A Changing World 6Th Canadian Edition By O. C. Ferrell -Test Bank

A Changing World 6Th Canadian Edition By O. C. Ferrell -Test Bank

 

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Sample Questions Are Posted Below

 

Chapter 05

Small Business, Entrepreneurship, and Franchising

 

 

True / False Questions

1. Entrepreneurship is the process of creating and managing a business to achieve desired objectives.
   TRUE

Entrepreneurship is the process of creating and managing a business to achieve desired objectives.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-01 Define entrepreneurship and small business.
Topic: 05-02 The Nature of Entrepreneurship and Small Business

2. It is difficult to define small business because the concept of “smallness” is relative.
   TRUE

It is difficult to define small business because it is relative (some small businesses have three employees, other small businesses have over 500 employees depending on the industry).

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-01 Define entrepreneurship and small business.
Topic: 05-04 What Is a Small Business?

3. Any business that is independently owned and operated can be classified as a small business.
   FALSE

A small business is independently owned and operated that is not dominant in its competitive area and does not employ more than 500 employees.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-01 Define entrepreneurship and small business.
Topic: 05-04 What Is a Small Business?

 

4. The Canadian Federation of Independent Businesses (CFIB) offers advice on starting a small business.
   TRUE

The Canadian Federation of Independent Businesses (CFIB) offers advice on starting a small business. Also, it offers information to current and potential small-business owners.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-01 Define entrepreneurship and small business.
Topic: 05-04 What Is a Small Business?

5. The entrepreneurship movement is declining because of technological advances.
   FALSE

The entrepreneurship movement is accelerating because technologies once available only to the largest firms are now available to smaller businesses.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-01 Define entrepreneurship and small business.
Topic: 05-02 The Nature of Entrepreneurship and Small Business

6. Small businesses rarely have alliances with other companies.
   FALSE

Small businesses can form alliances with other companies to produce and sell products in domestic and global markets.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-01 Define entrepreneurship and small business.
Topic: 05-02 The Nature of Entrepreneurship and Small Business

7. Entrepreneurs possess a wide variety of characteristics. There does not appear to be any common characteristics shared among them.
   FALSE

Many of them share certain characteristics including the following:

Strong desire to act independently, high need for achievement, willingness to take some risks, and energetic.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-01 Define entrepreneurship and small business.
Topic: 05-03 Entrepreneurship Characteristics

 

8. In recent years, small businesses generated very few new jobs in Canada.
   FALSE

Small businesses are largely responsible for fuelling job creation and innovation.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-05 The Role of Small Business in the Canadian Economy

9. Small businesses in Canada employ about half of all private sector employees.
   TRUE

About 5 million Canadians are employed by small businesses.

 

Blooms: Apply
Difficulty: Easy
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-05 The Role of Small Business in the Canadian Economy

10. Retailing, services, manufacturing, and high technology are attractive to entrepreneurs because these fields tend to be easy to enter and require low initial financing.
    TRUE

Retailing, services, manufacturing, and high technology are attractive to entrepreneurs because these fields tend to be easy to enter, require low initial financing, and suffer less from heavy competition, at least in the early stages.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-06 Industries that Attract Small Business

11. Retailers purchase goods and resell them to consumers and some distributors.
    FALSE

Retailers acquire goods from producers and wholesalers and sell them to consumers (distributors sell to retailers).

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-06 Industries that Attract Small Business

 

12. People who operate service businesses are generally not considered retailers.
    FALSE

Many service providers are also retailers because they provide their services to the end-user.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-06 Industries that Attract Small Business

13. A number of very successful high technology businesses began as small entrepreneurial ventures.
    TRUE

Many entrepreneurs in the high tech industry (Apple, Dell Inc., Research in Motion) started out in garages, basements, kitchens, and dorm rooms.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-06 Industries that Attract Small Business

14. In the last decade, between 60 and 80 percent of net new jobs annually were created by small businesses.
    TRUE

The energy, creativity, and innovative abilities of small-business owners have resulted in jobs for other people.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-05 The Role of Small Business in the Canadian Economy

 

15. Of the 50 fastest-growing companies in Canada as identified by Profit magazine, nine of the top 10 are service-based businesses.
    TRUE

Additionally in 2006, four of the top five businesses had revenues less than $75,000. Today, the top four service companies all have revenue in excess of $1 million.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-06 Industries that Attract Small Business

16. Service businesses represent one of the slowest-growing sectors of the Canadian economy.
    FALSE

Service businesses represent one of the fastest-growing sectors of the Canadian economy.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-06 Industries that Attract Small Business

17. Technology is increasing start-up costs and preventing entrepreneurs from reaching consumers around the globe.
    FALSE

Technology is reducing start-up costs and allowing entrepreneurs to reach consumers all over the globe.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-06 Industries that Attract Small Business

 

18. The desire to be your own boss is a major reason for going into business for yourself.
    TRUE

The advantages of starting a small business are low start-up costs, the ability to focus on specified market niches, the flexibility to adapt to change, the ability to develop highly reputable products and services, and independence (being your own boss) which is the most advantageous component.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-03 Specify the advantages of small-business ownership.
Topic: 05-08 Independence

19. Relatively low start-up costs are an advantage of a small business.
    TRUE

The advantages of starting a small business are low start-up costs, the ability to focus on specified market niches, the flexibility to adapt to change, the ability to develop highly reputable products and services, and independence (being your own boss).

