AAMI Small Business Management Practice Test

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• Research has shown that most entrepreneurs generate their business ideas by searching external sources of ideas.
• Which of the following is a current liability?
• A sales promotion typically offers value to recipients.
• An entrepreneur's concern that his values will be reflected in firm practices after retirement is an example of which concept?
• Goodwill appears on the balance sheet as an intangible asset.
• Inventory turnover is the total number of times that the average inventory has been sold or used up during a period.
• Prospective entrepreneurs typically obtain their initial financing from which source?
• Fringe benefits are expensive, amounting to more than 40 percent of payroll expense for many small firms. (Reinforces the concept.)
• The goodwill gained from benefiting the community may be worth more than it costs. Which statement is true?
• The Americans with Disabilities Act requires employers to make _______ adaptations to facilitate the employment of individuals protected by the act.
• Under terms of sale 2/5, net 30, how much discount will a buyer receive on a $60,000 bill paid on the net due date?
• The older the account becomes, the harder it is to collect.
• Which term refers to promotional items designed for long-term use?
• Which of the following statements about disability risk in partnerships is most accurate?
• The Control Unit of the Computer that directs the input and output devices is called the:
• Why might two reputable valuations of the same business yield different results?
• Which of the following is classified as an entrepreneur?
• A home-based business is located in
• Which federal legislation prohibits discrimination on the basis of race, color, religion, sex, pregnancy, or national origin?
• Earnings valuation approach is a business valuation approach which centers on estimating the amount of potential income that may be produced by the business in the next year.
• Which statement is true about the relationship between financial statements and business valuation?
• Professionalization of management in small family businesses is optional and depends on strategic goals.
• Where does permission to incorporate typically come from?
• When financing a company, a banker looks at two kinds of assets. Which are they?
• Which agency carries responsibility for regulatory and enforcement of safety and health matters for most United States employees?
• Which statement best describes a typical compensation structure in small businesses for salespeople?
• Which statement best defines risk in business terms?
• The term that refers to benefits provided to replace revenue when a key employee is disabled is known as
• A firm will be successful only if it charges a price that covers total cost and provides some profit margin.
• Which condition allows legal discrimination by employers?
• The main reason many small business owners leave their previous employers is to gain independence.
• Tangible assets are generally easier to value than intangible assets because they can be seen, touched, or appraised.
• Which financial statement shows all cash receipts and payments involved in operating the business and managing its financial activities?
• The three primary rewards of entrepreneurship are profit, independence, and personal fulfillment.
• A coinsurance provision requires that a property be insured for at least ______ percent of its value.
• The Traditional Five C's of Credit include which of the following?
• Which of the following is the best example of transferring risk to another party?
• The quantity supplied refers to the amount producers are willing to supply at a price.
• A large percentage of small business owners cite their desire to be their own boss as the main reason they left their previous employers.
• The mission statement is best described as the
• Which statement best reflects current understanding of small business insurance protection?
• Which element of market analysis focuses on size, density, distribution, and income of a population?
• The guideline that an effective plan should be brief applies to which document?
• Risk is defined as:
• Human resource management can best be described as managing resources for humans.
• Unexpectedly stumbling across a business opportunity would not be considered a precipitating event.
• Joining with another firm to promote products is a form of strategic alliance.
• Which statement about the Better Business Bureau is correct?
• When considering growth, a business plan should be viewed as:
• Starting a new business from scratch rather than purchasing an existing business means the entrepreneur avoids undesirable precedents, policies, procedures, and legal commitments of the existing firm.
• In the Deep Pockets case, the illegal practice described relates to which term?
• What are the most significant factors to consider when selecting a supplier?
• A potential investor's single goal is to
• Consumerism is 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 the consumers relative to sellers.
• Planning for leadership transitions should be flexible and may require long lead times.
• Which is typically the source of initial financing for prospective entrepreneurs?
• Which legal form allows owners to contribute no capital but still participate in management and share in profits?
• A business plan is:
• Which term best fits 'anyone who invests in, or financially sponsors, a new business'?
