondary sources you may be able to compile the information you require, and at much lower cost than going out and gathering your own information. Difficulty: Easy Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 3-5 Stage 03 - Market Feasibility Study 15. One key source of demographic data on the Canadian market is: A. Industry Canada B. CANSIM C. The CRA (Canada Revenue Agency) D. Canadian Industry Statistics CANSIM is Statistics Canada's key socioeconomic database. Updated daily, CANSIM provides fast and easy access to a large range of the latest statistics available in Canada. Difficulty: Medium Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 16. Perhaps the best way to get the most current and useful information regarding your potential market is through: A. Primary data B. Secondary data C. Trade publications D. Statistics Canada Doing your own research-called primary research-may be the best way to get the most current and useful information regarding your potential market. Difficulty: Easy Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 17. All of the following are likely uses for your prototype, except: A. You can get photographs and other promotional material. B. Show the idea to prospective buyers C. Sell the prototype to the highest bidder D. Put out publicity releases You are not likely to sell the prototype which represents the culmination of your hard work. Difficulty: Easy Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 3-6 Stage 03 - Market Feasibility Study 18. Other companies which offer products similar to yours are called: A. Indirect competitors B. Direct competitors C. Parallel competitors D. Rival competitors Direct competitors offer products or services that are very similar to yours. Difficulty: Medium Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 19. A SWOT analysis represents: A. Strengths, weaknesses, obstacles, tactics B. Strategy, weaknesses, opportunities, tactics C. Strengths, weaknesses, opportunities, threats D. Strategy, weakness, obstacles, threats This analysis helps you to see how your strengths stack up against your competitors' weaknesses and suggests ways to take advantage of opportunities out in the marketplace. Difficulty: Easy Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 20. Which of the following competitive strategies creates a meaningful difference between your products and those of the competition, which creates a higher level of perceived customer benefits? A. Cost advantage B. Marketing advantage C. Differentiation advantage D. Focus on a Market Niche This could be in terms of the physical characteristics of the product itself, the range or level of services provided, or the image and reputation of your business. A business with a meaningful differential advantage can often charge higher prices and generate higher unit profits. Difficulty: Hard Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 3-7 Stage 03 - Market Feasibility Study 21. Which of the following competitive strategies identifies a position in the market that has been overlooked by your competitors? A. Cost advantage B. Marketing advantage C. Differentiation advantage D. Focus on a Market Niche This can be particularly effective for smaller firms trying to escape direct competition with larger companies with more resources while trying to build their own competitive advantage. Difficulty: Hard Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 22. The ______ approach utilizes published statistics and weights them by an index that may be some factor such as the percentage of the population within your designated geographic area. A. Broad-based B. Narrow-focus C. Statistic-specific D. Top-down One word of caution with the top-down approach: An estimate of the total market is accurate only if data can be extrapolated and conclusions applied to the entire population. Difficulty: Hard Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 23. For your business plan, sales estimates for your first year of operation should be _____, while the estimates for subsequent years can be _________. A. Quarterly; annually B. Quarterly; semi-annually C. Monthly; semi-annually D. Monthly; quarterly For your business plan, these sales estimates for your first year of operation should be monthly, while the estimates for subsequent years can be quarterly. Difficulty: Hard Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 3-8 Stage 03 - Market Feasibility Study 24. All of the following are external factors which might affect your sales, except: A. Seasonal changes B. Level of your promotional effort C. Political activities and events D. Changes in the retail mix This is considered an internal factor. Difficulty: Medium Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 25. All of the following are internal factors which might affect your sales, except: A. the distribution channels you decide to use B. level of your promotional effort C. fashion trends and cycles D. your ability to manage inventory levels effectively This is considered an external factor. Difficulty: Medium Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 26. Selecting a location is most critical for which of the following businesses? A. An automobile manufacturing plant B. Public Utilities Commission C. Municipal waste and recycling site D. Hakim Optical Location is most critical for retailers. Difficulty: Hard Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 3-9 Stage 03 - Market Feasibility Study 27. The principal ingredients of a marketing program include all of the following, except: A. Person B. Productivity C. Pricing D. Place The other ingredients are promotion and product. Difficulty: Medium Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 28. All of the following are forms of non store retailing, except: A. Vending machines B. Fairs and exhibitions C. Bricks and Mortars D. The Internet Bricks and Mortars is the term used to describe the traditional