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-03 Specify the advantages of small-business ownership.
Topic: 05-11 Low Start-Up Costs

20. Small businesses cannot be operated from an individual’s home.
    FALSE

The availability of the computer, copy machine, business telephone, and fax machine has permitted many small business owners to work at home.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-03 Specify the advantages of small-business ownership.
Topic: 05-08 Independence

21. The ability to develop a reputation for quality and service is an advantage of a small business.
    TRUE

The advantages of starting a small business are low start-up costs, the ability to focus on specified market niches, the flexibility to adapt to change, the ability to develop highly reputable products and services, and independence (being your own boss).

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-03 Specify the advantages of small-business ownership.
Topic: 05-14 Reputation

 

22. Targeting small niches or product needs is a dangerous strategy for a small business to follow.
    FALSE

By targeting small niches or product needs, small businesses sometimes can avoid fierce competition from larger firms, helping them to grow into stronger companies.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-03 Specify the advantages of small-business ownership.
Topic: 05-13 Focus

23. Small businesses usually have multiple layers of management.
    FALSE

Small businesses usually have only one layer of management—the owners.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-03 Specify the advantages of small-business ownership.
Topic: 05-12 Management

24. According to Statistics Canada, independence is the leading reason that entrepreneurs choose to go into business for themselves.
    TRUE

Being a small-business owner means being your own boss. Many people start their own businesses because they believe they will do better for themselves than they could do by remaining with their current employer or by changing jobs.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-03 Specify the advantages of small-business ownership.
Topic: 05-08 Independence

25. Small businesses have a high success rate.
    FALSE

Small businesses have a high failure rate.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

 

26. Managerial inexperience can lead to business failure.
    TRUE

Three major causes of small-business failure are undercapitalization, managerial inexperience or incompetence, and inability to cope with growth.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

27. The shortest path to small-business failure is undercapitalization.
    TRUE

Undercapitalization is the lack of funds to operate a business normally, which would quickly lead to bankruptcy.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

28. Insufficient funds to withstand slow sales may cause a small business to fail.
    TRUE

Almost all businesses suffer from seasonal variations in sales, which make cash tight, and may lead to insufficient funds during these variations.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

29. Poor business management is a cause of many small-business failures.
    TRUE

Entrepreneurs may lack the skills and experience to make good management decisions in hiring, negotiating, finance, and control.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

 

30. According to research, the top challenge of small and medium-sized businesses is finding and retaining qualified employees.
    TRUE

See Figure 5.1.

 

Blooms: Remember
Difficulty: Hard
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-16 High Stress Level

31. According to a study by Statistics Canada the median income of self-employed individuals was only 91.4 percent of the median income of paid employees.
    TRUE

While many people start a business with dreams of becoming wealthy, research indicates that this does not always happen.

 

Blooms: Remember
Difficulty: Hard
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-17 Limited Financial Rewards

32. Statistics Canada, Profit, and the U.S. Census all have produced research indicating that entrepreneurs work fewer hours than paid employees.
    FALSE

Statistics Canada, Profit, and the U.S. Census all have produced research indicating that entrepreneurs work longer hours than paid employees.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-18 Time Demands

33. To start any business, large or small, you must first have an idea.
    TRUE

To start any business, large or small, you must first have an idea.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-20 Starting a Small Business

 

34. A key element of business success is a business plan.
    TRUE

After identifying a business idea, the next step is to develop a business plan to guide planning and how the business will achieve its goals.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-23 The Business Plan

35. The most important source of funds for any new business is the employees.
    FALSE

The most important source of funds for any new business is the owner.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-25 Financial Resources

36. When a business owner uses real personal assets rather than borrowing funds from outside sources to get started in a new business, it is called debt financing.
    FALSE

This is called equity financing since the owner uses real personal assets rather than borrowing funds from outside sources.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-25 Financial Resources

37. Small businesses can also obtain equity financing by finding investors for their operations.
    TRUE

Other sources of equity financing include the informal risk-capital market or business angel investors and venture capitalists.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-25 Financial Resources

 

38. Angel investors are private, wealthy individuals who typically invest less than $5000 in a business in return for an equity stake in that business.
    FALSE

Angel investors typically invest anywhere from $10,000 to $500,000.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-25 Financial Resources

39. Banks are the main suppliers of external financing to small businesses.
    TRUE

Business owners can also borrow money from some government sources such as the Business Development Centre or have some of their bank loans guaranteed by government programs such as the Canadian Small Business Financing Program.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-25 Financial Resources

40. Small businesses may obtain funding from their suppliers in the form of a trade credit—that is, suppliers allow the business to take possession of the needed goods and services and accept other needed goods and services as payment, in a way similar to bartering.
    FALSE

Small businesses may obtain funding from their suppliers in the form of a trade credit—that is, suppliers allow the business to take possession of the needed goods and services and pay for them at a later date or in installments.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-25 Financial Resources

41. In Canada, family businesses account for 80 to 90 percent of all firms.
    TRUE

Entrepreneurs may join an existing family business, start their own family-orientated company, or inherit a firm.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-26 Approaches to Starting a Small Business

 

42. The most widely requested financial instrument by SMEs is lease financing.
    FALSE

The most widely requested financial instrument by SMEs is trade credit (29%). See Table 5.4.

 

Blooms: Remember
Difficulty: Hard
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-25 Financial Resources

43. Occasionally, small businesses engage in bartering.
    TRUE

For example, an accountant may offer accounting services to an office supply firm in exchange for printer paper and CDs.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-25 Financial Resources

44. The practice of franchising first began in Canada when Singer used to sell sewing machines in the 19^th century.
    FALSE

The practice of franchising first began in the United States when Singer used it to sell sewing machines in the 19^th century.

