ENTREPRENEURSHIP AND INNOVATION

TUTOR MARKED ASSIGNMENT QUESTIONS

GENERAL INSTRUCTION

1. The TMA for this course do have three types of questions:

1.1 Part I which includes multiple type questions (15 Points)

1.2 Part II which contains short answer questions (15 points)

1.3 Part III developing a business proposal (30 points)

2. The first TMA includes chapter one and two, the second TMA covers chapter three and

four, and the last TMA involves chapter five and six.

TMA 01:
Includes: Chapter one and two

CHAPTER ONE: ENTREPRENEURSHIP – AN OVERVIEW

PART I: MULTIPLE CHOICE QUESTIONS

1. Some entrepreneurs report that the financial rewards associated with entrepreneurship can
be bittersweet if they are accompanied by
A. modest upside potential
B. the thrill of starting a business
C. motivating factors
D. losing control of the firm
E. None of the above
2. Which of the following is NOT a common myth about entrepreneurs?
A. Everyone has the potential to be an entrepreneur.
B. Entrepreneurs are born, not made.
C. Entrepreneurs are gamblers.
D. Entrepreneurs love the spotlight.
E. B and C
3. Influence on innovation and job creation best typifies entrepreneurial firms' ________.
A. impact on society
B. economic impact
C. impact on larger firms
D. impact on the environment
E. All of the above

4. The entrepreneurial process is comprised of each of the following steps EXCEPT:

A. Deciding to become an entrepreneur.
B. Inventing a new product or process.
C. Managing and growing the entrepreneurial firm
 D. Moving from an idea to an entrepreneurial firm.
E. None of the above
5. Which of the following is true?
A. Approximately one-third of new firms fail within their first four years.
B. Entrepreneur and inventor mean essentially the same thing.
C. Entrepreneurship only pertains to starting new businesses, not existing firms.
D. The average entrepreneur does NOT make more money than someone with a similar
business.
E. All of the above
6. Each of the following are ways to identify an opportunity EXCEPT:
A. Observing trends.
B. Solving a problem.
C. Trying out alternative uses of existing products.
D. Finding gaps in the marketplace.
E. All of the above
7. Entrepreneurs can recognize problems and find ways to solve them through each of the
following EXCEPT:
A. Recognizing problems in emerging trends.
B. Identifying a currently available product or service and then building a business
around a better version.
C. Framing a problem differently than it's been thought of before, and then proposing
an appropriate solution.
D. Experiencing a problem in one's own life, and then realizing the solution represents
a business opportunity.
E. None of the above

8. Which of the following is true?

A. As an entrepreneur, it is important to be aware of changes in trends.
 B. Major retailers that serve large groups of customers with similar needs by
competing mainly on price would be an example of finding gaps in the marketplace.
C. Often, entrepreneurs are able to pursue an opportunity even before it is recognized
as an opportunity.
D. A and B
E. All of the above
9. In the middle period, an entrepreneur was:
A. Viewed as a merchant adventurer.
B. One who entered into a contract with the government to supply goods and services.
C. Viewed as a person who introduced an innovative product to the market.
D. All of the above.
E. None of the above.
10. An individual who takes responsibility for pushing an innovative idea, product, or process
within an existing business is called:
A. Intrapreneur.
B. Entrepreneur.
C. Corporate entrepreneur.
D. All of the above.
E. A and C.

SHORT ANSWER QUESTIONS

1. Discus entrepreneurship's importance to the economy and society as a whole.

2. What are the steps of the entrepreneurial process?
3. What are the major sources of innovation? Explain and give an example of each
4. Why is entrepreneurship both challenging and rewarding? Is it more rewarding than
other occupations? Why?