• The risk management concept involving setting aside funds to cover potential losses rather than transferring risk to an insurer is called
• The term for a group of potential customers possessing purchasing power and unsatisfied needs is:
• Entrepreneurs are four times less likely to be millionaires than employees.
• The necessity of formal governance structures in a family business depends on the size and complexity of the business.
• An example of an industry especially vulnerable to environmental protection as it relates to waste discharge is the _____ industry.
• Consumerism is the emphasis on safe, reliable, and honestly advertised products and services to customers, and also represents a movement to protect consumer rights.
• Writing a business plan should be thought of as which kind of process?
• Customer profiles may include which types of information?
• Who owns a sole proprietorship?
• Current assets include all of the following EXCEPT
• A job description refers to a listing of the knowledge, skills, abilities, and other characteristics necessary to perform a job.
• Selling price is the amount charged to customers for a product.
• Markup pricing may be expressed as a percentage of either selling price or cost.
• _____ serves as an inducement to buy a certain product while typically offering value to recipients.
• A 32-year-old funeral director launching a funeral firm after seven years in the industry is an example of which concept?
• The supply curve describes which relationship?
• The statistical study of human populations with respect to their size, density, distribution, composition, and income is called:
• According to experience, which characteristic should an effective plan have?
• Which term refers to expenses incurred in the normal operation of a business?
• In the context of small business risk management, which insurance covers workers injured on the job?
• Debt capital is
• Which description most accurately defines debt capital?
• Which of the following is an insurance coverage that is required by law in most states?
• What term describes management and other key personnel sharing in profits?
• The federal government provides funds to small businesses through which agency?
• Self-insurance involves:
• Market value approach is a valuation used in business which determines value based upon sales of stocks in the stock market.
• Self-insurance means
• Which term refers to promotional items branded with a company logo used as a marketing tool?
• Which statement best defines demand?
• Which set of categories does the cash flow statement cover?
• A line of credit is the ________ amount of credit a bank will provide a borrower at any one time.
• Which statement best defines a partnership?
• In a business plan, fringe benefits as a percentage of payroll costs should be shown as what percentage?
• Which term describes failing to record cash receipts for funeral items?
• The Actual Cash Value (ACV) is best described as:
• If a product is priced at $180 and is based on a 35% markup of cost, the product cost is approximately what?
• Which statement about patents is correct?
• In budgeting for fringe benefits, fringe costs are shown as a percentage of payroll costs.
• A Chamber of Commerce is:
• Which statement supports the value of corporate social responsibility for small businesses?
• Which term describes the funding provided by wealthy individuals to startups, often in early stages?
• In a business plan, which component is typically placed at the very start to summarize the plan?
• Startups are more likely to be successful when the entrepreneur first evaluates his or her own capabilities and then looks for a new product or service idea, as opposed to beginning with a need in the marketplace and then relating those to personal capabilities.
• Which statement best describes the objectives of inventory management?
• Which statement about a sole proprietorship is true?
• Under terms 2/5, net 30, the discount applies if payment is made within the first five days.
• Small firms are at a great disadvantage when it comes to competing based on customer service.
• Costs incurred by a firm in actually producing a product are considered to be a part of cost of goods sold.
• Small firm owners may rationalize bribery or other unethical behavior as a way of offsetting what?
• The executive summary in a business plan should come:
• Fixed assets include
• Which statement best describes a business plan in terms of its function for an entrepreneur seeking funding?
• If a parent retires completely and turns the firm over to a son or daughter, the firm remains a family business.
• Which term is typically used to describe insurable risks?
• Which concept describes a founder's values continuing to guide the firm after retirement?
• Even if a family member contributes to the success of a family business, this does not mean that he or she has the ability to serve the firm in a key position.
• The primary role of the operating system is to:
• A canned sales talk is successful with most buyers.
• Which concept allows legal discrimination by employers when it is essential to the job performance?
• Unions typically concentrate their primary attention on small companies, where their influence is most needed.
• The older the account becomes, the harder it is to collect.
• If the selling price is $35 and the cost is $21, the markup on selling price is 40%.
• Entrepreneurial teams are formed by bringing together two or more persons who together function as entrepreneurs.