 

Blooms: Remember
Difficulty: Hard
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-26 Approaches to Starting a Small Business

45. Research has found that franchisees fail at the same rate as traditional small and medium-sized firms.
    TRUE

Among the many shortcomings experienced by some franchisees are strict adherence to standardized operations, possible market saturation, and a limited product line.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-26 Approaches to Starting a Small Business

 

46. A franchisee is a company that sells a franchise.
    FALSE

The franchisee is the purchaser of a franchise.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-26 Approaches to Starting a Small Business

47. Franchisees pay the franchiser a monthly or annual fee based on a percentage of sales or profits.
    TRUE

The franchisee acquires the rights to a name, logo, methods of operation, national advertising, products, and other elements associated with the franchiser’s business in return for a financial commitment (including a monthly or annual fee based on a percentage of sales or profits).

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-26 Approaches to Starting a Small Business

48. Industry Canada offers financing for small business but is not able to provide training programs for entrepreneurs.
    FALSE

Because of the crucial role that small business and entrepreneurs play in the Canadian economy, a number of organizations offer programs to improve the small-business owner’s ability to compete. These include entrepreneurial training programs and programs sponsored by Industry Canada and the Business Development Centre.

 

Blooms: Apply
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-27 Help for Small-Business Managers

 

49. National publications such as Profit, Inc., and Entrepreneur share statistics, advice, tips, and success/failure stories.
    TRUE

Additionally, many urban areas—including Halifax, Montreal, Ottawa, Toronto, Calgary, and Vancouver—have weekly or monthly business journals or newspapers that provide stories on local businesses as well as on business techniques that a manager or small business can use.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-27 Help for Small-Business Managers

50. While networking may be crucial in a corporate environment, it is not necessary to run your own small business.
    FALSE

Networking is vital for any businessperson, whether you work for a huge corporation or run your own small business.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-27 Help for Small-Business Managers

51. Small businesses typically are not vulnerable to turbulence and change in the marketplace.
    FALSE

Although small businesses are crucial to the economy, they can be more vulnerable to turbulence and change in the marketplace than large businesses.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-28 The Future for Small Business

52. Millennials are also called Generation Y.
    TRUE

Known as Millennials or Generation Y, they were born between 1977 and 1994.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-29 Demographic Trends

 

53. The baby boomer cohort represents the segment of the population that is probably the wealthiest, although generally the least pursued by small businesses.
    FALSE

The baby boomer cohort represents the segment of the population that is probably the wealthiest, and the one that is often pursued by small businesses.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-29 Demographic Trends

54. Technological advances have resulted in fewer opportunities for small businesses abroad.
    FALSE

Advances in technology have opened up many new markets to small businesses.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-30 Technological and Economic Trends

55. According to many small business owners, the market with the least potential is the echo generation, the children of the baby boomers.
    FALSE

This market is considered to have huge potential.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-29 Demographic Trends

56. The Millennials are considered an attractive market because they shop frequently and spend lavishly on clothing, entertainment, and food.
    TRUE

Companies that have the most success with this group are ones that cater to the teens’ and young adults’ lifestyles.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-29 Demographic Trends

 

57. Companies that have the most success with the Millennial segment, are the ones that cater to health care, pharmaceutics, and pet supplies.
    FALSE

Some successful small businesses aimed at this market include Sylvan Learning Centre (after-school tutoring), Alien Workshop (skateboards), and Burton Snowboards (snowboards).

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-29 Demographic Trends

58. More and more firms are emulating small businesses in an effort to improve their own bottom line.
    TRUE

More and more firms are emulating small businesses in an effort to improve their own bottom line, through intrapreneurship or creating independent operating units.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-07 Explain why many large businesses are trying to “think small.”
Topic: 05-31 Making Big Businesses Act “Small”

59. Small business principles cannot be transferred to larger organizations.
    FALSE

More and more companies are trying to instill an entrepreneurial spirit into the company culture, in order to capitalize on small business success in introducing innovative new products.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-07 Explain why many large businesses are trying to “think small.”
Topic: 05-31 Making Big Businesses Act “Small”

60. Downsizing is one way firms try to enhance their competitiveness.
    TRUE

Since the 1980s, the buzzword in business has been to downsize, which makes a firm more flexible, resourceful, and innovative like a smaller business.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-07 Explain why many large businesses are trying to “think small.”
Topic: 05-31 Making Big Businesses Act “Small”

 

61. Large firms avoid entrepreneurship.
    FALSE

More and more companies are trying to instill an entrepreneurial spirit into the company culture, in order to capitalize on small business success in introducing innovative new products.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-07 Explain why many large businesses are trying to “think small.”
Topic: 05-31 Making Big Businesses Act “Small”

62. Intrapreneurs take responsibility for the development of innovations of any kind within larger organizations.
    TRUE

Intrapreneurs, like entrepreneurs, champion the development of innovations of any kind within larger organizations.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-07 Explain why many large businesses are trying to “think small.”
Topic: 05-31 Making Big Businesses Act “Small”

 

Multiple Choice Questions

63. Which of the following began as a small business based on the entrepreneurial visions of its founders?
    A.1-800-GOT-JUNK?
    B. Magna International Inc.
    C. Rogers Communications.
    D. Pizza Pizza.
    E. All of the businesses began as small businesses based on the entrepreneurial visions of their founders.

Many large businesses all began as small businesses based on the entrepreneurial visions of their founders.

