TEST BANKS For Family Practice Guidelines, 6th Edition
by Jill C. Cash; Cheryl A. Glass
Assume that you can sell a new product at $5.00 per unit. Variable costs are $3.00
per unit, and fixed costs are $20,000. What will be the profit before taxes if you sell
12,000 units next year? - ANSWER:$4,000
You have the opportunity of making a $5,000 investment. The outcomes one year
from now will be either $4,500 or $6,000, with an equal chance of either outcome
occurring. What is the expected outcome? - ANSWER:$5,250
The owner-debtholder conflict is the divergence of the owners' and lenders' self-
interests as the firm gets close to going "public." - ANSWER:False
Which stage in the venture life cycle is characterized by creating and building value,
obtaining additional financing, and examining opportunities? - ANSWER:rapid-
growth stage
Which of the following are sources of entrepreneurial opportunities? - ANSWER:a.
societal, demographic, and technological trends; crises and "bubbles"; and emerging
The "dot.com" or Internet bubble burst in 2008. - ANSWER:False
The gig economy involves individuals working as independent contractors and
accepting short-term jobs or assignments, rather than being full-time employees. -
ANSWER:True
You are considering investing in two independent projects: A and B. Project A
requires an initial investment of $12,000. In one year, there is a 30% chance of a
$10,500 return; a 50% chance of a $12,500 return; and a 20% chance of a $14,500
return. Project B requires an initial investment of $1,000. In one year, there is a 25%
chance of a $950 return; a 25% chance of a $1,000 return; and a 50% chance of a
$1,200 return. If you require a 7% return on your investment after one year, you
should: - ANSWER:accept Project B and reject Project A
A market-oriented economic system provides an environment that fosters the
formation, development, and transformation of ideas into useful products and
services. - ANSWER:True
Entrepreneurial opportunities can occur only when there are societal changes in the
world. - ANSWER:False
The last three stages of a successful venture's life cycle occur in the following order: -
ANSWER:survival, rapid-growth, early-maturity
,The type of financing that occurs during the survival stage of a venture's life cycle is
typically referred to as: - ANSWER:first-round financing
Around two-thirds of new employers survive at least two years, and only about one-
half survive for at least five years. - ANSWER:True
Entrepreneurship is the process of changing ideas into commercial opportunities and
creating value. - ANSWER:True
Maximizing the value of the venture for its owners is the common financial goal of
which of the following? - ANSWER:the entrepreneur and the venture equity
investors
Which of the following advise and assist corporations on the type, timing, and costs
of issuing new debt and equity securities? - ANSWER:investment banking firms
Financial distress occurs when cash flow is insufficient to meet current debt
obligations. - ANSWER:False
Mark Twain once said, "I was always able to see an opportunity before it became
one." - ANSWER:False
E-commerce refers to: - ANSWER:electronic commerce
Nine principles of entrepreneurial finance are identified and explored in this
textbook. - ANSWER:False
Obtaining bank loans, issuing bonds, and issuing stock is characteristic of which type
of financing during a venture's life cycle? - ANSWER:seasoned financing
About what percent of all new employers in the United States survive for at least
two years? - ANSWER:two-thirds
Successful entrepreneurs do not exhibit which of the following traits? - ANSWER:are
pessimistic about the future
A study of the U.S. Census Bureau's Characteristics of Business Owners database
suggests that about two-thirds of closed businesses were successful at closure. -
ANSWER:False
Democratic capitalism exists where a country or state organized as a democracy
adopts a capitalistic economic system. - ANSWER:True
Fads are not predictable, have short lives, and do not involve macro changes. -
ANSWER:True
, The time value of money is an important component of the rent one pays for using
someone else's financial capital. - ANSWER:True
Founder and venture investor shares that are sold to the public after the initial public
offering to the public is called a: - ANSWER:secondary stock offering
One principle of entrepreneurial finance is "risk and expected reward go hand in
hand." - ANSWER:True
Free cash flows are adjusted for risk and the time value of money when used to
calculate the value of a venture. - ANSWER:True
The entrepreneurial process involves: developing opportunities, gathering resources,
and managing and building operations, all with the goal of creating value. -
ANSWER:True
Which of the following is not a source of entrepreneurial opportunities referred to in
this textbook? - ANSWER:political changes
The type of financing that occurs during the development stage of a venture's life
cycle is typically referred to as: - ANSWER:seed financing
Disruptive innovation is an innovation that creates a new market or network that
disrupts and displaces an existing market or network. - ANSWER:True
Best practices of high-growth, high-performance firms applied in the marketing
practices area include "developing new products or services that are considered to
be the best." - ANSWER:True
A high asset intensity implies a large investment in fixed assets and/or net working
capital is needed to support revenue growth - ANSWER:True
A venture's value to its owners is determined by the: - ANSWER:size and timing of its
future free cash flows (to equity)
typical business plan includes all of the following sections except:
a.risk and opportunities
b.initial public offering information
c.financial plans and projections
d.management team - ANSWER:initial public offering information
When moving from entrepreneurial opportunities to new businesses, products, or
services, which of the following is not considered a component?
