Question 1 

1. The area from which a small business expects to draw      customers over a reasonable time span is its:

  

trading area.

 

metropolitan statistical area.

 

enterprise zone.

 

incubator.

2 points   

Question 2 

1. A(n) ________ layout has the advantage of creating a      relaxed, friendly shopping atmosphere encouraging shoppers to linger and      increasing the number of impulse purchases.

  

free-form

 

grid

 

angled

 

boutique

2 points   

Question 3 

1. The type of business that does well when located near      competitors is:

  

one that has a unique product   line, dissimilar to that of its competitors.

 

one that sells high-priced   products that customers comparison shop for.

 

one whose location is part of its   trademark.

 

one located in an incubator.

2 points   

Question 4 

1. The best way to determine where to place merchandise,      what a store’s “hot” and “cold” spots are, is to:

  

conduct a kinesiology study.

 

hire a market research firm to   study your business.

 

conduct focus groups with former   customers.

 

simply observe customers in the   store.

2 points   

Question 5 

1. The secret to selecting the ideal location for a      business is:

  

the available labor pool for the   business.

 

knowing the customer and what is   convenient to them.

 

the tax rate of the local and   state governments.

 

the security of the area and the   services provided by the site to the business owner.

2 points   

Question 6 

1. The vendor certification process assumes:

  

all vendors are charging the same   prices.

 

the use of a cross-functional team   to conduct the evaluation.

 

the business owner has detailed   knowledge of the vendors.

 

vendors are publicly owned so   information can be gathered on each of them.

2 points   

Question 7 

1. When seeking suppliers, a small business owner should      use which of the following sources?

  

Competitors

 

The local telephone directory

 

The industry trade association

 

All of these

2 points   

Question 8 

1. A firm’s reorder point for an item takes into      consideration its ________, which is the difference between the time an      order is placed and the time it is actually received.

  

minimum level of stock allowable

 

EOQ

 

usage rate

 

lead time

2 points   

Question 9 

1. The small company’s purchasing plan is closely linked      to which of the other functional areas?

  

Marketing and sales

 

Finance and accounting

 

Production and engineering

 

All of the above

2 points   

Question 10 

1. A danger of an excessive investment in inventory for      the small business is:

  

excessive inventory taxes by local   and state government.

 

minimizing reordering costs.

 

creating too quick a turnover of   inventory.

 

tying up an excessive amount of   the firm’s capital.

2 points   

Question 11 

1. For most retailers and wholesalers, the investment in      ________ is the largest capital outlay next to payroll.

  

office equipment, computers, etc.

 

vehicles, automobiles and trucks

 

inventory

 

taxes and licensing fees

2 points   

Question 12 

1. Employee theft can be caused or encouraged by a number      of factors including:

  

physical breakdowns of security.

 

improper cash controls.

 

organizational atmosphere.

 

All of these

2 points   

Question 13 

1. A periodic physical inventory count:

  

is not necessary if the business   owner uses a perpetual inventory control system or has a computerized point   of sale (POS) terminal.

 

typically involves one employee   and is done weekly.

 

allows the owner to evaluate the   effectiveness and the accuracy of his/her inventory control system.

 

is not necessary if the business   owner uses an ABC inventory system.

2 points   

Question 14 

1. Combining ________ with a POS system gives a small      business owner a state-of-the-art checkout system and further extends the      abilities of the POS system in the information it provides the owner.

  

TQM

 

an EDI system

 

universal product code labels and   scanners

 

an ABC system

2 points   

Question 15 

1. The 80/20 rule suggests that business owners:

  

try to exercise control 80% of the   time over 20% of their inventory.

 

identify those inventory items   that represent the greatest value to the business and focus inventory control   efforts on them.

 

focus on the 80% of their   inventory that only produces 20% of their results in order to improve   performance.

 

try to earn 20% more out of the   80% of their inventory that isn’t producing.