store based retail location. Difficulty: Medium Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 29. Using cost-based pricing, what is the percentage markup on an item costing $1.00 and selling for $5.00? A. 25% B. 45% C. 55% D. 80% See example provided in Table 3.1 Price Markup Chain. Difficulty: Hard Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 3-10 Stage 03 - Market Feasibility Study 30. What is the percentage markup on an item costing $1.50 and selling for $3.00? A. 25% B. 50% C. 75% D. Cannot be determined. See example provided in Table 3.1 Price Markup Chain. Difficulty: Hard Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 31. Items such as specialty products or jewellery, for example, typically have markups in the range of: A. 5-10% B. 20-30% C. 35-45% D. 50-60% Standard markups tend to prevail in different industry sectors. Food products and other staple items usually have a low unit cost and high inventory turnover, so the markups tend to be fairly low, 15 to 25 percent; products such as jewellery and highly advertised specialty products typically have higher markups, perhaps as much as 50 or 60 percent or even more. Difficulty: Medium Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 32. Items such as food products and other staple products typically have markups in the range of: A. 5-10% B. 15-25% C. 35-45% D. 50-60% Standard markups tend to prevail in different industry sectors. Food products and other staple items usually have a low unit cost and high inventory turnover, so the markups tend to be fairly low, 15 to 25 percent; products such as jewellery and highly advertised specialty products typically have higher markups, perhaps as much as 50 or 60 percent or even more. Difficulty: Medium Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 3-11 Stage 03 - Market Feasibility Study 33. ________ are commonly provided to customers who buy more than some minimum quantity or dollar value of products or services from you. A. Loyalty discounts B. Cash discounts C. Quantity discounts D. Cumulative discounts This discount may be based either on the quantity or value of each individual order (noncumulative) or on the total value of their purchases over a certain period of time, such as a month (cumulative). Difficulty: Easy Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 34. _________ permit customers to deduct a percentage amount from the net cost of their purchases if payment is made in cash at the time of purchase or full payment is made within a specified number of days. A. Cash discounts B. Quantity discounts C. Quality discounts D. Noncumulative discounts Different types of businesses have their own customary cash discounts. For example, a typical discount is expressed as "2/10 net 30." In this situation, a customer who is invoiced on October 1 for an outstanding bill of $2,000 need pay only $1,960 if payment is made before October 10. Difficulty: Medium Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 35. _______ gives you a method of moving inventories that you may otherwise have to carry over to the following year. A. Cash discounts B. Quantity discounts C. Quality discounts D. Seasonal discounts Seasonal discounts of 10 percent, 15 percent, 20 percent, or more on your normal base price may be offered to your customers if their purchases are made during your slow or off-season. Difficulty: Hard Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 3-12 Stage 03 - Market Feasibility Study 36. Which of the following promotional activities has the highest cost per audience member? A. Advertising B. Sales Promotion C. Public Relations D. Personal Selling See Table 3.2 A Comparison of Various Promotional Activities. Difficulty: Medium Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 37. Which of the following promotional activities offers the greatest ability to focus on the target customer? A. Advertising B. Sales Promotion C. Public Relations D. Personal Selling See Table 3.2 A Comparison of Various Promotional Activities. Difficulty: Easy Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 38. Which of the following promotional activities has the highest level of credibility? A. Advertising B. Sales Promotion C. Public Relations D. Personal Selling See Table 3.2 A Comparison of Various Promotional Activities. Difficulty: Hard Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 3-13 Stage 03 - Market Feasibility Study 39. Which of the following promotional activities is weakest in terms of the ability to deliver a complicated message? A. Advertising B. Sales Promotion C. Public Relations D. Personal Selling See Table 3.2 A Comparison of Various Promotional Activities. Difficulty: Hard Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 40. Which of the following promotional activities is weakest in terms of the ability to focus on the target customer? A. Advertising B. Sales Promotion C. Public Relations D. Personal Selling See Table 3.2 A Comparison of Various Promotional Activities. Difficulty: Hard Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 41. Which of the following promotional activities offers the greatest capacity to interchange with the audience? A. Advertising B. Sales Promotion C. Public Relations D. Personal Selling See Table 3.2 A Comparison of Various Promotional Activities. Difficulty: Medium Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 3-14 Stage 03 - Market Feasibility Study 42. Free product samples and contests are activities related to: A. Advertising B. Personal selling C. Sales promotion D. Public relations Other examples of sales promotion activities include gifts, discount coupons, exhibits and displays, etc. Difficulty: Medium Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 43. In the model for small business growth, the key issue in the inception Chapter is: A. Obtaining customers B. Increasing competition C. Expansion into new products or markets D. Finding growth opportunities