Intro to Business: Chapter Five Review Questions:
1. What information would you need to determine whether a particular business is small according to SBA guidelines? Information that we would need to determine whether a particular business is small according to SBA guidelines are listed below:
No. of employees
Annual sales receipts
Max. 500 – 1,500
$6 million - $24.5 million
5. General construction
$12 million - $28.5 million
6. Special trace construction
Up to $12 million
$0.75 million - $5 million
$6 million - $29 million
2. Which two areas of business generally attract the most small-businesses? Why are these areas attractive to small business? Two areas of business that generally attract the most small businesses and the reasons why these areas attract the small businesses are Distribution Industries: This category includes retailing, wholesaling, transportation and communications. These industries concerned with the movement of goods from producers to consumers. Of these, almost ¾ are involved in retailing (sale the goods directly to consumers). For example: Clothing, jewelry stores, pet shops, bookstores and grocery stores. Service Industries: This category attractive the small businesses for over 48%. Of these, about ¾ provide such non-financial services as medical and dental care; watch, shoe repairs, restaurants, dry cleaning. Only 8% of the small service firms offer financial services, such as accounting, insurance, real estate, and investment counseling.
4. What kinds of factors encourage certain people to start new business? In some people, the motivation to start a business develops slowly as they gain the knowledge and ability required for success as a business owner. Knowledge and ability – especially management ability – are probably the most important factors involved.
5. What are the major causes of small-business failure? Do these causes also apply to larger business? The major causes of small-business failure are lack of capital, management and planning. Businesses can experience a number of money related problems. Entrepreneurs not only need the capital to open a business but also the money to operate it. One cash-flow obstacle often leads to others. And a series of cash-flow predicaments usually ends in a business failure. The major causes the small-business failure does not apply to larger business. The major causes the larger business failure are the overexpansion. Many entrepreneurs with successful small businesses make the mistake of overexpansion. Fast growth often results in dramatic changes in a business. Thus the entrepreneurs must plan carefully and adjust competently to new and potentially disruptive situations.
6. Briefly describe four contributions of small business to the American economy. The contribution of small business to the American economy is listed below: Providing the technical innovation many of inventions sparked major new U.S. industries or contributed to an established industry by adding some valuable service. Ex: Air conditioning, helicopter, airplane, jet engine, penicillin, personal computer, etc. Providing employment small businesses provide 67% of workers with their first jobs and initial on-the-job training in basic skills. Small businesses thus contribute significantly to solving unemployment problems. Providing competition ( small businesses challenge larger, established firms in many ways, causing them to become more efficient and more responsive to consumer needs. Filling needs of society and other businesses ( small firms also provide a variety of goods and services to each other and to much...
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