a.feasibility
b.harvest of venture
c.ideas
d.business plan - ANSWER:b.harvest of venture
by Jill C. Cash; Cheryl A. Glass
Assume that you can sell a new product at $5.00 per unit. Variable costs are $3.00
per unit, and fixed costs are $20,000. What will be the profit before taxes if you sell
12,000 units next year? - ANSWER:$4,000
You have the opportunity of making a $5,000 investment. The outcomes one year
from now will be either $4,500 or $6,000, with an equal chance of either outcome
occurring. What is the expected outcome? - ANSWER:$5,250
The owner-debtholder conflict is the divergence of the owners' and lenders' self-
interests as the firm gets close to going "public." - ANSWER:False
Which stage in the venture life cycle is characterized by creating and building value,
obtaining additional financing, and examining opportunities? - ANSWER:rapid-
growth stage
Which of the following are sources of entrepreneurial opportunities? - ANSWER:a.
societal, demographic, and technological trends; crises and "bubbles"; and emerging
The "dot.com" or Internet bubble burst in 2008. - ANSWER:False
The gig economy involves individuals working as independent contractors and
accepting short-term jobs or assignments, rather than being full-time employees. -
ANSWER:True
You are considering investing in two independent projects: A and B. Project A
requires an initial investment of $12,000. In one year, there is a 30% chance of a
$10,500 return; a 50% chance of a $12,500 return; and a 20% chance of a $14,500
return. Project B requires an initial investment of $1,000. In one year, there is a 25%
chance of a $950 return; a 25% chance of a $1,000 return; and a 50% chance of a
$1,200 return. If you require a 7% return on your investment after one year, you
should: - ANSWER:accept Project B and reject Project A
A market-oriented economic system provides an environment that fosters the
formation, development, and transformation of ideas into useful products and
services. - ANSWER:True
Entrepreneurial opportunities can occur only when there are societal changes in the
world. - ANSWER:False
The last three stages of a successful venture's life cycle occur in the following order: -
ANSWER:survival, rapid-growth, early-maturity
,The type of financing that occurs during the survival stage of a venture's life cycle is
typically referred to as: - ANSWER:first-round financing
Around two-thirds of new employers survive at least two years, and only about one-
half survive for at least five years. - ANSWER:True
Entrepreneurship is the process of changing ideas into commercial opportunities and
creating value. - ANSWER:True
Maximizing the value of the venture for its owners is the common financial goal of
which of the following? - ANSWER:the entrepreneur and the venture equity
investors
Which of the following advise and assist corporations on the type, timing, and costs
of issuing new debt and equity securities? - ANSWER:investment banking firms
Financial distress occurs when cash flow is insufficient to meet current debt
obligations. - ANSWER:False
Mark Twain once said, "I was always able to see an opportunity before it became
one." - ANSWER:False
E-commerce refers to: - ANSWER:electronic commerce
Nine principles of entrepreneurial finance are identified and explored in this
textbook. - ANSWER:False
Obtaining bank loans, issuing bonds, and issuing stock is characteristic of which type
of financing during a venture's life cycle? - ANSWER:seasoned financing
About what percent of all new employers in the United States survive for at least
two years? - ANSWER:two-thirds
Successful entrepreneurs do not exhibit which of the following traits? - ANSWER:are
pessimistic about the future
A study of the U.S. Census Bureau's Characteristics of Business Owners database
suggests that about two-thirds of closed businesses were successful at closure. -
ANSWER:False
Democratic capitalism exists where a country or state organized as a democracy
adopts a capitalistic economic system. - ANSWER:True
Fads are not predictable, have short lives, and do not involve macro changes. -
ANSWER:True
, The time value of money is an important component of the rent one pays for using
someone else's financial capital. - ANSWER:True
Founder and venture investor shares that are sold to the public after the initial public
offering to the public is called a: - ANSWER:secondary stock offering
One principle of entrepreneurial finance is "risk and expected reward go hand in
hand." - ANSWER:True
Free cash flows are adjusted for risk and the time value of money when used to
calculate the value of a venture. - ANSWER:True
The entrepreneurial process involves: developing opportunities, gathering resources,
and managing and building operations, all with the goal of creating value. -
ANSWER:True
Which of the following is not a source of entrepreneurial opportunities referred to in
this textbook? - ANSWER:political changes
The type of financing that occurs during the development stage of a venture's life
cycle is typically referred to as: - ANSWER:seed financing
Disruptive innovation is an innovation that creates a new market or network that
disrupts and displaces an existing market or network. - ANSWER:True
Best practices of high-growth, high-performance firms applied in the marketing
practices area include "developing new products or services that are considered to
be the best." - ANSWER:True
A high asset intensity implies a large investment in fixed assets and/or net working
capital is needed to support revenue growth - ANSWER:True
A venture's value to its owners is determined by the: - ANSWER:size and timing of its
future free cash flows (to equity)
typical business plan includes all of the following sections except:
a.risk and opportunities
b.initial public offering information
c.financial plans and projections
d.management team - ANSWER:initial public offering information
When moving from entrepreneurial opportunities to new businesses, products, or
services, which of the following is not considered a component?
a.feasibility
b.harvest of venture
c.ideas
d.business plan - ANSWER:b.harvest of venture