 

Blooms: Apply
Difficulty: Easy
Learning Objective: 05-01 Define entrepreneurship and small business.
Topic: 05-02 The Nature of Entrepreneurship and Small Business

 

64. Your textbook uses the term small business to refer to an owner-managed business that employs not more than:
    A.100 people.
    B. 500 people.
    C. 15,000 people.
    D. 25 people.
    E. 1,000 people.

A small business is independently owned and operated that is not dominant in its competitive area and does not employ more than 500 employees.

 

Blooms: Remember
Difficulty: Hard
Learning Objective: 05-01 Define entrepreneurship and small business.
Topic: 05-04 What Is a Small Business?

65. Which of the following is not part of the definition of a small business used in this text?
    A.It is independently owned.
    B. It employs fewer than 500 employees.
    C. It employs more than 500 employees.
    D. It is not dominant in its field.
    E. It is independently operated.

A small business is independently owned and operated that is not dominant in its competitive area and does not employ more than 500 employees.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-01 Define entrepreneurship and small business.
Topic: 05-04 What Is a Small Business?

66. The CFIB is:
    A.Canadian Faction of Internet Businesses.
    B. Canadian Federation of Independent Buyers.
    C. Canadian Federation of Independent Businesses.
    D. Canadian Farmers and Independent Businesses.
    E. Canadian Franchising and International Businesses.

The Canadian Federation of Independent Businesses (CFIB) offers advice on starting a small business and offers information to current and potential small-business owners.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-01 Define entrepreneurship and small business.
Topic: 05-04 What Is a Small Business?

 

67. Which of the following are characteristics of entrepreneurs?
    A.Strong desire to act independently.
    B. High need for achievement.
    C. Willingness to take some risks.
    D. Energetic.
    E. All of the choices are characteristics of many entrepreneurs.

Entrepreneurs can come from varied and diverse backgrounds.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-01 Define entrepreneurship and small business.
Topic: 05-03 Entrepreneurship Characteristics

68. The CFIB uses a slightly different definition of small business, and believes the cut-off should be:
    A.250 employees
    B. 750 employees
    C. 1000 employees
    D. 1250 employees
    E. 50 employees

The CFIB uses 250 employees as its cut-off.

 

Blooms: Remember
Difficulty: Hard
Learning Objective: 05-01 Define entrepreneurship and small business.
Topic: 05-04 What Is a Small Business?

69. The majority of all new jobs created in Canada in recent years were generated by:
    A.medium businesses.
    B. small businesses.
    C. large businesses.
    D. corporations.
    E. provincial governments.

99% of firms in Canada are small businesses.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-05 The Role of Small Business in the Canadian Economy

 

70. Perhaps one of the most significant strengths of small businesses is:
    A.their ability to innovate and bring significant changes and benefits to customers.
    B. the entrepreneurial spirit they foster.
    C. the encouragement they receive from larger businesses.
    D. the competition they encourage.
    E. the ease of starting one.

Although small businesses have many strengths such as low initial cost and creation of jobs, the most significant strength of small businesses is their ability to innovate and bring significant changes and benefits to customers.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-05 The Role of Small Business in the Canadian Economy

71. Which of the following sectors are most attractive to small businesses?
    A.Wholesaling, retailing, and services
    B. Retailing, distribution, and services
    C. Retailing and wholesaling, services, manufacturing, and high technology
    D. Wholesaling, services, and high technology
    E. Services, distribution, and high technology

Retailing, services, manufacturing, and high technology are attractive to entrepreneurs because these fields tend to be easy to enter, require low initial financing and suffer less from heavy competition, at least in the early stages.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-06 Industries that Attract Small Business

 

72. All of the following are reasons why a small business would choose to become a retailer, except that:
    A.Starting a retail business is relatively easy.
    B. Retailing does not require a large capital investment.
    C. Retailing requires a large capital investment.
    D. Gaining knowledge and experience in retailing is relatively easy.
    E. The owner can capitalize on personal expertise or interests.

Entrepreneurs are attracted to retailing because gaining exposure and experience is easy, they do not have to spend large sums of money to open (as in manufacturing), and they can capitalize on personal expertise or interests.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-06 Industries that Attract Small Business

73. In the context of starting a new business, a retailer differs from a manufacturer in that the retailer is less likely to make a heavy investment in:
    A.equipment and distribution systems.
    B. space.
    C. bookkeeping.
    D. stationery.
    E. advertising.

An entrepreneur opening a new retailing store does not have to spend the large sums of money for the equipment and distribution systems that a manufacturing business requires.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-06 Industries that Attract Small Business

 

74. Many service businesses are considered retailers because they:
    A.sell small quantities of goods.
    B. sell their services to consumers.
    C. sell from a single store location.
    D. open their businesses for the same hours that most retailers stay open.
    E. employ only a small number of people.

Many service providers, such as veterinarians, doctors, and jewellers are considered retailers because they sell their services to the end-user.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-06 Industries that Attract Small Business

75. One of the fastest-growing sectors of the Canadian economy is represented by:
    A.manufacturers.
    B. retailers.
    C. exporters.
    D. wholesalers.
    E. service providers.

Service-oriented businesses represent one of the fastest-growing sectors of the Canadian economy, accounting for 66% of the Canadian economy and employing 75% of the workforce.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-06 Industries that Attract Small Business

76. One of the major reasons people want to own and operate their own business is to:
    A.make a fortune.
    B. be their own boss.
    C. have complete freedom.
    D. have an easy life.
    E. eliminate all pressure.

