Q&A Hero

Q: Infringement of intellectual property is ________. A) a business tactic B) a crime C) profitable D) legal in some states

Q: Obtain a trademark in order to ________. A) protect your logo B) register your business name C) protect all your intellectual property D) protect your business name

Q: Of the three types of bankruptcies, Chapter 7 or Liquidation is the best choice to take.

Q: Every corporation is recognized and treated under the law as ________. A) an entity, much like a person, that has expenses and earnings B) a small business C) a large business D) if it were its owners and employees

Q: Why are contracts useful to business owners?

Q: Contract drafting and review is something the business owner can do and should do using law books at the local library.

Q: The four "A's" of a successful contract include ________. A) avoid misunderstanding and assure work B) assure payment and avoid liability C) assess risk and analyze profit D) Both A and B.

Q: Some contracts specify that conflicts may be settled through ________ instead of court. A) negotiation B) coercion C) arbitration D) small claims

Q: The time period in which legal action may be taken is the ________. A) limit of liability B) statute of legal obligations C) statute of limitations D) None of the above.

Q: An injured party whose rights in a contract have been breached can bring a(n) ________ against the other party. A) arbitration B) motion C) mediation D) lawsuit

Q: A good contract will spell out ________, or unforeseeable "acts of God" beyond anyone's control, for which neither party is responsible. A) contingencies B) liabilities C) amendments D) disasters

Q: ________ are the building blocks of business. A) Letters of agreements B) Contracts C) Personal relationships D) Customer services

Q: A(n) ________ is an agreement between two or more parties that is enforceable by law. A) trust B) contract C) understanding D) None of the above.

Q: Which is not a potential penalty for breaking a contract? A) You may lose a share of the ownership of your business to the other party who signed the contract. B) You may be sued in a court of law by the other party who signed the contract. C) A court may order you to pay damages to the other party who signed the contract. D) It can be costly.

Q: Compare the legal structure implications of a sole proprietorship and a Subchapter S Corporation for the seven parameters of 1) ownership, 2) liability, 3) taxation issues, 4) profit distribution, 5) voting on policy, 6) life of the legal structure, and 7) capitalization.

Q: How is a legal entity, such as a corporation, similar to a person? If you owned a business, why might you want it to be incorporated?

Q: The limited liability company (LLC) combines the best features of partnerships and corporations and can be an excellent choice for small business with a limited number of owners.

Q: The main disadvantage of corporations is that corporate income is ________. A) taxed only once B) always high C) taxed twice D) taxed three times

Q: The number of stockholders in a Subchapter S Corporation is limited to ________. A) 75 B) 50 C) 100 D) 250

Q: Which of the following are not usually not-for-profit organizations? A) trade associations B) charitable foundations C) churches D) book stores

Q: In a corporation, all profits go to ________. A) reduce the surplus B) the owners and the shareholders C) the stockholders as salaries D) the partners according to the terms of the agreement

Q: In limited liability companies ________. A) income is taxed only once, as the personal earnings of members B) personal assets of the owners are left legally unprotected C) income is never taxed D) income is taxed twice, corporately and personally

Q: Tax-exempt, nonprofit corporations ________. A) cannot make a profit B) do not have legal liability C) are set up with a specific mission to improve society D) pay dividends more often than for-profit corporations

Q: Explain the three types of insurance most states require business owners to carry.

Q: Permits, licenses, or certificates may be required for your business. Local, county, and state government offices, as well as chambers of commerce, are good places to contact for this information.

Q: Federal, state and local ________ may apply to a business and may affect what it can do, how it can do it, and when and where it can operate. A) regulations B) grants C) taxes D) zoning

Q: A(n) ________ is an official document that gives you the right to carry out a specific activity, such as an outdoor festival. A) license B) certificate C) permit D) entitlement

Q: ________ insurance is designed to cover you in the event that a business (its employees) fails to do something that causes harm to a customer. A) Negligence B) Errors and omissions C) Product liability D) Casualty

Q: ________ insurance compensates employees for loss of income and for medical expenses due to job-related injuries. A) Short-term disability B) Disability C) Injury D) Worker's compensation

Q: A ________ is the amount of loss or damage that you agree to cover before any insurance coverage takes over. A) deductible B) carrying cost C) premium D) co-insurance

Q: A low deductible will yield a ________. A) lower premium B) higher coverage plan C) has no impact on the premium D) higher premium

Q: ________ protects people from having property or wealth stolen, lost or destroyed. There are many kinds and in order to purchase it you pay a monthly, quarterly or annual ________. A) Insurance/carrying cost B) Insurance/premium C) Insurance/dividend D) Insurance/maintenance fee

Q: To protect against lawsuits brought by anyone injured by your product, you will need to buy ________. A) liability insurance B) business insurance C) casualty insurance D) an umbrella policy

Q: You purchase $250,000 worth of insurance to protect your restaurant with a $10,000 deductible. How much money are you entitled to receive as a payout if a fire destroys your store which is valued at $250,000? A) $240,000 B) $10,000 C) $250,000 D) $240,000 less co-payment

Q: Explain the difference between a copyright and a trademark and how each is useful.

Q: A discount, when speaking of bonds, is the difference between a bond's trading price and its par value when the trading price is below par.

Q: High risk = high reward and conversely, low risk = low reward.

Q: The equity investor's risk is ________ that of the debt lender. A) much lower than B) lower than C) the same as D) higher than

Q: Bonds are a form of ________. A) debt financing B) equity financing C) Both of the above D) None of the above.