• An owner of a crematory has returned from a seminar on environmentalism and wishes to act responsibly in this area. Which action will accomplish this purpose?
• Which statement best describes valuing a company?
• Which statement about ownership in a corporation is true?
• Which statement about skimming income in small businesses is correct?
• Business interruption insurance covers
• Which is the compensation plan best suited for salespersons in a small business?
• If cost is $133 and markup on cost is 35%, the selling price is approximately $180.
• The ideal age for starting a business appears to be between 40 and 50.
• Which of the following statements about financing options is suggested by the material?
• Attitudes have an indirect impact on consumer behavior.
• An earnings valuation approach concentrates on estimating the potential income the business may generate in the near term.
• If a retailer's estimated sales are $1 million and assets in the firm's industry tend to run about 25 percent of sales, the retailer should maintain assets of approximately which amount?
• The liquidity of a firm is often measured by a ratio of what to what?
• A product liability arises when a product causes harm due to a defect or assembly error; this is classified as
• Which statement best describes credit?
• Non-family managers can contribute to the firm's performance.
• Which statement best describes the profitability timeline for startups?
• A venture capitalist
• Which group is typically eligible for profit sharing?
• From where does permission to incorporate a business typically come?
• The process of planning and executing the development pricing, promotion, and distribution of an organization's goods and services is called?
• The statement 'The ability to enjoy one-on-one contact with customers has always been a competitive advantage for large firms' is:
• Traditional physical stores are often referred to as what type of store?
• If a crematory wants to act responsibly environmentally, which action aligns with this goal?
• Which statement about copyright is correct?
• The seller's measure of what is received in exchange for transferring ownership of a product is known as what?
• Which financial statement is used to track cash flows from operating, investing, and financing activities?
• A sales commission compensation plan is a type of time-based compensation system.
• Which statement about financial statements and valuation is accurate?
• Which form allows owners to contribute no capital but still participate in management and share profits?
• Break-even analysis is the point at which total sales revenue equals or exceeds total operating costs.
• Which form is described by easier transfer of ownership due to tradable shares?
• Specialties are promotional tools that can do what for the company?
• Which situation might serve as a precipitating event for starting a new business?
• A focus strategy is most effective when a firm serves which market?
• A major method for sharing business risks among parties is:
• A markdown is the reduction of an item's selling price to encourage sales.
• In a family business, the family's primary function is to ensure the profitability and survival of the business.
• It is generally true that most small business managers carry sufficient insurance protection.
• Trademarks are best categorized as which type of asset?
• Which financial statement shows the results of a firm's operations over a period of time, usually one year?
• The size standard for small business used in this course would exclude firms that have more than 100 employees.
• The primary outside users of business plans are which groups?
• A focus strategy refers to concentrating on a specific market niche. Which option is correct?
• Which list correctly names all five traditional C's of credit?
• Mistakes that an employee makes in assembling a product could be a source of
• Entering into a franchising agreement typically provides which rights?
• Which statement about product differentiation is most accurate?
• Professional management is always compatible with family business culture.
• Which of the following is NOT a legal basis for selecting employees?
• Relational conflicts among family members can threaten business performance if not managed.
• What is the major objective of a firm in granting credit?
• Legal commitments of an existing business are not factors to evaluate by a prospective buyer. True or false?
• A family business should avoid outside investors to preserve independence.
• Which statement describes ownership in a sole proprietorship?
• In supplier relationships, delivery reliability and favorable credit terms are examples of benefits for:
• In a business plan, what is the key statement in the financial plan?
• One weakness of a family business is the tendency of family members to leave quickly when the business 'falls on hard times.'
• Good relationships with suppliers are especially important for:
• In a small business, the most important key to ethical performance is the personal integrity of the founder or owner.
• Small firms can compete effectively by emphasizing customer service.
• Which of the following is a legal basis for selecting employees?
• Inventory, buildings, cars, and equipment are examples of intangible assets.
• With a 40% markup on selling price, the cost is 60% of the selling price.
• Better Business Bureaus serve primarily as assistants to district attorneys, helping expose corrupt business practices. Which statement is correct?
• Which action is described by placing a price reduction on an item to clear inventory?