Independence (being your own boss) is the most advantageous component of starting a small business.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-03 Specify the advantages of small-business ownership.
Topic: 05-08 Independence

 

77. When market conditions change rapidly, a small business usually has fewer layers of management to work through in making decisions. This advantage of small business is called:
    A.focus.
    B. flexibility.
    C. reputation.
    D. hierarchical organization.
    E. standardization.

When a business is small in size, it has the ability to quickly respond to changing market demands due to having only one layer of management (the owners), and thus the ability to make decisions promptly.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-03 Specify the advantages of small-business ownership.
Topic: 05-12 Management

78. Which of the following is an advantage of small-business ownership?
    A.Lower cost of formation
    B. High stress level
    C. High failure rate
    D. Lack of flexibility
    E. Poor reputation

The advantages of starting a small business are low start-up costs, the ability to focus on specified market niches, the flexibility to adapt to change, the ability to develop highly reputable products and services, and independence (being your own boss).

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-03 Specify the advantages of small-business ownership.
Topic: 05-07 Advantages of Small-Business Ownership

 

79. Which of the following is not an advantage of small-business ownership?
    A.Lower cost of formation
    B. Flexibility in decision-making
    C. Ability to focus on specific groups of customers
    D. Over-optimism
    E. Ability to gain a solid reputation

The advantages of starting a small business are low start-up costs, the ability to focus on specified market niches, the flexibility to adapt to change, the ability to develop highly reputable products and services, and independence (being your own boss).

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-03 Specify the advantages of small-business ownership.
Topic: 05-07 Advantages of Small-Business Ownership

80. One advantage that small businesses have over large businesses is that they:
    A.are better able to focus on a few key customers.
    B. have well-defined goals and objectives.
    C. can arrange financial help easily because their capital needs are much smaller.
    D. know what they want to do and have the ability to do it.
    E. have specialized knowledge about the various areas of business concern.

Many large corporations must compete in the mass market or for large market segments, but smaller firms can develop products for particular groups of customers or to satisfy a need that other companies have not addressed.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-03 Specify the advantages of small-business ownership.
Topic: 05-13 Focus

81. A small business’s ability to focus on narrow niches can help it develop:
    A.high blood pressure.
    B. lower costs.
    C. higher costs.
    D. flexibility.
    E. an enviable reputation for quality and service.

Small firms, because of their capacity to focus on narrow niches, can develop enviable reputations for quality and service.

 

Blooms: Remember
Difficulty: Hard
Learning Objective: 05-03 Specify the advantages of small-business ownership.
Topic: 05-14 Reputation

 

82. Worries about new equipment, expanding inventory, rent increases, competition, changing market conditions, and the like may contribute to:
    A.optimism.
    B. a high stress level.
    C. a high failure rate.
    D. undercapitalization.
    E. a low stress level.

The small-business owner is often the manager, sales force, shipping and receiving clerk, bookkeeper, and custodian, which leads to worries about new equipment, expanding inventory, rent increases, competition, changing market conditions, and the like, that may contribute to high stress levels.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-16 High Stress Level

83. Although some businesses are less risky than others, overall the financial risks of running a small business are:
    A.very low.
    B. moderate.
    C. insurmountable.
    D. low.
    E. very high.

About 90% of all new businesses fail within the first five years, which means the owners may lose all of their investments into the business.

 

Blooms: Understand
Difficulty: Medium
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

84. Which of the following is a disadvantage of small-business ownership?
    A.Flexibility
    B. Low stress level
    C. High failure rate
    D. Low failure rate
    E. Focus

Roughly 90 percent of all new businesses fail within the first five years.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

 

85. All of the following concerns contribute to high stress levels for small-business owners, except:
    A. rent increases.
    B. the changing market demand.
    C. competition.
    D. the expanding inventory.
    E. reputation.

Usually small firms develop enviable reputations for quality and service.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-16 High Stress Level

86. According to research, the top challenge of small and medium-sized businesses is:
    A.Increasing costs of materials and health care
    B. Changing economic conditions
    C. Managing the growth of the business
    D. Increasing revenue
    E. Finding and retaining qualified employees

See Figure 5.1.

 

Blooms: Remember
Difficulty: Hard
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-16 High Stress Level

87. Small-business success:
    A.rarely lasts for more than two years.
    B. is not guaranteed.
    C. is not really attainable.
    D. happens only in Canada.
    E. is a sure thing.

Nearly 90 percent of small businesses fail within the first five years, but the ones that do succeed sometimes become multinational corporations, such as RIM and Dell.

 

Blooms: Understand
Difficulty: Medium
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

 

88. Which of the following is not a common cause of small business failure?
    A.Poor business concept
    B. Managerial inexperience
    C. Entrepreneurial vision
    D. Inability to cope with growth
    E. Undercapitalization

Entrepreneurial vision won’t cause a small business to fail or succeed.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

89. Few businesses make money:
    A.at all.
    B. from the start.
    C. easily.
    D. with competent managers.
    E. and grow at the same time.

Few businesses make money from the start and suffer from seasonal variations in sales.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

90. When the founder of a Quebec-based waste-disposal firm spent $16 million on a hazardous-waste incinerator project, believing that the project would benefit the environment and the community, despite local residents’ objections, he may have had:
    A.a poor business concept.
    B. poor financing.
    C. a lack of optimism
    D. inefficient expectations.
    E. overextended finances.

A poor business concept involves a lack of fulfilling consumer needs or wants.

 

Blooms: Understand
Difficulty: Hard
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

 

91. The shortest path to failure in a small business is:
    A.poor inventory control.
    B. poor vendor relations.
    C. improper policies and procedures.
    D. undercapitalization.
    E. overregulation by government.

