Chapter 5

Question 1

Entrepreneurship

Answer 1

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

Question 2

Microentrepreneur

Answer 2

entrepreneurs who develop businesses with 5 or fewer employees

Question 3

Social Entrepreneurs

Answer 3

individuals who use entrepreneurship to address social problems

Question 4

Small Business

Answer 4

an independently owned and operated business that is not dominant in its competitive area and does not employ more than 500 people

Question 5

Small Business Administration (SBA)

Answer 5

an independent agency of the federal government that offers managerial and financial assistance to small businesses

Question 6

Sharing Economy (Gig Economy)

Answer 6

an economic model involving sharing of underutilized resources

Question 7

Undercapitalization

Answer 7

the lack of funds to operate a business normally

Question 8

Business Plan

Answer 8

a precise statement of the rational of the business and a step by step explanation on how it will achieve its goals

Question 9

Venture Capitalists

Answer 9

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

Question 10

Franchise

Answer 10

a license to sell another’s products or to use another’s name in business or both

Question 11

Franchiser

Answer 11

the company that sells the franchise

Question 12

Franchisee

Answer 12

the purchaser of the franchise

Question 13

Intrapreneurs

Answer 13

individuals in large firms who take responsibility for the development of innovations within the organization

Question 14

Retailers

Answer 14

retailers acquire goods from producers or wholesalers and sell them to customers.

Question 15

Wholesalers

Answer 15

provide both goods and services to producers and retailers

Question 16

High Technology

Answer 16

used to describe businesses that depend heavily on advanced scientific and engineering knowledge

Question 17

Successful traits of Entrepreneurs

Answer 17

1. Intuitive
2. Productive
3. Resourceful
4. Charismatic
5. Innovative
6. Risk-Taker
7. Persistent
8. Friendly

Question 18

Advantages of Small Business

Answer 18

1. Independence
2. Costs
3. Flexibility
4. Focus
5. Reputation

Question 19

Disadvantages of Small Business

Answer 19

1. High Stress
2. High Failure Rate
3. Undercapitalization
4. Managerial Inexperience
5. Inability to Cope with Growth

Question 20

Equity Financing

Answer 20

the owner uses real personal assets rather than borrowing from outside sources

Question 21

Collateral

Answer 21

a financial interest in the property or fixtures of the business, a guarantee payment of the debt

Question 22

Line of Credit

Answer 22

an agreement by which the financial institution promises to lend a business a predetermined sum on demand

Question 23

Bartering

Answer 23

a business trading their own products for the goods and services offered by other businesses

Question 24

Trade Credit

Answer 24

suppliers allow the business to take possession of the needed goods and services and pay them at a later date or in installments

Question 25

Common Advantages Franchisees report

Answer 25

1. Management training/support
2. Brand Name Appeal
3. Standardized quality of goods and services
4. National and Local advertising programs
5. Financial Assistance
6. Proven products and business formats
7. Centralized buying power
8. Site Selection
9. Greater chance of success

Question 26

Shortcomings Franchisee reported

Answer 26

1. Franchise fees and profit sharing with the franchiser
2. Strict adherence to standardized operations
3. Restrictions on purchasing
4. Limited product line
5. Possible Market saturation
6. Less freedom in business decisions