Q: If an investment is not risky, the reward or the potential return will probably be ________. A) around 20% B) high C) low D) around 15%

Q: Corporations sell equity in the form of ________. A) debt B) ownership C) stock D) perks

Q: The greater the potential reward, ________. A) the riskier the investment is likely to be B) the more the investment is likely to cost C) the less risky the investment is likely to be D) the longer it will take to show a return

Q: A share of stock represents ________ in a company. A) interest B) a right to discounts on products C) a concept like insurance D) ownership

Q: What are the Five "C's" of borrowing?

Q: There are many sources of capital to start a business. What are they?

Q: Why might a bank be more willing to loan money to a large successful company than to a start-up business?

Q: Who are venture capitalists? How do they get their returns?

Q: Lender financing occurs when a business establishes trade credit with the lender.

Q: Some federal agencies provide grants, loans, and/or loan guarantees for businesses that meet specific criteria. One of these is the United States ________. A) Interstate Commerce Commission (ICC) B) Small Business Administration (SBA) C) Federal Land Bank (FLB) D) Agricultural Extension Agency (AEA)

Q: No matter what way you approach raising money for your business, you will need a ________. A) written business plan B) family investment C) winning lottery ticket D) bank loan

Q: Methods of bootstrap financing include ________. A) getting suppliers to extend you credit terms B) using temporary help rather than permanent employees C) working from home or borrowing office space D) All of the above.

Q: Venture capitalists can make their money by ________. A) selling their percentage share of the business to another investor B) waiting until the company "goes public" and converting their shares into stock, which can then be traded on the stock market C) Either of the above. D) Neither of the above.

Q: ________ is property or other assets pledged against the loan that the lender can take and sell if the loan is not repaid. A) Equity B) Collateral C) Asset D) Guarantee

Q: If you are a small business owner looking for a loan, a bank will expect you to ________. A) find equity investors to spread the bank's risk B) incorporate in order to maximize cash flow C) personally guarantee that you will be responsible for the business loan D) incorporate in order to avoid taxation

Q: Which of the following is not a type of community development loan fund? A) community development banks B) public employee credit union C) community development credit unions D) venture capital

Q: The amount you will have to pay over a given period of time until the loan is repaid is called ________. A) payback B) principal C) present value D) debt service

Q: ________ accounts are credit accounts that have a single borrowing limit and may be used and repaid on a repeated cycle. A) Charge B) Loan C) Checking D) Savings

Q: Which of the following is not one of the "Five C's of Borrowing?" A) certainty B) collateral C) character D) conditions

Q: The lender has no say in the management or direction of the business, as long as the loan payments are made and contracts are not violated.

Q: Relying primarily on debt financing is very dangerous for a company because ________. A) creditors can force a company into bankruptcy or take over company property B) creditors can sabotage the business by refusing to lend it money C) creditors can gain a majority share of the company and take it over D) it can be very stressful for the owners, thus causing them to make mistakes

Q: If $5,000 is borrowed at 9 percent to be paid back over one year, the interest on the loan is ________. A) $450 B) $590 C) $500 D) None of the above.

Q: A ________ is a document agreeing to repay a certain sum of money (with interest) by a specified date. A) stock B) mutual fund C) promissory note D) bond

Q: If you take out a loan for $2,000 at an annual interest rate of 10%, how much interest will you pay each year? A) $100.00 B) $20.00 C) $200.00 D) $2000.00

Q: How is financing with equity different from financing with debt?

Q: The three common ways for a business to raise the capital it needs to grow are with earnings, equity, and debt.

Q: You could borrow money from friends and family who would like to invest in your business, or you could offer them ________. A) equity B) a bonus C) debt D) a job

Q: ________ are forms of gifts or grants to businesses. A) Tax abatements B) Tax credits C) Unpaid labor by friends and family D) All of the above.

Q: An investor who invests money into your business in exchange for equity receives ________. A) a monthly dividend out of the business profits B) liability for any debt the business incurs C) a share of ownership of the business D) annual dividends

Q: Financing a corporation with debt means borrowing or ________. A) taking a loan on a credit card B) borrowing from the entrepreneur's personal accounts C) lending money to customers D) selling bonds

Q: What do you have to do before you can sell stock in your business? A) hold an initial public offering B) register C) incorporate D) seek an attorney's help

Q: Financing with earnings is an option under what circumstances? A) A company has no debt and is growing. B) A company is profitable and has positive cash flow from operations. C) A company is profitable and has negative cash flow from operations. D) A company has substantial cash savings and marketable securities.

Q: Raising money for a business is an aspect of ________, which is the use of money for a purpose. A) comparative advantage B) equity analysis C) surety sequencing D) financing

Q: The amount of risk or threat of loss that an entrepreneur is willing to sustain is ________. A) risk acceptance B) risk tolerance C) risk aversion D) risk allowance

Q: Business failure is defined by Dun and Bradstreet as "business termination ________." A) with no notice B) because of owner illness C) with losses to creditors D) with loss of sales in three continuous quarters

Q: Statistics indicate that 45 percent of all small businesses ________. A) survive ten plus years B) fail after three years C) survive five or more years D) fail after the first year

Q: What are the tax issues for the various legal structures your business can have?

Q: Make your life easier at tax time by keeping ________. A) complete financial records B) operating ratios C) a good working capital figure D) high net income

Q: A ________ is a legal structure for your business which separates the owners/partners from personal liability and provides a more flexible allocation of profit and loss. A) limited liability company (LLC) B) sole proprietorship C) partnership D) limited partnership

Q: One of the penalties for failure to file proper wage taxes is sweeping your company bank account. What action will the federal government take? A) cleaning out your inventory of saleable items B) charge interest and penalties C) taking out any available funds D) confiscate your state business license

Q: As a sole proprietorship, you sell tangible products to the public at retail. You will need to pay ________. A) sales tax B) self-employment tax C) services tax D) Both A and B.