Undercapitalization is the lack of funds to operate a business normally, which would quickly lead to bankruptcy.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

92. The lack of funds to operate a business normally is called:
    A.discounting.
    B. creative financing.
    C. financial pessimism.
    D. undercapitalization.
    E. overcapitalization.

Undercapitalization is the lack of funds to operate a business normally, which would quickly lead to bankruptcy.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

93. Initially, the factor that probably affects a company’s reputation more than anything else is poorly managed:
    A.growth.
    B. diversification.
    C. equity.
    D. collateral.
    E. labourers.

Poorly managed growth probably affects a company’s reputation more than anything else because products that do not arrive on time or goods that are poorly made can quickly reverse a company’s success.

 

Blooms: Remember
Difficulty: Hard
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

 

94. Many small business in Canada fail because of events which occur in a company’s external environment that the company cannot control. In these situations, failure is due to:
    A.external dilemmas.
    B. external shocks.
    C. insufficient capital.
    D. the failure to adapt.
    E. an inadequate business plan.

Examples of external shocks include: downturns in the economy, new competitors, customers going out of business, loss of suppliers, energy prices, and so forth.

 

Blooms: Remember
Difficulty: Hard
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

95. To start any business, you must first have:
    A.investors.
    B. an idea.
    C. capital.
    D. employees.
    E. a business plan.

To start any business, large or small, you must first have an idea.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-20 Starting a Small Business

96. A precise statement of the rationale for a business and a step-by-step explanation of how it will achieve its goals is a:
    A.mission statement.
    B. corporate charter.
    C. business plan.
    D. corporate statement.
    E. balance sheet.

The business plan is a key component of a business’s success that is a detailed explanation of how it will achieve its goals.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-23 The Business Plan

 

97. The business plan should do all of the following, except:
    A.explain the business.
    B. include estimates of income and expenses.
    C. establish a strategy for acquiring sufficient funds.
    D. include an analysis of the competition.
    E. act as a shackle to limit the business’s flexibility and decision making.

The business plan should act as a guide and reference document, not act as a shackle to limit the business’s flexibility and decision making.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-23 The Business Plan

98. Many financial institutions decide whether to loan a small business money based on its:
    A.reputation.
    B. business plan.
    C. owners.
    D. employees.
    E. goals.

Many financial institutions decide whether to loan a small business money based on its business plan.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-23 The Business Plan

99. To make money from a small business, the owner must obtain capital. A small retail store will probably need at least what amount of initial financing?
    A.$500
    B. $5,000
    C. $50,000
    D. $500,000
    E. $1,000

Even a small retail store will probably need at least $50,000 in initial financing to rent space, purchase or lease necessary equipment and furnishings, buy the initial inventory of merchandise, and provide working capital.

 

Blooms: Remember
Difficulty: Hard
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-25 Financial Resources

 

100. The money used to start a business and keep it running is also called:
     A.capital.
     B. trade.
     C. currency.
     D. leverage.
     E. stock.

Capital is the wealth, owned or employed, in a business by an individual or firm.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-25 Financial Resources

101. The most important source of funds for any new business is:
     A.the Chamber of Commerce.
     B. the bank.
     C. the stockholders.
     D. the owner.
     E. donations.

Usually, the small-business owner has to put up a significant percentage of the necessary capital or funds.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-25 Financial Resources

102. Persons or organizations that agree to provide some funds for a new business in exchange for an ownership interest or stock are called:
     A.entrepreneurs.
     B. corporate raiders.
     C. venture capitalists.
     D. stockholders.
     E. shareholders.

Venture capitalists are persons or organizations that agree to provide some funds for a new business in exchange for an ownership interest or stock.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-25 Financial Resources

 

103. Venture capitalists are a source of:
     A.debt financing.
     B. owners’ equity.
     C. preferred stockholders.
     D. equity financing.
     E. tax deductions.

Equity financing includes investors such as venture capitalists, friends, and families in which the owner sells stock in the business.

 

Blooms: Understand
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-25 Financial Resources

104. A mortgage is an example of:
     A.owners’ equity.
     B. debt financing.
     C. venture capitalism.
     D. equity financing.
     E. an unsecured loan.

Debt financing is obtaining capital through borrowing money from an external source, usually a bank.

 

Blooms: Remember
Difficulty: Hard
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-25 Financial Resources

105. The type of financial instrument most used by SMEs is:
     A.personal savings
     B. trade credit
     C. personal credit cards
     D. loans from friends and relatives
     E. leasing

See Table 5.4.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-25 Financial Resources

 

106. A licence to sell another’s products or to use another’s name in business is called a:
     A.franchise.
     B. franchisee.
     C. franchiser development system.
     D. franchise logo.
     E. franchiser.

A franchise is a licence to sell another’s products or to use another’s name in business, such as Tim Horton’s and Boston Pizza.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-26 Approaches to Starting a Small Business

107. Since Rachel Hollings decided to purchase the rights to own and operate a Tim Horton’s fast-food restaurant rather than start her own operation, she is probably a(n):
     A.trade creditor.
     B. franchisee.
     C. industrialist.
     D. franchiser.
     E. venture capitalist.

A franchisee is the purchaser of a franchise (Tim Horton’s, Boston Pizza, etc.).

 

Blooms: Understand
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-26 Approaches to Starting a Small Business

108. An organization that sells a licence to use its products or name is a:
     A.contract manufacturer.
     B. venture capitalist.
     C. cooperative.
     D. franchisee.
     E. franchiser.

