Small Business Management Exam I

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Small Business Management Exam I
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2012-09-17 09:09:32
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Small Business Management Exam I
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  1. A small business is one that is?
    1. Actively managed by the owners

    2. Highly personalized

    3.  Largely local in its area of operations

    4. Largely dependent on internal sources of capital

    5. Independently owned and operated and does not dominate the field of operation
  2. Small busness based on number of employees
    Mining/Manufacturing - 500-1500

    Wholesale - upto 500

    Retail - 25-100

    Service - 25-300
  3. Manufacturing business
    Business that makes finished goods from raw materials by hand or machinery.
  4. Merchandising business
    Business that purchases finished goods for resale.
  5. Service business
    Business that provides a service instead of a product.
  6. Interdependence of business
    Small businesses are essential to enable a few large ones to concentrate on those economic activities where their efforts are more effective.

    S.B. creates 52% of all private employment and 51% of the nations total output  of goods & services (as of 2002 data.
  7. Stimulating economic competition
    Economic developement of the U.S. has resulted from the efforts of small business
  8. Innovation
    Individuals and small businesses provide the major source of new ideas, inventions, and innovations
  9. A successful going concern has demonstrated?
    Ability to attract customers

    Ability to control costs

    Ability to Make profit

    They have a track record under actual market conditions
  10. Causes of business failure
    Neglect - 3.9%

    Disaster - 4.6%

    Fraud - 2.2%

    Economic causes - 63.5%

    Financial causes - 24.1%

    Strategy causes - 1.0%
  11. Tangible asset
    A physical asset that possesses genuine value

    A/R, inventories, Pre-paid Exp., Building, Fixtures, Supplies, Etc.
  12. Intangible asset
    A type of asset that is not able to be physically touched but is retained by a small business because of its genuine value appeal.

    Goodwill

    Franchisees or restricted representation

    Leases and other contracts

    Patents, copyrights, and trademarks
  13. Plans
    Written statements of actions and decisions that will lead the company to its goals or mission
  14. Long range planning
    over 10 years
  15. Intermediate planning
    2-9 years
  16. Short-term planning
    1 year or less
  17. Management Activities
    Planning

    Organizing

    Motivating

    Directing

    Controlling
  18. Planning
    that function of determining in advance what needs to be accomplished in order to achieve a particular goal
  19. Organizing
    To arrange or constitute in interdependent parts, each having a specific function or relation with respect to the whole

    Thech work is arranged and distributed among members of the firm
  20. Motivating
    Energizing, chenneling and sustaining people's behavior
  21. Directing
    Actuating
    Regulating the activities or course of activities of an organization

    To guide and/or supervise the activities of an organization

    Refers to those activities which encourage subordinates to work toward the achievement of the company's goals
  22. Controlling
    Evaluating
     A management function which compares organizational and individual performance with predetermined standards or expected results
  23. Management skills
    technical skills

    Human skills

    Conceptual skills
  24. Technical Skills
    Abilities necessary to carry out a particular task
  25. Human skills
    Ability to work with, motivate, and direct individuals toward a common goal
  26. Conceptual skills
    Ability to understand the degree of complexity in a given situation and to reduce that complexity to a level at which specific courses of action can be derived
  27. Organizational goals two main functions
    Goals affect the way the organization relates to the environment, serving to clarify the connection between organizational activitiies and other organizations, groups, and individuals in the environment

    Goals guide the internal activities of the organization, providing employees knowledge of task scope, decision guidelines, methods of motivations, performance criteria, and a retional for organizing
  28. Reasons for selling a business
    Old age, illness

    Desire to relocate to a different part of the country

    Desire to accept a position with another company

    Owner about to lose a contract or franchise

    Proposed changes in road routes or zoning
  29. Small Business Adminitstration
    Principal government agency concerned with the financing, operation, and management of a small business
  30. Small Business Administration Act
    Established in 1953 to combat growing monopolies by the larger businesses

    To encourage competition by small business as a basis of free enterprise
  31. Market Value approach
    Valuation based upon sale of similar business

    •      1. Depends upon similarity of business
    •      2. recent sales of like businesses
    •      3. Real estate appraisals rely extensively on this method
  32. Replacement cost approach
    Asset-valuation that relies on replacement value of the business

    •      1. Attempts to find replacement value of tangible assets being purchased
    •      2. Starts with recent balance sheets
    •      3. method usually ignores intangible assets
    •      4. Difficutl if small business has poor records; need good accounting recourds
  33. Liquidation value approach
    Asset based method that requires the salvage value of the business's assets

    •     1. Provides a "minimum" value - worst case scenario
    •     2. Worst method for the seller
  34. Earnings approach
    Valuation based on the business's past earnings record

    •     1. Centers on estimating the amount of potential income that may be produced by the business
    •     2. Capitalization of the average earning of the company (usually 5 year average).
    •     3. The average annual earnings are divided by expected rate of return
    •     4. Funeral home POR is 12.9% before taxes
  35. Angels
    Private investors who are willing to supply financing to new and/or risky small venture startups
  36. Artisan entrepreneur
    A person with primarily technical skiills and little business knowledge who starts a business
  37. Consumerism
    The emphasis placed on providing to customers products and services that are safe, reliable, and honestly advertised

    Also, a social movement that seeks to strengthen the rights of consumers relative to sellers
  38. Copyright
    The registered right of a creator to reproduce, publish, and sell the work which is the product of the intelligence and skill of that person

    Offer best protection for books, periodicals, and orally presented materials
  39. Corporate refugees
    Those individuals who flee the bureaucratic environment of big business by going into business for themselves
  40. Delegation of authority
    Asuperior's act of granting to subordinates, on the basis of competence, the right to act or decide
  41. Entrepreneur
    One who organizes, manages, and assumes the risk of a business firm or venture
  42. Founder
    An entrepreneur who brings a new firm into existence
  43. Goodwill
    An intangible asset such as the name of a funeral home

    Also, an intangible asset which enables a business to earn a profit in excess of the normal rate of profit earned by other businesses of the same kind
  44. Internal locus of control
    Abelief that one's sucess depends on one's own effort
  45. Legitimacy
    The acceptance of the organization's activities by non-members of the organization
  46. Management
    The art and science of motivating people toward the achievement of a goal
  47. Mission
    Path that organizations choose to achieve their purpose
  48. Opportunistic entrepreneur
    A person with both sophisticated managerial skills and technical knowledge who starts a business
  49. Patent
    The registered right of an inventor to make, use, and sell an invention

    Protect the product idea from unauthorized use or infringement for a limited time
  50. Plans
    Written statements of actions and decisions that will lead the company to its goals or mission
  51. Refugee
    A person who becomes an entrepreneur to escape an undesirable situation
  52. Reluctant entrepreneur
    A person who becomes an entrepreneur as a result of some severe hardship
  53. Trademark
    Chief function is to identify certain products and to create and maintain a demand for them

    Provide protection against unfair competition in business

    An intangible asset that is a distinct name, sign, or symbol that the federal government grants exclusive rights to use for a specified period of time

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