Domain 1
What is the primary goal of a business plan?
a) To secure funding from investors
b) To outline the company's goals and strategies
c) To hire employees
d) To market products to customers
Correct Answer: b) To outline the company's goals and strategies
What is the primary purpose of a target market analysis?
a) To identify the business's competitors
b) To determine the ideal customer base for a product or service
c) To set prices for products or services
d) To create a business logo
Correct Answer: b) To determine the ideal customer base for a product or service
What is the primary purpose of a cash flow statement?
a) To show the profitability of a business
b) To track the inflow and outflow of cash over a period
c) To list all assets and liabilities of a business
d) To calculate employee salaries
Correct Answer: b) To track the inflow and outflow of cash over a period
What is the primary purpose of a balance sheet?
a) To track cash inflows and outflows
b) To show a business's financial position at a specific point in time
c) To calculate net profit or loss
d) To list all sales and expenses
Correct Answer: b) To show a business's financial position at a specific point in time
Which of the following is a key characteristic of an entrepreneurial mindset?
a) Avoiding risks at all costs
b) Focusing solely on short-term profits
c) Embracing innovation and problem-solving
d) Relying on established business models only
Correct Answer: c) Embracing innovation and problem-solving
Which of the following is an example of a secondary market research method?
a) Conducting customer surveys
b) Analyzing industry reports published by a trade association
c) Hosting a focus group
d) Interviewing potential customers
Correct Answer: b) Analyzing industry reports published by a trade association
Which of the following is an example of a fixed cost in a small business?
a) Cost of raw materials
b) Monthly rent for office space
c) Shipping fees for customer orders
d) Sales commissions
Correct Answer: b) Monthly rent for office space
Which of the following is an example of a long-term liability?
a) Accounts payable
b) A 10-year business loan
c) Monthly utility bills
d) Employee wages
Correct Answer: b) A 10-year business loan
A small business owner is considering whether to operate as a sole proprietorship or a limited liability company (LLC). What is one key advantage of choosing an LLC over a sole proprietorship?
a) Simplicity in tax filing
b) Unlimited personal liability for business debts
c) Separation of personal and business assets
d) No requirement for formal registration
Correct Answer: c) Separation of personal and business assets
A small business owner is developing a marketing mix for a new product. Which of the following elements is part of the "4 Ps" of marketing?
a) Profit
b) Packaging
c) Price
d) People
Correct Answer: c) Price
A small business owner is considering whether to hire an independent contractor or a full-time employee. Which of the following is a key advantage of hiring an independent contractor?
a) The business has more control over the worker's schedule
b) The business does not need to provide benefits like health insurance
c) The worker is more likely to stay with the company long-term
d) The business can train the worker to follow specific procedures
Correct Answer: b) The business does not need to provide benefits like health insurance
A small business owner is considering whether to reinvest profits into the business or distribute them as dividends to shareholders. What is one advantage of reinvesting profits?
a) It reduces the business's tax liability
b) It allows the business to fund growth and expansion
c) It increases shareholder satisfaction in the short term
d) It eliminates the need for external financing
Correct Answer: b) It allows the business to fund growth and expansion
When conducting a SWOT analysis, which of the following would be considered an external threat to a small business?
a) Lack of skilled employees
b) A strong brand reputation
c) New competitors entering the market
d) High employee turnover
Correct Answer: c) New competitors entering the market
A small business is launching a new product and wants to create brand awareness. Which of the following marketing strategies would be most effective for reaching a large audience quickly?
a) Direct mail campaigns
b) Social media advertising
c) Networking events
d) Cold calling
Correct Answer: b) Social media advertising
A small business is experiencing a high employee turnover rate. Which of the following strategies would be most effective in improving employee retention?
a) Increasing the number of performance evaluations
b) Offering competitive salaries and benefits
c) Reducing the number of paid holidays
d) Implementing stricter workplace policies
Correct Answer: b) Offering competitive salaries and benefits
A small business is evaluating two investment opportunities. Project A has a net present value (NPV) of 10,000,andProjectBhasanNPVof10,000,andProjectBhasanNPVof15,000. Based on this information, which project should the business choose?
a) Project A, because it requires less initial investment
b) Project B, because it has a higher NPV
c) Neither project, because both NPVs are positive
d) Both projects, because they are equally profitable
Correct Answer: b) Project B, because it has a higher NPV
A small business is experiencing cash flow issues due to delayed payments from customers. Which of the following strategies would be most effective in improving cash flow in the short term?
a) Increasing the prices of products or services
b) Offering discounts for early payment by customers
c) Investing in new equipment to increase production
d) Expanding the business to new markets
Correct Answer: b) Offering discounts for early payment by customers
A small business is using a penetration pricing strategy for a new product. What is the most likely goal of this strategy?
a) To maximize profit margins from the start
b) To recover research and development costs quickly
c) To attract customers by offering a lower initial price
d) To target only high-income customers
Correct Answer: c) To attract customers by offering a lower initial price
A small business owner is analyzing their break-even point. If fixed costs are 50,000,thesellingpriceperunitis50,000,thesellingpriceperunitis25, and variable costs per unit are $15, what is the break-even quantity?
a) 2,000 units
b) 3,333 units
c) 5,000 units
d) 10,000 units
Correct Answer: c) 5,000 units
Explanation: Break-even quantity = Fixed Costs / (Selling Price per Unit - Variable Costs per Unit) = 50,000/(50,000/(25 - $15) = 5,000 units.
A small business is analyzing its working capital. If current assets are 120,000 and current liabilities are 120,000 and current liabilities are 80,000, what is the working capital ratio?
a) 0.67
b) 1.5
c) 2.0
d) 3.0
Correct Answer: b) 1.5