Entrepreneurship Test 3 (Final)

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  1. How productively a firm utilizes its assets.
  2. Company's ability to meet its short term obligations.
  3. Summarizes the changes in a firm’s cash position for a specified period of time and details why the changes occurred.
    Statement of Cash Flow
  4. Reflects the results of the operations of a firm over a specified period of time. It records all the revenues and expenses for the given period and shows whether the firm is making a profit or is experiencing a loss.
    Income Statement
  5. Is a snapshot of a company’s assets, liabilities, and owner’s equity at a specific point in time.
    Balance Sheet
  6. What is the formula for Current Ratio.
    Current Assets / Current Liabilities
  7. Company's ability to make $$$
  8. Overall health of the financial structure of the firm, particularly as it relates to its debt to-equity ratio. -aim for 1:2
  9. Summary of finance over a period of time.
    Income Statement
  10. Summary of business finance at a current time.
    Balance Sheet
  11. How cash comes in and out over a period of time.
    Cash Flow Statement
  12. What are the 3 reasons why most new ventures need financing or funding
    • Cash Flow Challenges
    • Capital Investments
    • Lengthy Product Development Cycles
  13. Which of the 3 reasons ventures need funding is this:

    Inventory must be purchased, employees must be trained and paid, and advertising must be paid for before cash is generated from sales.
    Cash Flow Challenges
  14. Which of the 3 reasons ventures need funding is this:

    The cost of buying real estate, building facilities, and purchasing equipment typically exceeds a firm's ability to provide funds for these needs on its own.
    Capital Investments
  15. Which of the 3 reasons ventures need funding is this:

    Some products are in development for years before they generate earnings. The up-front costs often exceed a firm's ability to fund these activities on its own.
    Lengthy Product Development Cycles.
  16. What is the order of raising funds?
    • 1. Personal funds
    • 2. Friends and family
    • 3. Bootstrapping
  17. Finding ways to avoid the need for external financing or funding through creativity, ingenuity, thriftiness, cost cutting, or any means necessary.
  18. What are some examples of bootstrapping?
    -Buying used instead of new equipment.

    -Coordinating purchases with other businesses.

    -Leasing equipment instead of buying.

    • -Obtaining payments in advance from customers.
    • -Minimizing personal expenses.

    -Avoiding unnecessary expenses.

    -Buying items cheaply but prudently via options such as eBay.

    -Sharing office space or employees with other businesses.

    -Hiring interns.
  19. Individuals who invest their personal capital directly in start-ups. Typically 50 years old, has high income and wealth, is well educated, has succeeded as an entrepreneur, and is interested in the start-up process.
    Angel Investors
  20. Reasonable steps taken by a person in order to satisfy a legal requirement, especially in buying or selling something.
    A comprehensive appraisal of a business undertaken by a prospective buyer, especially to establish its assets and liabilities and evaluate its commercial potential.
    Due Diligence
  21. The initial capital used to start a business. Often comes from the company founders' personal assets or from friends and family.
    Seed Funding
  22. A company’s first sale of stock to the public. When a company goes public, its stock is traded on one of the major stock exchanges.
    Initial Public Offering (IPO)
  23. Most entrepreneurial firms that go public trade on the...
  24. What is Intellectual Property?
    Any product of human intellect that is intangible but has value in the marketplace.
  25. Why is it called "Intellectual Property"?
    Because it is the product of human imagination, creativity, and inventiveness.
  26. Why is intellectual property an important issue for entrepreneurs?
    A company’s intellectual assets are the most important – AS THEY MAY BE A SOURCE OF A COMPETITIVE ADVANTAGE!
  27. What are the 4 forms of intellectual property?
    • Copyrights
    • Trademarks
    • Patents
    • Trade Secrets
  28. What are the 3 basic requirements to grant a patent?
    • -Must be useful (utility).
    • -Must be novel (original).
    • -Must not be obvious to a person of ordinary skill in the field.
  29. A patent that protects an invention that is or facilitates a method of doing business.
    Business Method Patent
  30. What are Trademarks?
    Any word, name, symbol, or device used to identify the source or origin of products or services and to distinguish those product or services from others.
  31. What are the different kinds of Trademarks?
    • -Trademark
    • -Service Mark
    • -Collective Mark
    • -Certification Mark
  32. What are some examples of a Certification Mark?
    Marks, words, names, symbols, or devices used by a person other than the owner to certify a particular quality about a good or service.