The franchiser is the company that sells a franchise, which is an organization that sells a licence to use its products or name.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-26 Approaches to Starting a Small Business

 

109. One of the attractive features of franchising is that:
     A.franchisers have well-known names and products.
     B. franchises are inexpensive.
     C. franchisees are almost certain to succeed.
     D. a new-business owner can be assured that he or she gets honest information from the franchiser.
     E. franchisers have total financing available so that a new business owner doesn’t need any capital.

The advantages to the franchisee are management training and support, brand-name recognition, and standardized quality of goods and services.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-26 Approaches to Starting a Small Business

110. Franchising first began in the United States within the following industry:
     A.fast food restaurants.
     B. home delivery food services.
     C. sewing machines.
     D. maid services.
     E. printing services.

The practice of franchising first began in the United States when Singer used it to sell sewing machines in the 19^th century.

 

Blooms: Remember
Difficulty: Hard
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-26 Approaches to Starting a Small Business

111. In a franchise business, the following generally happens:
     A.The franchiser pays a fee to the franchisee.
     B. The franchisee pays a fee to the franchiser.
     C. Both the franchiser and the franchisee pay fees to the capital investors.
     D. Each pays separate fees to the other.
     E. No one pays any fees to anyone.

The franchisee acquires the rights to a name, logo, methods of operation, national advertising, products, and other elements associated with the franchiser’s business in return for a financial commitment (including a monthly or annual fee based on a percentage of sales or profits).

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-26 Approaches to Starting a Small Business

 

112. All of the following are advantages of franchising, except:
     A.Brand-name appeal
     B. Management training and support
     C. A limited product line
     D. Centralized buying power
     E. The standardized quality of goods and services

Franchisees cannot change the product line ad hoc, they must stick to the assortment sanctioned by the head office.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-26 Approaches to Starting a Small Business

113. Which segment of the population is probably the wealthiest in Canada?
     A.Echo boomers
     B. Generation Y
     C. Baby boomers
     D. Millennials
     E. Generation Z

America’s Baby Boom generation, the wealthiest segment in Canada, began in 1946 and ended in 1964.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-29 Demographic Trends

114. Which market segment is most targeted by marketers and small businesses?
     A.Echo boomers
     B. Generation Y
     C. Baby boomers
     D. Millennials
     E. Generation Z

The baby boomers represent the largest demographic group and are most targeted by marketers.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-29 Demographic Trends

 

115. Millennials number around 6 million and represent a huge business opportunity in Canada. Who are they?
     A.It is another term for baby boomer
     B. First generation immigrants
     C. People born at the turn of the millennium between 1999-2001
     D. People born between 1977 and 1994
     E. It is a synonym for Generation X

Echo boomers, born between 1977 and 1994, are also known as Millennials or Generation Y.

 

Blooms: Understand
Difficulty: Medium
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-29 Demographic Trends

116. The Echo generation, who are the children of the baby boomers:
     A.were born between 1977 and 1994.
     B. are the market of the future.
     C. are also known as baby boomers.
     D. are immigrants.
     E. are over the age of 50.

Echo boomers, born between 1977 and 1994, are also known as Millennials or Generation Y.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-29 Demographic Trends

117. Which of the following characteristics is generally true of the millennial generation?
     A.They are determined to invest in their future.
     B. They are big contributors to their retirement savings plans.
     C. They have shopping habits very similar to the baby boom generation.
     D. They are frugal and conservative in their spending habits.
     E. They shop frequently and lavishly.

The Generation Y or millennial cohort generally shop frequently and spend lavishly on clothing, entertainment, and food.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-29 Demographic Trends

 

118. Approximately how many people immigrate to Canada each year?
     A.10,000
     B. 50,000
     C. 100,000
     D. 250,000
     E. 500,000

Yet another trend is the growing number of immigrants living in Canada, as 260,000 people immigrate to this country each year.

 

Blooms: Apply
Difficulty: Hard
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-29 Demographic Trends

119. All of the following have helped to create new opportunities abroad for small businesses, except:
     A. technological advances.
     B. an increase in service exports.
     C. free trade agreements.
     D. communication advances.
     E. deregulation.

Deregulation is concerned with creating new opportunities domestically.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-30 Technological and Economic Trends

120. Which industries will be likely to continue to grow as baby boomers age?
     A.Clothing and entertainment
     B. Travel, financial planning, and health care
     C. Cosmetics and food
     D. Clothing, travel, and cosmetics
     E. Recreation and sports equipment

Due to the retirement age of the Baby Boomer generation, which represents 30 percent of the American population, the travel, financial planning, and health care industries will continue to grow.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-29 Demographic Trends

 

121. Downsizing helps firms to become:
     A.more flexible.
     B. larger.
     C. less innovative.
     D. less resourceful.
     E. independent.

Since the 1980s, the buzzword in business has been to downsize, which makes a firm more flexible, resourceful, and innovative like a smaller business.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-07 Explain why many large businesses are trying to “think small.”
Topic: 05-31 Making Big Businesses Act “Small”

122. Some larger corporations have acted like small businesses from their inception with great success. Which of the following companies are cited in the text as examples?
     A.Nortel.
     B. Bell Canada.
     C. Air Canada.
     D. WestJet Airlines
     E. All of the choices are examples given in the text.

Air Canada was mentioned along with Nortel, Bell Canada, and WestJet.

