EEM QUIZ-1 1.

After reading the following four scenarios, select the example that does NOT describe an entrepreneur. C a. After being a carpenter for a few years, a woman comes up with the idea of manufacturing flower window boxes. b. A woman who enjoys cooking and entertaining in her home decides to start a cupcake bakery. c. An environmental engineer involved in top-secret research makes breakthrough discoveries that would advance the frontiers of his field. He has, however, no interest in identifying the practical uses of his findings. d. A retired national park warden purchases horses to start offering tours of wilderness areas. 2. Individuals who create something new inside an existing company instead of through the route of founding a new venture. B a. Nonproprietary thinkers. b. Intrapreneurs. c. Inventors. d. Traditional entrepreneurs. 3. Which factors must be understood in order to understand the entrepreneurial process? D a. The economic, technological, and social conditions from which opportunities rise. b. The people who recognize technological, economic, and social conditions from which opportunities rise. c. The business techniques and legal structures used to develop opportunities. d. All of the above. 4. Full understanding of entrepreneurship can be gained only through careful consideration of a. the socio-economic considerations B b. macro and micro approaches. c. the technological considerations d. microeconomics. 5. There are five major phases of the entrepreneurship process. Which of the following is NOT one of those five? D a. Recognition of an opportunity. b. Deciding to proceed and assembling the essential resources. c. Launching a new venture. d. Socio-economic impact analysis. 6. Which variables play a role in the entrepreneurial process? D a. Societal-level variables. b. Individual-level variables. . c. Group-level variables. d. All of the above

7. The text lists several means of acquiring knowledge. Of the following, which is one of the principal means? B a. Transactional b. Observation. c. Participation. d. None of the above are the principal means of acquiring knowledge. 8. Venture capital can provide advantages to entrepreneurs in which of the following ways? C a. It serves as a small source of money for high-risk business. b. It can guarantee that the business will be successful. c. It can add credibility to a new business. d. None of the above are advantages of venture capital to entrepreneurs. 9. Which of the following is a common problem that investors have when they invest in a new business started by an entrepreneur? B a. Investors have no significant problem since they have all the information that the entrepreneurs have. b. The existence of adverse traction. c. The existence of positive selection. d. Entrepreneurs might have information that investors dont have and the entrepreneurs can use this to obtain investments that they might use for their own benefit. 10. An investor is considering two new businesses but wants to invest in only one. The investor is going to decide which one, based upon an assessment of the entrepreneurs in each business. However, the investor seems to be unable to distinguish between the two entrepreneurs in terms of which one has the desired qualities and which one doesnt. This is known as A a. adverse selection. b. critical selection. c. syndication. d. indistinguishable syndrome. 11. In starting a new business, which of the following questions is the least important for an entrepreneur to ask? D a. How much money do I need? b. What are the potential sources of capital? c. Is there a need for the product that I intend to produce? d. What should the corporate stock exchange symbol be? 12. Which type of analysis can be used by an entrepreneur to help determine how much money will be needed to start a new business? C a. Adverse selection reports. b. Convertible securities. c. Breakeven analysis. d. Asset-based financing reports.

15. Which of the following statements is true? A a. Proforma income statements estimate the profit and loss for the new business. b. Proforma income statements show the financial structure of the business. c. Proforma income statements alone allow investors to conduct ratio analysis. d. None of the above are true. 16. Assume that an investor will provide money for your new business only if she can redeem her stock and obtain her equity investment on demand. This is known as B a. proforma right. b. mandatory redemption right. c. geographical investing right. d. voting right. 17. What is the most commonly recommended schedule for preparing an income statement for a new business? B a. Weekly. b. Monthly. c. Yearly. d. Every two years. 18. Several investors have contributed relatively small amounts of money to form a larger sum of money to invest in numerous businesses. This is known as C a. geographically localized investing. b. accurate profit margin analysis. c. syndication. d. None of the above. 19. Which of the following can be used to estimate the amount of cash that a business will need over a certain period of time? a. Cash flow statement. b. Breakeven analysis. c. Equity statement. d. Capital ownership statement. 20. Which of the following is not a source of cash flow? a. Depreciation. b. Increases in accounts receivable. c. Revenues from sales. d. Increases in accounts payable. 21. Which one of the following types of debt is the least common for new ventures that do obtain debt financing? a. Asset-based financing b. Supplier credit.

