Chapter 2: Nature of a Small Business

Question 1

According to the ______ approach, small businesses are independently owned and which is not dominant in its field of operation.

Answer 1

Market share approach

Question 2

According to the _____ approach, a small business has total assets that fall within a certain bracket.

Answer 2

Total assets approach

Question 3

One of the disadvantages of the Total Assets approach is that asset values are affected by ______

Answer 3

Inflation

Question 4

Type of small business that is involved in the conversion of raw materials into products needed by society

Answer 4

Manufacturing

Question 5

Type of small business that provides services in one way or another

Answer 5

Service

Question 6

Service Business classifications:

Answer 6

1. Business services
2. Personal services
3. Repair services
4. Entertainment and recreation
5. Hotels and motels
6. Education services

Question 7

Type of small business that refers to business activities that sell to retailers and other merchants

However, they do not sell in large amounts to final consumers

Answer 7

Wholesaling

Question 8

Type of small business that covers all activities involved in the sale of goods/services to the final consumers

Answer 8

Retailing

Question 9

Type of small business that are engaged in the construction of buildings whether for private individuals or the government

Answer 9

General Construction Firms

Question 10

Characteristcs of Small Business:

Answer 10

1. Independent management
2. Small capital requirement
3. Mostly local operation

Question 11

Economic Importance of Small Business:

Answer 11

1. Providers of economic opportunities for entrepreneurs
2. Providers of products and services to consumers
3. Suppliers of products and services to other businesses
4. Distributors of products and services of other businesses
5. Supporters of government
6. Providers of employment

Question 12

Advantages of being a Small Business Owner:

Answer 12

1. Opportunity to gain control over your destiny
2. Opportunity to reach full potential
3. Opportunity to reap unlimited profits
4. Opportunity to make a contribution to society and receive recognition for efforts

Question 13

Disadvantages of being an SBO:

Answer 13

1. Uncertainty of income
2. Risk of losing your entire capital investment
3. Lower quality of life until business is established
4. Complete responsibility
5. Having to serve undesirable customers
6. Paperwork and other chores
7. Long hours and demanding work conditions