Exam 2

Question 1

Distinctive, unwritten, informal code of conduct that governs the behavior, attitudes, relationships, and style of an organization.

Answer 1

company culture

Question 2

Two types:

1) sell to outsiders
2) sell to insiders
- leveraged buyout
- employee stock ownership plan

Answer 2

exit strategy

Question 3

Used to purchase the permanent or fixed assets of the business (e.g., buildings, land, equipment, and others).

Answer 3

fixed capital

Question 4

used to support the small company’s normal short-term operations (e.g., buy inventory, pay bills, wages, or salaries, and others).

Answer 4

working capital

Question 5

used to help the small business expand or change its primary direction.

Answer 5

growth capital

Question 6

Represents the personal investment of the owner(s) in the business. It is called risk capital because investors assume the risk of losing their money if the business fails. Does not have to be repaid with interest like a loan does. Means that an entrepreneur must give up some ownership in the company to outside investors.

Answer 6

equity capital

Question 7

Financing that a small business owner has secured. Must be repaid with interest. Is carried as a liability on the company’s balance sheet. Can be just as difficult to secure as equity financing, even though sources of debt financing are more numerous. Can be expensive, especially for small companies, because of the risk/ return tradeoff.

Answer 7

debt capital

Question 8

Taps the power of social networking and allows entrepreneurs to post their elevator pitches and proposed investment terms on specialized web sites and raise money from ordinary people who invest as little as $100.

Answer 8

crowd funding

Question 9

Wealthy individuals who invest in emerging entrepreneurial companies in exchange for equity stakes. An excellent source for businesses needing relatively small amounts of capital. Willing to invest in the early stages of a business.

Answer 9

angel investors

Question 10

Private, for profit organizations that purchase equity positions in young businesses with high growth and profit potential.

Answer 10

venture capital

Question 11

Federal government sponsored financing option for entrepreneurs.

Answer 11

SBA - Small Business administration

Question 12

Initial public offering. When a company raises capital by selling shares of its stock to the public for the first time.

Answer 12

IPO

Question 13

The percentage of visitors to a site who view a single page and leave without viewing other pages.

Answer 13

bounce rate

Question 14

The amount it costs to generate a purchase (or a customer registration).

Answer 14

cost per acquisition

Question 15

The percentage of shoppers who place at least one item in a shopping cart but never complete the transaction.

Answer 15

cart abandonment rate

Question 16

characteristics of effective leaders

Answer 16

• create a set of values and beliefs for employees and passionately pursue them.
• establish a culture of ethics
• define and then constantly reinforce the vision they have for the company
• develop a strategic plan that gives the company a competitive advantage
• respect and support their employees.
• set the example for their employees
• create a climate of trust in the organization.
• build credibility with their employees.
• Focus efforts on challenging and driving toward those goals,.
• provide the resources employees need to achieve their goals.
• communicate with their employees.
• value the diversity of their workers.
• celebrate their workers successes.
• are willing to take risks.
• encourage creativity among their workers.
• maintain a sense of humor.
• create an environment in which people have the motivation, the training, and the freedom to achieve the goals they have set
• create a work climate that encourages maximum performance
• become a catalyst for change when needed
• develop leadership talent
• keep their eyes on the horizon

Question 17

what causes a company culture to be a positive culture?

Answer 17

• respect for work and life balance
• sense of purpose
• sense of fun
• engagement
• diversity
• integrity
• participative management
• learning environment

Question 18

importance of family businesses to our economy

Answer 18

• make up more than 80% of US businesses
• account for 57% of US GDP
• employ 60% of private sector
• comprise 35% of the fortune 500
• created 78% of the net new jobs in last 20 years

Question 19

why family businesses struggle with succession

Answer 19

• only 30% survive into the second generation
• of those that survive, 12% make it to the third
• only 3% make it fourth and beyond.
• 81% of founders intend to pass to their children

Question 20

sources of financing for entrepreneurs

Answer 20

• personal savings
• friends and family members
• crowd funding
• angels
• partners
• venture capital companies
• corporate venture capital

Question 21

why small loan requests often get rejected

Answer 21

1) “our bank doesn’t make small business loans.”
2) “I don’t know enough about you or your business.”
3) “You haven’t told me why you need the money.”
4) “Your numbers don’t support your loan request.
5) “You don’t have enough collateral. “
6) “Your business does not support the loan on its own.”

Question 22

advantages of going public

Answer 22

• ability to raise large amounts of capital
• improved corporate image
• improved access to future financing
• attracting and retaining key employees
• using stock for acquisitions
• listing on a stock exchange

Question 23

disadvantages of going public

Answer 23

• Dilution of founder’s ownership
• loss of control
• loss of privacy
• reporting to the SEC
• filing expenses
• accountability to shareholders
• pressure for short-term performance
• timing

Question 24

benefits of e-comerce/m-commerce

Answer 24

• opportunity to increase revenues and profits
• ability to expand into global markets
• ability to remain open all the time
• capacity to use the internet’s interactive nature to enhance customer service
• power to educate and inform
• ability to lower the cost of doing business
• ability to spot new business opportunities and capitalize on them
• ability to grow faster
• power to track sales results

Question 25

myths of e-commerce

Answer 25

1) if I launch a site, customers will flock to it.
2) online customers are easy to please
3) making money on the web is easy
4) privacy is not important issue
5) i don’t need a strategy
6) The most important part of an e-commerce effort is technology
7) Customer service is not important
8) Flashy websites are better than simple sites.
9) It’s what’s up front that counts
10) It’s too late to get on the web

Question 26

strategies for success with e-commerce

Answer 26

• focus on a market niche
• Develop a community of customers with similar interests.
• attract visitors by giving away freebies
  make creative use of e-mail, but avoid becoming a “spammer”
• make sure your website says “credibility”
• your website isn’t about your company, it’s an extension of your company!
• make the most of the web’s global reach
• use enterprise tools to attract and retain customers
• promote your site online and offline
• develop an effective search engine optimization