CHAPTER TWO: ETREPRENEURIAL BACKGROUNG, TRAITS AND

MOTIVATIONS
PART I: MULTIPLE CHOICE QUESTIONS

1. Entrepreneurial behavior typically requires all of the following EXCEPT:

A. Invention of something new
B. Willingness to take risks.
C. Drive.
D. Creativity.
E. C and D
2. What is the most common reason given for why people choose to become entrepreneurs?
A. To make a lot of money.
B. To be their own boss.
C. To be able to retire early.
D. To escape the long hours associated with corporate jobs
E. All except B
3. All of the following are characteristics shared by successful entrepreneurs EXCEPT
A. Passion.
B. Risk averse.
C. product/customer focus
D. Tenacity despite failure.
E. None of the above
4. Which of the following is true about the qualities of successful entrepreneurs?
A. Only individuals that thrive on taking big risks have the right personality to be an
entrepreneur.
B. According to research, most entrepreneurs are born, not made.
C. Only individuals that thrive on taking big risks have the right personality to be an
entrepreneur.
D. A and C
E. None of the above
5. Emotional stability refers to:
A. The ability of a person to find a solution by himself or herself
 B. A belief in oneself
C. Strictly follow emotion at the time of stress
D. The ability to identify problems from situations that stabilize emotion
E. None of the above.
6. Which of the following is both a trait and motivation in entrepreneurship?
A. Need for power
B. Need for freedom
C. Need for autonomy
D. Need for achievement
E. A and D
7. Which of the following is true?
A. Men entrepreneurs are less tolerable to a stressful situation
B. Women entrepreneurs are more confident than their male counterparts
C. Men and female entrepreneurs are similar in their level of flexibility.
D. Both male and female individuals are goal oriented and hard workers
E. All of the above.
8. Which of the following is wrong about successful entrepreneurs?
A. A great need for independence and autonomy.
B. Substantial need to achieve and tolerance of ambiguity.
C. A lower need for social support.
D. High energy and endurance.
E. None of the above.
9. Given a sizable risks, time and energy requirements of entrepreneurship, ________ are
motivators for many individuals to be entrepreneurs:
A. Independence or being once own boss.
B. Short term profit.
C. Personal and professional growth.
D. Unemployment.
E. All of the above.
 F. All except b.
10. Hard working, energy, and single mindedness are all essential elements of the
entrepreneurial profile. This statement specifically shows:
A. Emotional stability.
B. All – roundness
C. A need for refuge.
D. Self confidence.
E. None of the above.

SHORT ANSWER QUESTIONS

1. What are the essential qualities of an opportunity?

2. Researchers have identified several characteristics that tend to make some people
better at recognizing opportunities than others. Discuss them.
3. Are entrepreneurs born or made? Did entrepreneurs profiled seemed to have
entrepreneurial characteristics that would give them a tendency to start their own
venture?
4. Some of the characteristics attributed to entrepreneurs include internal locus of control,
calculated risk takers and have a conceptual ability. What does this statement meant?
Be complete in your answer.
5. Are entrepreneurs born or made? Did entrepreneurs profiled seemed to have
entrepreneurial characteristics that would give them a tendency to start their own
venture?

TMA 02: Includes: Chapter three and four

CHAPTER THREE: SMALL BUSINESS OWNERSHIP ALTERNATIVES

PART I: MULTIPLE CHOICE QUESTIONS

1. Which one of the following questions can not be addressed at the time of business
evaluation for buying?
A. Do any unfavorable contracts against the business exist?
B. Why is this business being sold?
C. What is the degree of competition?
D. How much capital is needed?
E. Where will the business be established?
2. _______ refers to the operation of a retail franchise with in the physical facilities of a
host store.
A. Trade name franchising.
B. Piggybacking
C. Master franchising
D. B and C only
E. None
3. Which one of the following is among the weaknesses of franchising to a franchisor?
A. Financial assistance
B. Management training and support
C. Reduced risk and cost of expansion
D. Brand-name appeal
E. None of the above.
4. The process of starting a business from scratch begins with:
A. Developing a business plan.
B. Identifying and evaluating opportunities and problems from the environment.
C. Evaluating the business offered for sale.
D. Commencing the business.
E. Identifying a business offered for sale or bid.
5. The benefits of small businesses to a country’s economy include all except;
A. Provide big businesses with many of services, supplies, and raw materials they
need.
B. Major innovations are as likely to come from small businesses as from big
businesses.
C. Large number of new jobs relatively comes from the birth of large new firms
than small businesses.
D. Distribute the goods and services of big businesses.
E. None

6. In a franchising agreement:
A. A franchise business gives the franchisor the right to use a widely recognized
product or trade name.
B. The franchisee is expected to pay royalties fees.
C. Provides the franchisee with a lot of revenue as from of initial franchise fees,
royalties fees, sales of product, etc.
D. All of the above.
 E. All except c.
7. Relative to acquisition, starting a business from scratch as a means of business
ownership:
A. Requires less the time and costs in launching an entirely new business.
B. Permits the entrepreneur to establish his or her own reputation in low cost and
effort.
C. Reduces the uncertainty involved in launching an entirely new venture.
D. Gives the entrepreneur an opportunity to provide unique products.
E. b and d.
F. All of the above
8. Creating an entirely new business is preferable in the following situations except:
A. Avoiding undesirable precedents of existing firms
B. Existing firm offered to be sold has certain desirable features such as good
image, market, and future growth potential, etc…
C. Making decisions concerning an ideal location, equipment, product, service, etc…
D. When the entrepreneur has developed a new product or service that
necessitates new type of business
E. None