    Examples: 100% Napa Valley and Underwriters Laboratories
  33. What are some exclusions of Copyright Laws?
    • The Idea-Expression Dichotomy.
    • The main exclusion is that copyright laws cannot protect ideas.
  34. What are some examples of Trade Secrets?
    Trade secrets include marketing plans, product formulas, financial forecasts, employee rosters, logs of sales calls, and similar types of proprietary information.
  35. What are the 3 things to prepare for growth?
    • 1. Appreciate the nature of business growth.
    • 2. Stay committed to a core strategy.
    • 3. Plan for growth.
  36. What are the 10 warning signs of a business growing too fast?
    • -Borrowing money to pay for routine operating expenses.
    • -Extremely tight profit margins.
    • -Over-stretched staff.
    • -Declining product quality.
    • -Unanswered emails.
    • -Customer Complaints.
    • -Employees dread coming to work.
    • -Productivity is falling.
    • -Operating in a "crisis mode" becomes the norm.
    • -Those working with the business financial structure are starting to worry.
  37. Occurs when increasing production
    lowers the average cost of each unit produced.
    Economics of Scale
  38. What are the 5 stages of growth?
    Image Upload 1
  39. Variable Costs vs. Fixed Costs
    Variable Costs: Costs that vary on production. (Resources)

    Fixed Costs: Costs that don't vary. (Rent, Insurance)
  40. Image Upload 2
    Managerial Capacity Problem
  41. What are some day-to-day challenges of growth?
    Cash Flow Management: A firm requires an increasing amount of cash as it grows.

    Price Stability: If growth comes at the expense of a competitor’s market share, a price war could ensue.

    Quality Control: An increase in firm activity can result in quality control issues if a firm is not able to increase its resources to handle the extra work.

    Capital Constraints: Capital constraints are an ever-present problem for growing firms.
  42. If growth comes at the expense of a competitor’s market share, a price war could ensue.
    Price Stability
  43. Increasing the sales of a product or service through greater marketing efforts or through increased production capacity.
    Market Penetration Strategy
  44. Making additional variations of a product so it will appeal to a broader range of clientele.
    Product Line Extension Stategy
  45. Growth via expanding to additional geographic locations.
    Geographic Expansion
  46. What are some examples of Foreign Market Entry Strategies?
    • -Exporting
    • -Licensing
    • -Joint Ventures
    • -Franchising
    • -Turnkey Project
    • -Wholly Owned Subsidiary
  47. What are some advantages / disadvantages with External Growth Strategies?

    • •Reducing
    • competition
    • •Gaining access to proprietary products or services
    • •Gaining access to new products and markets
    • •Obtaining access to technical expertise
    • •Gaining access to an established brand name
    • •Economies of scale
    • •Diversification of business risk

    • Disadvantages:
    • •Incompatibility
    • of top management
    • •Clash of corporate cultures
    • •Operational problems
    • •Increased business complexity
    • • Loss of organizational flexibility
    • •Antitrust implications
  48. An arrangement whereby a firm with the proprietary rights to a product grants permission to another firm to manufacture that product for specified royalties or other payments.
  49. A partnership between two or more firms developed to achieve a specific goal.
    Strategic Alliances
  50. What are some advantages / disadvantages of Internal Growth Strategies?
    • Advantages: 
    • •Incremental, even-paced growth
    • • Provides maximum control
    • •Preserves organizational culture
    • •Encourages internal entrepreneurship
    • •Allows firms to promote from within


    • •Slow form of growth
    • •Need to develop new resources
    • •Investment in a failed internal growth strategy can be difficult to recoup
    • •Adds to industry capacity
Card Set
Entrepreneurship Test 3 (Final)
Entrepreneurship Test 3
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