• A pricing tactic whereby a firm sets a high price to convey an image of high quality or uniqueness is known as what?
• A business plan should generally project financial and operational aspects of the proposed business for the first:
• Which form commonly has unlimited personal liability for the owner?
• Which option best describes how a banker views asset types in financing decisions?
• What is the role of OSHA in the workplace?
• Which of the following is one of the basic promotional methods?
• It is now illegal for employers to arrange for background investigations of job applicants.
• _____________ is a section of the business plan that describes the user benefits of the product or service and the type of market that exists.
• What is the purpose of a business plan?
• The lasting medium is a term that refers to which of the following?
• Only large corporations can afford to be socially responsible. Which statement is true?
• Which concept describes justifying unethical actions, such as bribery, to offset competitive disadvantage?
• The Internet provides an alternative to which type of retail venue?
• Which statement is NOT one of the three primary rewards of entrepreneurship?
• The Deluxe Register Company sells 1,000 register books annually at a price of $35 each. If the pricing policy adheres to a 40% markup of selling price, the cost of each register book is approximately what?
• Bait advertising is best described as:
• A startup typically does not become profitable or breakeven for how many years?
• The insurance that provides monetary benefits to a business that has experienced an unforeseen peril such as flood or fire is called
• Overhead costs are the expenses incurred in the normal operation of a business.
• What is the most critical factor in evaluating a site for a funeral home?
• Bait advertising describes what it attempts to do to customers?
• In the Deluxe Register example, what is the approximate profit per unit when selling price is $35 and cost is $21?
• Applied to a business, risk relates to the possibility of losses associated with the firm's reputation.
• Actual Cash Value (ACV) is best described as:
• Which of the following is not a recommended way to evaluate applicants for a position?
• Which statement best describes business planning?
• Business angels provide what type of capital?
• A precipitating event can include unexpectedly stumbling upon a business opportunity.
• The cash flow statement reflects cash flows from which of the following categories?
• Family councils and formal meetings improve communication and reduce misaligned expectations.
• Pure risk is defined as:
• According to the described marketing process, which three elements are explicitly mentioned as planned and executed?
• Under terms 2/5, net 30, which statement is true?
• Sales promotion refers to promotional techniques other than personal selling or advertising.
• What is the purpose of determining the value of a business?
• Regarding partners in a small business, statistics reveal that the risk of disability is __________ the risk of death.
• Conflicts between family and business goals are best resolved by excluding family input from decision-making.
• Goodwill is an intangible asset representing the value of brand, customer relationships, and reputation.
• A refugee is a person who tried entrepreneurship, failed, and sought refuge in corporate employment.
• Which statement best reflects the idea about choosing between debt and equity financing?
• In general, products that are consumed in different amounts have elastic demand.
• Succession planning is essential to maintain continuity in a family business across generations.
• Transparency in financial reporting within a family business can reduce conflicts and increase trust.
• An entrepreneurial team typically consists of two or more people who function as entrepreneurs.
• What happens to the value of a depreciable asset over time?
• Goodwill is something a business donates to charity.
• Tangible assets are those assets that can be appraised by value or seen or touched.
• The term used for risks that are insurable is:
• An example of a current asset is
• Key-person disability insurance
• What is the term for the point where revenue equals costs, resulting in zero profit?
• Which item is typically not classified as a current asset?
• T or F - Many new businesses are formed as a result of the entrepreneur's previous work experience, through which he or she sees ways to improve or modify a product.
• Temptations and pressures to act unethically are thought to be greater in big business than in small business. Which option is true?
• A trade credit bill of 80,000 with terms of 2/5, net 30 means the buyer saves how much if the bill is paid within the discount period?
• Which statement about aging accounts receivable is true?
• What is an advantage an entrepreneur gains by leasing facilities rather than buying them?
• Fringe benefits are expensive, amounting to more than 40 percent of payroll expense for many small firms.
• Which of the following is not one of the basic objectives of the business plan?
• Which statement about trademarks is correct?
• If a firm differentiates its products effectively, which outcome is most likely?
• The answer to the question of whether you need a business plan is:
• Which component is essential when seeking external funding for a business plan?