9. At which phases/process/step of starting a business from a scratch is the entrepreneur

responsible for supervising the day to day operation of the new enterprise?
A. Implementing the business plan
B. Managing the enterprise created
C. Developing a business plan
D. Identifying a genuine business opportunity
E. None of the above
10. In a franchising agreement:
A. A franchisor gives a franchisee the right to use a widely recognized product or
trade name.
B. The franchisee is expected to pay royalties fees.
C. Provides the franchisor with a lot of revenue in a from of initial franchise fees,
royalties fees, sales of product, etc.
D. All of the above.
E. All except c
SHORT ANSWER QUESTIONS
 1. Describe the concept of a business franchise
2. Describe how a franchisor profits from a franchise concept
3. Explain “the book value” method of asset valuation and its benefits
4. Identify and briefly describe major considerations for buying an ongoing business
5. Describe the major steps involved in new business startup from scratch.

CHAPTER FOUR: SMALL BUSINESS VITAL COMPONENT OF THE

ECONOMY

PART I: MULTIPLE CHOICE QUESTIONS

1. Which of the following is the best form of business ownership?

A. Sole proprietorship
B. Partnership
C. Cooperatives
D. Corporation
E. None of the above
2. Which of the following is not the consideration that every entrepreneur should review
prior to making the final form of ownership?
A. Tax considerations
B. Liability exposures
C. Startup capital requirement
D. Management succession plan
E. None of the above
3. Relative to sole proprietorship, which of the following is not true about partnership?
With partnership:
A. The owners are not legally liable for all debts of the business.
B. The owners must not wear lots of different hats
C. The business can significantly broaden the pool of capital available
D. The business avoids the double-taxation
E. None of the above.
4. Under a corporate business ownership:
A. The business can generally react quickly to changing market conditions
B. There is no distinction between the business and the owners’ private issue
C. The assets and liabilities, rights and obligations incidental to the company are
assts and liabilities, rights and obligations only to the company
D. b and c
 E. None of the above
5. With sole proprietorship, all are true except:
A. Though the legal requirement is not simple establishing this business is easy and
simple
B. The individual himself or herself provides the capital either from his or her
personal saving or by selling stocks to potential investors
C. The individual may run the business alone or take the help of the member of the
family
D. In the eyes of the law, there is no distinction between the business and the
individual private affaire
E. None of the above

6. Which of the following is not the advantage of sole proprietorship?

A. It is simple to establish because there may not be a need for making it formal
B. All the profit of the business belongs to one person
C. Since confidential information is a key to success of competitive business, life is
hard to maintain the secrecy of such form of business.
D. The profits from the business are the personal income of the owner and each
declare on his individual income tax return
E. None of the above
7. A secret partner:
A. Assumes unlimited liability, and is usually active in managing the business

B. Assumes limited liability, risking only his or her investment in the business

C. Takes on active role in managing the partnership but whose identities are
unknown to the public

D. Are not actually involved in the partnership but lend his or her name to the
business for public relations purpose

E. A and D

8. Which of the following is/are considered as part of mismanagement in small business

activities?
A. Over investment on fixed assets
B. Poor inventory control
C. Planned resource allocation
D. Poor financial control
E. All except C
9. Every year small businesses cease operations. All are causes of small businesses failure
except:
A. The owners simply do not know how to run the enterprise.
 B. Owners do not have well-rounded experience in major activities of the business.
C. Owners have entered a business line for which he or she has very little
knowledge
D. Owners invest unnecessary capital on business plan.
E. None of the above
10. The following are criteria for defining small businesses except:
A. The size of the business
B. Year of establishment.
C. Number of workforce requirement
D. Capital investment requirement
E. None of the above

SHORT ANSWER QUESTIONS

1. Discuss why many new entrepreneurial businesses start small

and remain small?
2. How can you explain the unique contributions of small business
to product innovation?
3. List and describe some of the non-financial costs of business
failure.
4. What special contribution is made by small business in providing
jobs?
5. Explain the advantages of partnership relative to corporation.

TMA03:

Includes: Chapter five and six

CHAPTER FIVE: FINANCING ENTREPRENEURIAL BUSINESS

PART I: MULTIPLE CHOICE QUESTIONS

1. To avoid conflict with friends and relatives, the entrepreneur should do which of the
following?
A. Honestly present the investment opportunity

B. Clearly state the nature of risks involved

C. Avoid unrealistic expectations

D. All

E. None

2. The two factors that make a deal attractive to venture capitalists are
A. High risk and less return

B. High risk and strong exit barriers

C. High returns and a convenient exit strategy

D. Less risk and high exit barriers

E. None of the above

3. The following are some of the non-bank sources of debt capital except:
A. Trade credit

B. Insurance companies

C. Account receivable financing

D. Credit unions

E. None

4. Which of the following is false?

A. Trade credit is common form of equity financing for which it does not need cost of
capital.
B. Factor companies help small businesses to free up cash by purchasing account
receivables at a discount value.
 C. No matter what type of financing is chosen, careful planning is necessary to secure
it.
D. With equity financing investors receive partial ownership in the company.
E. None of the above.