c. Unsecured credit. d. Guaranteed Financing 22. An investor is performing due diligence before investing in a new business. What does that mean? a. The investor is checking out essentially all aspects of the new business to see if they are reasonable and to see if everything is in order. b. The investor is gambling at a casino in order to raise the money in due time to invest in the new business. c. The investor is hiring an attorney. d. All of the above are true. 23. Which of the following is NOT a reason why investors in new ventures demand high rates of return? a. New ventures are extremely risky. b. Investors in new ventures are able to diversify their risks fairly well. c. Entrepreneurs have information about new ventures that they dont share with investors, allowing them an unfair advantage. d. Entrepreneurs are often overoptimistic when they project the future prospects of their new ventures. 24. Assume that an investor will provide money for you to start a business only if you will agree to giving the investor the right to approve any purchases of land. This is known as a a. proforma statement. b. breakeven statement. c. mandatory redemption. d. covenant. 25. Which of the following must an entrepreneur address in preparing to write a business plan? a. How to produce the product. b. Compare the product to those of existing competitors. c. The price to set on the product. d. All of the above are issues that need to be addressed. 26. While all parts of a business plan are important, in which part does the entrepreneur have the opportunity to stimulate interest in other people and make them want to learn more about the venture? a. Financial section. b. Executive summary. c. Background and purpose part. d. None of the above. 27. The executive summary part of the business plan should NOT a. be focused mostly on finances. b. provide a clear overview of what the venture is about. c. be at least 3 to 4 pages long.

d. contain an elevator pitch 28. I am writing a business plan for my new business. In which part should I explain the benefits of a new product? a. Marketing section. b. Risk factors section. c. Development, production, and location section. d. Background and purpose section. 29. Investors will be especially interested in which of the following information? a. Competing products. b. The size of the markets. c. Financial statements d. All of the above. 30. A small business owner is preparing a document in which the projected cash on hand at the end of year 1 is stated. What document is the business owner preparing? a. Proforma balance sheet. b. Cash flow statement. c. Proforma income statement. d. None of the above. 31. In which section of the business plan would you normally find the plan for eventually replacing the founder(s)? a. Management Team. b. Compensation strategies. c. Management succession. d. Human Resources. 32. The authors of the textbook discuss seven deadly sins related to the acceptance of a business plan by investors. Which of the following is NOT a deadly sin? a. The plan appears to be poorly prepared. b. The plan is too professional looking. c. The executive summary is five pages long. d. Financial projections are unrealistic. 33. Researchers suggest which of the following to deal with, and lower, the levels of anxiety? a. Emphasize the downside of stressful situations. b. View stressful situations as a challenge or opportunity to rise to the occasion. c. Ignore the stressful situation. d. All of the above are true. 34. Assume that investors have rejected your business plan. What should you do? a. Try to find out why the proposal was rejected.

b. Find out if there were any aspects of the plan and presentation that the potential investor found to be strong or positive. c. Go back to the drawing board and rework the plan. d. All of the above. 35. You are helping an entrepreneur to write a business plan. Which of the following is good advice? a. The plan need not look professional. Investors will understand that a business just starting up cant put a lot of money into printing the plan. b. Be very optimistic in the finance section. Base the proforma income statement on the highest possible numbers for revenue and profit in order to attract investors. c. Keep the length of the overall plan brief but complete; perhaps not over 50 pages. d. Be sure to have a complete executive summary of about 6 pages or more. 36. Break-even analysis refers to a. the level of sales (dollar value and number of products) needed to cover all costs. b. the market share required to compete effectively. c. cash flow. d. the number of employees required to sustain operations. 37. Which of the following is included in a proforma income statement? a. Amount of profit. b. Amount of equity. c. Value of assets invested. d. Cash flow. 38. You are getting ready to present your business plan to potential investors. You should a. only focus on delivery. b. discourage questions from the audience. c. show enthusiasm, but stay real. d. not rehearse. That will make it sound too canned. 39. Which of the following is a NOT an example of a milestone? a. The completion of a prototype. b. First sale. c. The total amount of risk involved in a certain decision. d. Sales of $1,000,000. 40. Innovation is the process by which entrepreneurs convert opportunities into marketable ideas. True False 41. Entrepreneurs are always looking for unique opportunities to fill needs or wants. True

False 42. Truly creative people are always geniuses. True False 43. Creative people always exhibit a strong need for group approval. True False 44. Only new patterns of thinking will lead to new ideas and innovation. True False 45. a. b. c. d. 46. a. b. c. d. 47. a. b. c. d. 48. a. b. c. d. 49. a. b. c. d. The incubation process involves which of the following? Working harder. Letting the subconscious work. Talking with friends. Changing jobs. Which of the following is a characteristic of creative people? Bright but not necessarily brilliant. Poor image of themselves. Rigid and dogmatic. Unmotivated by challenging problems. Security hunting means: using probability and stereotypes to minimize risk. finding a permanent source of venture capital. sticking firmly to decisions. installing a security system. Relying on abstractions can: limit one's perception of reality. do nothing detrimental. help in making correct choices. add a mathematical element to the idea. Which of the following statements is true? Successful innovations are clear and focused. Successful innovations are directed toward unclear applications. Most successful innovations are detailed and ambiguous. Successful innovations are profit motivated.