Table 3.4 A Model for Small Business Growth. Difficulty: Medium Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 44. In the model for small business growth, the key issue in the maturity Chapter is: A. Obtaining customers B. Increasing competition C. Expansion into new products or markets D. Finding growth opportunities Table 3.4 A Model for Small Business Growth. Difficulty: Medium Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 3-15 Stage 03 - Market Feasibility Study 45. In the model for small business growth, the key issue in the survival Chapter is: A. Obtaining customers B. Increasing competition C. Expansion into new products or markets D. Finding growth opportunities Table 3.4 A Model for Small Business Growth. Difficulty: Medium Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 46. In the model for small business growth, product and market research in the inception Chapter is: A. Non-existent B. Little C. Moderate D. Innovative Table 3.4 A Model for Small Business Growth. Difficulty: Hard Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 47. In the model for small business growth, product and market research in the survival Chapter is: A. Non-existent B. Little C. Moderate D. Innovative Table 3.4 A Model for Small Business Growth. Difficulty: Hard Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program True / False Questions 3-16 Stage 03 - Market Feasibility Study 48. The first plan you will write for your new venture is the business plan, once that is complete, you will then conduct a feasibility study. FALSE If the feasibility study indicates that the business idea has potential, then you can proceed to write a business plan. Difficulty: Easy Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 49. Examples of psychographic factors include the desire for status, the pursuit of fun, and the desire to be environmentally conscious. TRUE Psychographic or sociological factors such as lifestyle, status, timing and means of purchasing, and reasons for buying products or services similar to yours. Difficulty: Medium Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 50. The market research process involves two basic steps: gather information and then interpret it. FALSE There are four steps in the research process. Difficulty: Easy Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 51. Secondary data is far less expensive for a firm to collect than is primary data. TRUE Combining data from a number of secondary sources may allow you to compile the information you require, and at much lower cost than going out and gathering your own information. Difficulty: Easy Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 3-17 Stage 03 - Market Feasibility Study 52. Survey research is the most widely used method of primary data collection. TRUE Its principal advantages are its relatively low cost and flexibility. It can be used to obtain many different kinds of information in a wide variety of situations. Difficulty: Easy Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 53. When it comes to the "one-store test" to test your product, you are safe to assume that the single location will be representative of the marketplace in general. FALSE The one store in which you test your product may not be representative of the marketplace in general. Difficulty: Medium Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 54. A cost advantage competitive strategy involves a significantly lower cost compared to the competition which permits reasonable profit margins while offering lower prices. TRUE These lower costs may arise from maintaining a lower variable cost per unit sold, having a lower level of marketing expenses, or having a lower level of overhead or operating expenses. Difficulty: Hard Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 55. The bottom-up approach involves aggregating information from the customer level to the total market level. TRUE Individual or household statistics are aggregated based on population or household statistics that are available from Statistics Canada and other sources to develop an estimate of the total size of the potential market. Difficulty: Medium Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 3-18 Stage 03 - Market Feasibility Study 56. Merchant wholesalers are further classified as full-service, limited-function, drop shippers, truck wholesalers, and rack jobbers. TRUE Wholesalers are classified according to whether they actually take title or ownership of the products they handle (merchant wholesalers) or not (agents). Difficulty: Hard Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 57. A discount expressed as "2/10 net 30" means the customer can take a 2 percent cash discount for making payment within 10 days. Otherwise, the customer must increase the invoice total by 2 percent and pay that amount in 30 days. FALSE The customer need not increase the invoice total by 2 percent. If they forego the discount offered by paying within ten days, they simply pay the invoice total (without discount) within 30 days. Difficulty: Hard Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 58. A personal sales person's primary function is informing customers about the nature of the offering and the value and benefits of using the product or service. FALSE A personal sales person's primary function is usually more concerned with obtaining orders than informing your customers about the nature of your offering, as in the case of advertising. Difficulty: Easy Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program Short Answer Questions 3-19 Stage 03 - Market Feasibility Study 59. Discuss the relationship between the level of risk of a new venture and the expected return for that risk for new inventions, moderately or slightly innovative ideas, and copycat products? In general, the following relationships hold: 1. New inventions are extremely risky and difficult to evaluate, but if they are accepted in the marketplace they can provide enormous profits. 