2 points   

Question 16 

1. A ________ outlines the duties and responsibilities      associated with a job and the working conditions involved.

  

job analysis

 

job description

 

job specification

 

human resource plan

2 points   

Question 17 

1. When checking references, the small business owner:

  

can largely ignore the references   of professional job candidates.

 

should also talk with previous   employers, not just the references provided.

 

may only ask for confirmation of   employment dates, job title, and salary information.

 

is able to ask any question of the   reference to find about things he/she could not ask the candidate.

2 points   

Question 18 

1. Teams can be helped to succeed by:

  

placing a few underperformers on   the team to minimize internal conflict.

 

forming teams around natural work   flows, giving them specific tasks.

 

keeping pay based on individual   effort.

 

not permitting teams’ involvement   in the assessment of their own performance.

2 points   

Question 19 

1. If a company is to succeed, a leader must perform four      vital tasks which include:

  

knowing what to do.

 

motivate workers to higher levels   of performance.

 

knowing how to do.

 

wanting to do something.

2 points   

Question 20 

1. A motivational tool that also helps to guide      performance and lets the owner know that his/her company is accomplishing      its operational goals is:

  

benchmarking.

 

feedback.

 

job redesign.

 

a human resource audit.

2 points   

Question 21 

1. While a large percentage of business founders plan to      pass on their businesses, few create management succession plans because:

  

they don’t know how to do it.

 

they are reluctant to let go of   the business.

 

they can’t afford the attorneys’   and accountants’ fees.

 

they don’t feel they need one   because they know which child will assume management of the business.

2 points   

Question 22 

1. ________ is an essential quality for a successful      family business but it can also become a barrier to change. When it      provides a foundation, it works well, when it restricts the future, it      becomes a barrier.

  

Shared power

 

Shared values

 

Tradition

 

Family behavior

2 points   

Question 23 

1. ________ allow(s) employees and/or managers (that is,      the future owners) to purchase the business gradually, which frees up      enough cash to finance the venture’s future growth.

  

A sale for cash plus a note

 

Leveraged buyouts (LBOs)

 

Employee stock ownership plans   (ESOPs)

 

Selling to insiders

2 points   

Question 24 

1. A business founder relying on a lifetime giving      strategy to minimize the taxes on the estate she is passing on to her son      can give him a maximum gift of ________ in company stock each year, tax      exempt.

  

$5,000

 

$14,000

 

$25,000

 

$100,000

2 points   

Question 25 

1. Small business owners can make a number of mistakes in      their management succession plan including:

  

naming a successor too early.

 

having another manager in the   company mentor the successor.

 

assuming his/her children want   control of the business.

 

All of these

2 points   

Question 26 

1. The ________ requires lenders and sellers who extend      credit to disclose fully the terms and conditions of credit arrangements      to enable consumers to “shop around.”

  

Fair Credit Reporting Act

 

Truth-In-Lending Act

 

Consumer Product Safety Commission

 

Equal Credit Opportunity Act

2 points   

Question 27 

1. In most cases dealing with the issue of consideration,      courts:

  

still consider a promise binding   even if made without a consideration.

 

do not evaluate the adequacy of   the consideration.

 

consider offers of “love and   affection” to be valuable consideration.

 

weigh the value of the   consideration in ruling on the validity of the contract.

2 points   

Question 28 

1. Which of the following phrases is sufficient to      disclaim an implied sales warranty?

  

“No warranties”

 

“Seller makes no warranties   on this product whatsoever”

 

“As is”

 

None of the above. A merchant   cannot disclaim sales warranties.

2 points   

Question 29 

1. To have an agreement, a contract must have:

  

a promise by one party to do   something in the future.

 

the ability to contract.

 

an intention to be bound by the   contract.

 

an offer and an acceptance.

2 points   

Question 30 

1. The owner of a small auto repair shop knowingly      installs a used water pump in your car and tells you it is “brand      new.” This is:

  

fraud.

 

duress.

 

innocent misrepresentation.

 

breach of contract.