Entre2 ASK Practice Exam Part 2 (#13-25)

Which of the following venture-harvesting methods usually supports a venture's future growth and facilitates the business owner's exit:

• Developing a licensing plan

• Ceasing business operations

• Setting up a public trust fund

• Initiating a public stock offering

Answer explanation

Initiating a public stock offering. Venture harvesting is the stage in the entrepreneurial process in which the entrepreneur exits the business and collects (harvests) his/her share of the venture investment. There are many ways to harvest a venture, which includes closing the business entirely, selling the business to another person or company, keeping the business intact and releasing cash flows, and taking the company "public" through an IPO (initial public offering). IPO means that the entrepreneur is selling stock to the public and giving up control of some or all of the business; over time, the venture becomes a public corporation. By incorporating the business, the owner is selling stock, which generates money so the company can continue and grow. Ceasing business operations means that the business cannot grow because it is closed. Setting up a trust fund and developing a licensing program does not help the owner exit the business nor does it ensure the business's growth.

Bennett has just finished college and has moved into her own apartment that is located on a bus line. She'll be able to take the bus to her new job that she's scheduled to start in a month. In fact, she'll need to rely on bus transportation until she saves money to buy a car. What insurance coverage should she have?

• Health and life insurance

• Renter's insurance and temporary short-term health insurance

• Renter's insurance and auto insurance

• Auto insurance and temporary short-term health insurance

Answer explanation

Renter's insurance and temporary short-term health insurance. Although Bennett has not started her new job, she should obtain renter's insurance to protect her belongings in the apartment. Since she hasn't started her job yet, she should get temporary health insurance that would provide coverage from 1-12 months. Health insurance will probably be provided by Bennett's employer once she starts working. Auto insurance is not needed since she will be using bus transportation. They're, in effect, continuing their coverage with their previous employer. No information was provided as to whether Bennett had prior employment.

To prevent business failure, even a very profitable company must

• reinvest all its earnings.

• spend all its earnings

• manage its cash flow.

• increase its sales.

Answer explanation

Manage its cash flow. A company can be very profitable and still fail if it does not properly manage its inflows and outflows of cash. Spending all earnings would likely lead to business failure. Successful businesses reinvest some of their earnings, but it is important to keep some cash on hand for emergencies. If a profitable company increases sales, it may further increase its profits, but it still has to manage the cash from those profits to prevent business failure.

Which of the following is an advantage of a loan program provided by state or local development corporations:

• The business plan does not need to be complete.

• It may offer small-business loans at lower rates.

• It is designed to serve a certain geographical area

• A business may have a longer period of time to repay.

Answer explanation

It may offer small-business loans at lower rates. Often, government subsidies support these programs that enable businesses to obtain loans at lower rates of interest. The programs may also be able to guarantee a business loan from a bank. Businesses will still need to develop a good business plan. Most of these programs are restricted to certain geographical areas, which is a disadvantage. The repayment schedule is usually the same as for a conventional loan.

Changes in accounts receivable are reflected in

• investing.

• cash from operations.

• financing.

• net income.

Answer explanation

Cash from operations. Cash flow includes three components by which cash enters and leaves a company: cash from operations, investing, and financing. Cash from operations includes how much cash is generated from a company's products or services. Accounts receivable is included in this section. Net income is not the same as cash flow because it also includes sales made with credit.

When businesses help employees work together and share their knowledge in order to complete a project, they are managing

• performance.

• productivity.

• communication.

• collaboration.

Answer explanation

Collaboration. Collaboration is working together by drawing from one another's knowledge and experience. It is usually necessary for businesses to manage collaboration because the employees who are working together have different skills and backgrounds. The employees often need guidance and direction to help them focus on the common project rather than on their specific area of interest. Productivity is the amount of work employees perform in a given period, usually their output per hour. Communication is an exchange of information in which the words and gestures are understood in the same way by both the speaker and the listener. Performance is the way employees do their jobs.

During the employee-selection process, most businesses first require job applicants to

• have a physical examination.

• interview for the job.

• take employment tests.

• fill out an employment application.

Answer explanation

Fill out an employment application. The information provided by the applicant indicates to the business whether the applicant might be qualified for the job. The second step is an interview, followed in some cases by tests to determine whether a job applicant can perform successfully. A physical examination may also be required to protect the company from insurance or workers' compensation claims caused by pre-existing physical problems.

Should employees be part of management's efforts to create an equitable work environment?

• Yes, employees should be involved.

• No, this is management's responsibility.

• Yes, this is a legal requirement.

• No, including employees will create problems.

Answer explanation

Yes, employees should be involved. Since employees are usually well aware of anything that is unfair in the workplace, they should be encouraged to make suggestions for improvement. Including employees should help solve problems rather than create them. Equity is not solely management's responsibility. Involving employees is not a legal requirement.

A written or oral expression of employee dissatisfaction is called a(n)

• exit interview.

• open-door policy.

• contract.

• complaint.

Answer explanation

Complaint. The employee's complaint may be expressed to you, to other employees, and possibly to customers. An open-door policy is a business practice that encourages communication between employees and their supervisors. An exit interview is conducted to determine the reasons that an employee has resigned. A contract is an agreement between two or more parties that is legally binding.

One reason that companies perform needs assessments is to determine

• who is the best person to lead the company.

• the company's vision and mission statements.

• if there is a market for a product or service.

• how to best meet the demands of employees.

Answer explanation

If there is a market for a product or service. Needs assessments are an important process for identifying the viability of a certain product or service within a specific market. Needs assessments are a type of market research, and are not intended to help a company determine its vision and mission statements, the best person to lead the company, or how to meet the demands of employees.