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True-False Questions

1.  Entrepreneurs provide the financing to individuals who think, reason, and act to convert ideas into commercial opportunities and create opportunities.

2.  Entrepreneurship is the process of changing ideas into commercial opportunities and creating value.

3.  An entrepreneur is an individual who thinks, reasons, and acts to convert ideas into commercial opportunities and to create value.

4.  Mark Twain once said, “I was always able to see an opportunity before it became one.”

5.  Small businesses, those with less than 500 employees, represent over 99 percent of all employers, and account for about one-half of the gross domestic product in theUnited States.

6.  Small and growing enterprises are critical to the U.S. economy; small firms provide 20 to 30 percent of net new jobs.

7.  Small high-technology firms are responsible for twice as many product innovations per employee and obtain more patents per sales dollar than large high-technology firms.

8.  Phillips and Kirchhoff, using Dun & Bradstreet data, found that 24 percent of new firms were still in existence after two years of operation.

9.  Nearly half of business failures are due to economic factors such as inadequate sales, insufficient profits, and industry weakness.

10.  Although the risks associated with starting a new entrepreneurial venture are large, there is always room for one more success.

11.  Studies by Phillips and Kirchhoff, and by Headd, found that about 38%-40% of new firms survived six years of operation.

12.  One study of Inc. magazine’s 500 high-growth firms suggests that about 88 percent of founders feel their firms’ successes are due to extraordinary ideas, while the remaining 12 percent feel their firms’ successes are due to exceptional execution of ordinary ideas.

13.  “Fads” are large societal, demographic, or technological trends or changes that are slow in forming but once in place continue for many years.

14.  “Fads” are not predictable, have short lives, and do not involve macro changes.

15.  Three major megatrends discussed in Chapter 1 include: societal trends or changes, demographic trends or changes, and technological trends or changes.

16.  In 1982, Harry Dent identified several major or megatrends shapingU.S.society and the world.

17.  The so-called “baby boom” generation applies to people born in theUnited Statesduring the 1946-1964 time period.

18.  Perhaps the most important invention shuttling us from an industrial society to an information society is the computer chip.

19.  Environmental commerce, or e-commerce, involves the use of electronic means to conduct business online.

20.  The Office of Advocacy of the U.S. Small Business Administration documents that “employer firm births” have approached 600,000 annually in recent years.

21.  Reasonable estimates place nonemployer (e.g., single person or small family) business started each year at less than 100,000.

22.  Bill Gates once said: “I was seldom able to see an opportunity, until it ceased to be one.”

23.  A study by Phillips and Kirchhoff using Dun & Bradstreet data found that about three-fourths of new firms were still in existence after two years of operation.

24.  Studies by Phillips and Kirchhoff, and by Headd, found that one-half of new firms or new employers were still in existence after four years of operation.

25.  Nine principles of entrepreneurial finance are identified and explored in this entrepreneurial finance textbook,

26.  The “time value of money” is an important component of the rent one pays for using someone else’s financial capital.

27.  A venture’s financial objective is to survive.

28.  Private financial markets are a place where standardized contracts or securities are traded on organized security exchanges with restrictions on how they can be transferred.

29.  Free cash flow is the net income forecast to be available to the venture’s owners over time.

30.  Free cash flows are adjusted for risk and the time value of money when used to calculate the value of a venture.

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