5. All are advantages of equity financing except:

A. Provides capital on a permanent basis with no requirement of repayment of
principle or interest.
B. Carries a higher cost of capital; therefore, more expensive _ Dilutes ownership
control of the business.
C. Increases the company's net worth, hence improving the financial stability of the
company and its ability for other debt financing.
D. Can result in outside expertise being available for management.
E. None of the above.
6. Which one of the following is/are the classic criteria for good collateral?
A. Ease of transfer of title.
B. Low cost/no cost to maintain.
C. Increasing in value.
D. A ready and liquid market.
E. All of the above.
7. Factoring refers to :
A. Credit given by suppliers who sell goods on account

B. The pledge of receivables as collateral

C. Equipment lenders offer reasonable credit terms

D. The sale of receivables at a discount

E. None of the above

8. Debt financing is shown in the balance sheet as part of _____________

A. Current asset
 B. Liability

C. Fixed asset

D. Equity capital

E. None of the above

9. Which of the following is not a potential source of equity financing?

A. Personal saving.
B. Private investors.
C. Part of profit made by the business.
D. Sale of the assets of the business.
E. None of the above.

10. The source of finance for the new venture depends on:
A. How much money do you need?
B. What personal financial resources are you willing to invest in the business?
C. How long have you been in business, and what is your track of record?
D. How much are you willing to give up ownership of the business?
E. All of the above.

SHORT ANSWER QUESTIONS

1. How would you advise a potential entrepreneur who came to you seeking information
on financing sources? What questions would you need to ask in order to give a good
response?
2. Suppose an entrepreneur plans to start a business that will require total startup costs of
Birr 100,000. Assume the entrepreneur has Birr 5000 of his own money to invest. Why
might it be difficult to find a bank loan for the remaining Birr 95,000?
 3. What are the criteria that banks use to evaluate a loan application?
4. What is the difference between a private sale of stock and public sale of stock?

CHAPTER SIX: THE BUSINESS PLAN

PART I: MULTIPLE CHOICE QUESTIONS

6. A business plan is important for all of the following reasons EXCEPT:

A. A business plan forces a firm's founders to systematically think through each aspect
of their new venture.
B. A business plan provides lenders and investors assurance that they will earn a
decent return.
C. A business plan provides an investor with something to react to.
D. A business plan is a selling document that enables a company to present itself to the
public
7. Which type of business plan is meant primarily for an internal audience?
A. Summary plan
B. Full business plan
C. Potential suppliers and business partners.
D. Executive summary
E. Operational business plan
8. Why is the executive summary perhaps the most important section of the business plan?
A. This section of the plan provides in-depth discussion of the major trends in the
industry in which the firm intends to compete.
B. This section of the plan summarizes the firm's key executives.
C. If this section of the plan fails to attract an investor's interest, he or she is unlikely to
read the remainder of the plan.
D. This section of the plan deals with the day-to-day operations of the company.
9. In which section of a business plan should issues like facilities and equipment be discussed?
A. Financial Plan
B. Industry Analysis
 C. Marketing Plan
D. Operations Plan
5. What are pro forma financial statements?
A. forward-looking financial projections
B. financial assumptions
C. historical financial statements
D. ratio analyses
6. Most business plan writers interpret a firm's pro forma financial statements through:
A. historical analysis
B. present value calculations
C. assumption reviews
D. ratio analysis
7. All of the following are commonly found in the appendix of a business plan EXCEPT:
A. resumes of top management.
B. discussion of the business model
C. photos.
D. product prototype diagrams.
8. Section of the business plan highlights in a concise and convincing manner the key points in
the business plan.
A. Environmental and industry analysis
B. Industry analysis
C. Executive summary
D. Description of the venture
E. Financial plan
9. In preparing a business plan, the guide “Do not over diversify” refers to:
A. Focus the attention of the plan on one main opportunity for the venture
B. Substantiate the marketability of the product/service by identifying the particular
customer group
C. The entrepreneurs’ ability to identify potential problems
D. Sales potentials, revenue estimates, etc… should not be inflated
E. None of the above
10. ____________ determines the potential investment commitment needed by the new
venture and indicates whether or not the business is economically feasible
A. Assessment risk
B. Operation plan
C. Production plan
D. Marketing plan
E. All of the above

TUTOR MARKED PROJECT ASSIGNMENT

1. Discuss with your tutor and identify one viable, feasible and profitable business idea
and attempt to develop a business proposal.