 

Blooms: Apply
Difficulty: Medium
Learning Objective: 05-07 Explain why many large businesses are trying to “think small.”
Topic: 05-31 Making Big Businesses Act “Small”

123. Individuals who take responsibility for the development of innovations of any kind within larger organizations are called:
     A.crazy.
     B. entrepreneurs.
     C. inventors.
     D. intrapreneurs.
     E. engineers.

Intrapreneurs are similar to entrepreneurs in that they champion a new idea or innovation, but they do this within the construct of an established, larger organization.

 

Blooms: Remember
Difficulty: Medium
Learning Objective: 05-07 Explain why many large businesses are trying to “think small.”
Topic: 05-31 Making Big Businesses Act “Small”

 

 

Short Answer Questions

124. What is a small business?

Answers will vary

Feedback: Small business is defined in your textbook as any business that is independently owned and operated, does not dominate in its competitive area, and employs fewer than 500 people.

 

Blooms: Understand
Difficulty: Easy
Learning Objective: 05-01 Define entrepreneurship and small business.
Topic: 05-04 What Is a Small Business?

125. List some characteristics shared by many entrepreneurs.

Answers will vary

Feedback: Strong desire to act independently.
High need for achievement.
Willingness to take some risks.
Energetic.

 

Blooms: Remember
Difficulty: Easy
Learning Objective: 05-01 Define entrepreneurship and small business.
Topic: 05-03 Entrepreneurship Characteristics

 

126. How important is small business to the Canadian economy?

Answers will vary

Feedback: Small businesses are vital to the Canadian economy. More than 99 percent of all Canadian firms are classified as small businesses. Small businesses create most new jobs in Canada and provide significant opportunities for women and minorities.

 

Blooms: Understand
Difficulty: Medium
Learning Objective: 05-02 Investigate the importance of small business in the Canadian economy and why certain fields attract small business.
Topic: 05-05 The Role of Small Business in the Canadian Economy

127. What are some of the advantages of small-business ownership?

Answers will vary

Feedback: Independence is probably one of the leading reasons that entrepreneurs go into business for themselves. It costs less to start and maintain small businesses than larger businesses. Small businesses can be more flexible in adapting to changing market demands. Also, small businesses can focus their efforts on a few key customers to avoid competition from larger firms. They have the opportunity to develop an excellent reputation for quality and service.

 

Blooms: Understand
Difficulty: Medium
Learning Objective: 05-03 Specify the advantages of small-business ownership.
Topic: 05-07 Advantages of Small-Business Ownership

 

128. Why do small businesses have a high failure rate?

Answers will vary

Feedback: There are many reasons small businesses fail, but some of the major reasons include the inability to cope with growth, undercapitalization, and managerial inexperience or incompetence. Additional reasons include burdens imposed by government regulation, insufficient funds to withstand slow sales, and vulnerability to competition from larger companies.

 

Blooms: Understand
Difficulty: Medium
Learning Objective: 05-04 Summarize the disadvantages of small-business ownership, and analyze why many small businesses fail.
Topic: 05-19 High Failure Rates

129. What is a business plan and why is it important?

Answers will vary

Feedback: The key element of business success is a business plan. The business plan is a precise statement of the rationale for the business and a step-by-step explanation of how it will achieve its goals. The business plan should include an explanation of the business, an analysis of the competition, estimates of income and expenses, and other information.

 

Blooms: Understand
Difficulty: Medium
Learning Objective: 05-05 Describe how you go about starting a small business and what resources are needed.
Topic: 05-23 The Business Plan

 

130. Exemplify some Canadian companies that have been successful in tapping the huge potential of the echo generation.

Answers will vary

Feedback: Companies that have the most success with this group are ones that cater to the teens’ and young adults’ lifestyles. Some successful small businesses aimed at this market include Sylvan Learning Centre, a franchise that offers after-school tutoring, Alien Workshop, which designs and distributes skateboards and apparel, Burton Snowboards, a manufacturer of snowboards and accessories, and Femme Arsenal, which develops and distributes cosmetics.

 

Blooms: Understand
Difficulty: Hard
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-29 Demographic Trends

131. What demographic trends will have the most impact on small business in the future?

Answers will vary

Feedback: The aging baby boom generation (those born between 1946 and 1964) will provide opportunities in the travel, financial planning, and health care industries. The echo boom market (those born between 1977 and 1994) typically shops frequently and spends lavishly, creating opportunities for small businesses to service this lifestyle. Small businesses that specialize in ethnic products to offer bi- or multilingual employees may find great potential in the growing number of immigrants to Canada.

 

Blooms: Understand
Difficulty: Medium
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-29 Demographic Trends

 

132. What economic trends will have the most impact on small business in the future?

Answers will vary

Feedback: In recent years, economic turbulence has provided both opportunities and threats for small businesses. As large information technology companies had to recover from an economic slowdown and an oversupply of Internet infrastructure products, some smaller firms found new niche markets. Many small businesses are learning how to use the Internet to promote their businesses and sell products online.

 

Blooms: Understand
Difficulty: Medium
Learning Objective: 05-06 Evaluate the demographic, technological, and economic trends that are affecting the future of small business.
Topic: 05-29 Demographic Trends

133. Why would a big business “act small”?

Answers will vary

Feedback: The continuing success and competitiveness of small businesses through rapidly changing business conditions have caused many larger firms to take notice. More and more firms are emulating small businesses to improve their own bottom line. Some firms have done this through downsizing, while others have made their operating units function more like independent small businesses responsible for their own profits, losses, and resources.

 

Blooms: Understand
Difficulty: Medium
Learning Objective: 05-07 Explain why many large businesses are trying to “think small.”
Topic: 05-31 Making Big Businesses Act “Small”