2. For moderately innovative and slightly innovative ideas, the risks are lower and evaluation is less difficult, but profit potential tends to be more limited. 3. In the "copycat" category, risks are often very high and profit potential tends to be quite low. Such businesses usually show no growth, or very slow growth, and there is little opportunity for profit beyond basic wages. Difficulty: Medium Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 60. What are the most important technical requirements to consider when developing a working prototype? Functional design of the product and the attractiveness of its appearance Flexibility of the product in permitting ready modification of its external features to meet customer requirements or competitive pressures Durability of the materials from which the product is made Expected product reliability under normal operating circumstances Safety of the product under normal operating conditions Expected rate of obsolescence Ease and cost of maintenance Ease and cost of processing or manufacture Ease of handling and use by the customer Difficulty: Hard Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 3-20 Stage 03 - Market Feasibility Study 61. Describe market segmentation based on geographic location. Geographic location refers to part of a city or town, county, province, region, or country. If you are selling farm equipment, geographic location is obviously a major factor in segmenting your target markets since your customers will be located in particular rural areas. Climate is a commonly used geographic segmentation variable that affects industries such as sporting equipment, lawn and garden equipment, snowblowers and snowmobiles, and heating and air- conditioning equipment. If this is a factor in your business, you need to identify the geographic area where your market is located and identify the specific boundaries within which you will do business. Difficulty: Easy Learning Objective: 03-01 Explain what a feasibility study is and why you need one. Topic: 03-01 Technical and Market Assessment 62. Compare and contrast observational methods to questioning methods as a form of primary data collection. This is the gathering of primary data by observing people and their actions in particular situations. It may entail such approaches as observing the behaviour of shoppers in a store as they go about purchasing a range of different products, counting traffic flows through a mall or past a particular location, or observing patterns in traffic flows around a store or other facility. Questioning methods include both the use of surveys and experimentation that involves contact with respondents. Survey research involves the systematic collection of data from a sample of respondents to better understand or explain some aspect of their behaviour. This data collection can occur by personal contact, through the mail, by telephone, or on the Internet. In addition, the information may be gathered from people individually as in an individual interview or in a group such as a focus group. Difficulty: Medium Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 3-21 Stage 03 - Market Feasibility Study 63. Describe the primary issues faced by manufacturing firms in the selection of a location for their facilities. Manufacturers are principally concerned about locating their plant where their operations will be most efficient. This means considering such issues as: General proximity to primary market areas Access to required raw materials and supplies Availability of a suitable labour force Accessibility and relative cost of transportation and storage facilities Availability and relative cost of power, water, and fuel supplies Financial incentives and other inducements available from municipal, provincial, or federal government agencies The importance of each of these factors in the location decision will depend on the nature of your manufacturing business and your own preferences and requirements. Difficulty: Medium Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 64. Discuss the disadvantages associated with running a home-based business. It takes a lot of self-discipline to sustain a regular work schedule and resist distractions from family, friends, television, and other sources. Suppliers and prospective customers may not take you as seriously. The space available in your home may not be appropriate for your business, and you may not have access to facilities and equipment such as boardrooms and copy machines that you need to conduct your business effectively. If your house is in a typical residential area, operating a business from your home will probably contravene local zoning bylaws. You can feel lonely and very alone without anyone to talk to or banter ideas around with. Difficulty: Easy Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 3-22 Stage 03 - Market Feasibility Study 65. What are some of the common complaints faced by the owners of home-based business from neighbours and others in the community? Activities that may lead to complaints are posting a large sign on the front lawn; constant noise; a steady stream of customers, suppliers, or others in and out of your home; or the clutter of parked vehicles in your yard or on the street. Difficulty: Medium Learning Objective: 03-02 Describe why market research is important. Topic: 03-06 Research Your Market 66. Describe three different kinds of discounts provided by businesses to their customers. The three types of discounts presented in the text are cash, quantity, and seasonal. Cash discounts are based on the typical terms of trade within an industry and permit customers to deduct a certain percentage amount from the net cost of their purchases if payment is made in cash at the time of purchase or full payment is made within a specified number of days. Seasonal discounts of 10 percent, 15 percent, 20 percent, or more on your normal base price may be offered to your customers if their purchases are made during your slow or off-season. Quantity discounts are commonly provided to customers who buy more than some minimum quantity or dollar value of products or services from you. Difficulty: Medium Learning Objective: 03-03 Prepare your marketing plan. Topic: 03-15 Fleshing Out Your Marketing Program 3-23 Stage 04 - Cost and Profitability Assessment Stage 04 Cost and Profitability Assessment Multiple Choice Questions 1. One-time expenditures include all of the following, except: A. Capital expenditures B. Fixtures C. Soft costs D. Employees' wages Employees' wages is an operating expense. Learning Objective: 04-01 Explain what is involved in a cost and profitability assessment. Topic: 04-01 Cost and Profitability Assessment 2. Which of the following is not considered a soft cost? A. Utility deposits B. Pre-opening advertising C. Promotion expenses D. Lease of furniture Furniture lease expenses are considered capital expenditures. Learning Objective: 04-01 Explain what is involved in a cost and profitability assessment. Topic: 04-01 Cost and Profitability Assessment 3. Which of the following is considered an operating expense? A. Capital expenditures B. Equipment leasing C. Employees' wages D. The purchase of beginning inventory Employees' wages must be paid on an ongoing basis and are part of operating expenses. Learning Objective: 04-01 Explain what is involved in a cost and profitability assessment. Topic: 04-01 Cost and Profitability Assessment 4-1 Stage 04 - Cost and Profitability Assessment 4. Many retail businesses are: A. Capital intensive B. Labour intensive C. Inventory intense D. Employee intense The example provided in the text is a sporting goods store. It, like many retail stores, requires a lot of capital for inventory and store fixtures. Learning Objective: 04-01 Explain what is involved in a cost and profitability assessment. Topic: 04-01 Cost and Profitability Assessment 5. A(n) _______ measures the company's sales and expenses during a specified period of time. A. Balance sheet B. Ratio analysis C. Income statement D. Budget Its function is to total all sources of revenue for the business and subtract all expenses related to generating that revenue. Learning Objective: 04-01 Explain what is involved in a cost and profitability assessment. Topic: 04-01 Cost and Profitability Assessment 6. All of the following are required to construct a pro forma income statement, except: A. Projected net sales B. Projected cost of goods sold C. Variable operating expenses D. Last period's actual sales Last period's sales figures are not required. Learning Objective: 04-01 Explain what is involved in a cost and profitability assessment. Topic: 04-01 Cost and Profitability Assessment 4-2 Stage 04 - Cost and Profitability Assessment 7. Which of the following is an example of a fixed operating expense? A. Rent B. Advertising and promotion expenses C. Wages and salaries D. Delivery expenses All of the other choices are examples of variable operating expenses. Learning Objective: 04-01 Explain what is involved in a cost and profitability assessment. Topic: 04-01 Cost and Profitability Assessment 8. All of the following are examples of variable operating expenses, except: A. Advertising and promotion expenses B. Wages and salaries C. Insurance premiums D. Delivery expenses Insurance premiums are considered fixed operating expenses. Learning Objective: 04-01 Explain what is involved in a cost and profitability assessment. Topic: 04-01 Cost and Profitability Assessment 9. The cost of goods sold: A. Is the price of the goods sold, including selling and other expenses. B. Is the price of the goods sold, plus an estimated expense of carrying the inventory in the store or warehouse facility. C. Is just the price of the goods, not including selling and other expenses. D. Is a value that is not relevant when it comes to constructing the pro forma income statement. Selling and other expenses are not included. Learning Objective: 04-01 Explain what is involved in a cost and profitability assessment. Topic: 04-01 Cost and Profitability Assessment 4-3 Stage 04 - Cost and Profitability Assessment 10. Fixed expenses are those which: A. Are dependent on the level of sales. B. Must be paid regardless of the level of sales. C. Are proportionate to the level of sales. D. Can be deferred in the event that sales are zero. These include expenses such as rent, telephone, insurance premiums, business taxes and licences, and interest, as well as some provision for depreciation on any capital assets used in the business. Learning Objective: 04-01 Explain what is involved in a cost and profitability assessment. Topic: 04-01 Cost and Profitability Assessment 11. All of the following are examples of fixed expenses, except: A. Insurance premiums B. Business taxes and licences C. Rent D. Travel costs Travel costs are considered variable expenses. Learning Objective: 04-01 Explain what is involved in a cost and profitability assessment. Topic: 04-01 Cost and Profitability Assessment 12. All of the following are examples of variable expenses, except: A. Insurance premiums B. Salaries and commissions C. Advertising and promotion D. Travel costs Insurance premiums are fixed expenses. Learning Objective: 04-01 Explain what is involved in a cost and profitability assessment. Topic: 04-01 Cost and Profitability Assessment 4-4 Stage 04 - Cost and Profitability Assessment 13. In very simple terms, a cash flow forecast: A. Traces the expected expenses of a business on a semi-annual basis. B. Traces the cost of borrowing over the term of the debt. C. Traces the expected flow of funds into and out of a business over some period of time. D. Traces the amount of interest earned by a business when customers use credit cards to pay for their merchandise. The cash flow analysis is the most important document you will compile in assessing the financ