Choose the Best Alternative and Write the Letter of Your Choice on the attached paper.

1. Assume that a referral hospital is to be established in the north - east part of Bahir Dar City where
the majority of the residents of the city are living. Moreover, the site is assumed to be entrance of
most malaria infected people from the surrounding community. If a pharmacist is going to open a
drug store (Pharmacy) near the newly established hospital, the establishment of the hospital is -
______________ for the pharmacist.

A. Strength B. Threat C. Opportunity D. Weakness E. Warning

2. Which of the following statement is/are correct?

A. Basic business idea is at the top of the hierarchy and has a long life.
B. Businessmen should think of long-term goal and profit when they start a business.
C. Baisic business idea facilitiates choice of product under an overall plan.
D. All are correct E. All except B

3. Identify the correct steps to select the best business idea to be a successful entrepreneur using the
information given below:
1. Define your objectives 2. Select the best alternative
3. Identify, develop and analyze the possible alternatives 4. Identify your problem/need

A. 4312 B. 2341 C. 4132 D. 1432 E. 3241

4. If a businessman is enggaged in a small business firm which is created by contractual agreement

between two parties (buyer and seller) and if the buyer recieves specific technical assistance from
the seller, then the type of firm in which the businessman is enggaged is :

A. Personal service firm B. Family enterprise C. Corporation D. Franchise firm E. partnership

6. One of the following is not used to assess and evaluate a business idea:
A. The ability of the business to generate quick returns.
B. The ability of the business to permit quick changes in the products/services
C. The composition of the business founders and their origin
D. The ability of the business to achieve the founders short term and long term goals
E. The impact of the technology employed
7. Hard working, high devotion of their energy and single mindedness are all essential
elements in the entrepreneurial profit. This statement specifically shows:
A. Self-confidence B. All-roundedness C.A need to seek refuge D. Total commitment
8. The primary purpose of a business plan is to:
A. attract lenders and investors.
B. enable an entrepreneur to take his or her company public.
C. guide a company by plotting a strategy for its success.
D. meet other legal requirements designed to protect lenders and investors.
9. Which one is not an external source of financing a small business firm?
A. Private investors B.Commercial banks C. Credit unions D. Insurance
companies

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E. Equipment suppliers
10. Select the incorrect characteristics of small business finance:
A. High proportion of working funds B. Personal control. C. Low credit standing
D. High documentation system E. None
11. The properties owned by a business enterprise are called:
A. Assets B. Liabilities C. Stockholder’s equity D. Owner’s equity E. All
12. Which one of the following is not included under current asset category?
A. Revenue B. Expense C. Prepaid expense D. Land E. None
13. The existence of automatic loss detection programs like Fire alarms and Warning posters /NO
SMOKING!! , DANGER ZONE!!/. What type of risk management tool is this?
A. Avoidance B. Prevention C. Retention D. Separation E. Transfer

14. In “promotional mix” aspect of marketing organization, which one of the following represents
“selling by giving gifts, games, sampling, coupons, and window displays”?
A. Advertising B. Personal selling C. Sales promotion D. Publicity
15. Most bankers refer to the five Cs of credit in making lending decision. This of the following is not
one of the “Five C’s of Borrowing”?
A. Certainty B. Collateral C. Character D. Conditions
16. Dividing the market by attributes, motives, and lifestyles that have been observed is ________
segmentation.
A. demographic B. behavioral C. psychographic D. benefits-sought
17. Market study is one of the main parts of a feasibility study of a project/a business venture. Which
one of the following is not under the concepts of marketing?
A. Organizations are market oriented
B. Marketing focuses on selected markets
C. Customer satisfaction is the core of marketing
D. Marketing starts early before production & continues after selling E. None
18. Financial planning is the process of formulating policies and strategies relating to:
A. Procurement B. Investment C. Administration of fund D. The entire above E. None

 Financial planning is the process of formulating policies and strategies relating to the procurement,

investment and administration of funds for an enterprise .

19. Profit organizations that purchase equity positions in young businesses they believe have high
growth and high profit potential is known as:
A. Public stock sale B. Venture capital companies C. Angeles D. Credit unions

21. The type of innovation that makes the competencies involved in the old technologies obsolete is:
A. Incremental Innovation B. Transformational innovation
C. Radical Innovation D. Induced innovation
22. Writing a business plan can insure that:
A. You figure out how to make your business work B. You meet your target revenue goals
C. You achieve your expense projections D. You make a profit E. None
23. In a corporate business, all profit goes to
A. The owners and the shareholders B. The Stockholders as salaries
C. The partners according to the terms of agreement D. The Corporate refugees’

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24. In which one of the following situations a market is said to be saturated for a certain product
or service?
A. When the competitors have entered to the market and forced the price of the product/service so low that selling
can no longer earn a profit
B. When there has been so much advertising and publicity that almost everyone in the market is aware about the
product/service
C. When most of the people in the market who are interested on the product/service have already purchased it
D. When there is a high demand of the product/service and customers place to much order for it E. None

25. The type of business partner that assumes limited liability, risking only his /her investment in
the business is A. Limited partner B. General Partner
26. An entrepreneur’s market is
A. the building or compound where his/her business is located
B. the group of people who are his/her current or potential customers
C. his/her promotional activities D. His/her cash capital E. His /her assets

27. The final aspect of the financial feasibility analysis combines the estimated earnings and the capital
requirements to determine………….
A. Rate of return on the capital invested B. Net Profit
C. Borrowings interest rate D. Fixed capital E. Net present value of assets
28. Which of the following is not a potential advantage of franchising for a franchisee?
A. Management training and assistance
B. Involving in national and international advertising program
C. Increasing the buying power as it happens centrally
D. Having limited product lines as specified by the franchisee
E. Brand name appeal and standardization of goods and services
29. Which one of the following is not used in the process of business risk qualification
A. Determination of the chance of an occurrence or relative frequency
B. Determination of the impact of losses upon financial affairs
C. Predicting the losses that will actually occur during accident. D. None

30. Which of the following correct about hierarchy of the business plan?

a. Basic business idea, product, product range, product line

B. product, basic business idea, product range, product line

C. basic business idea, product line, product range, product line

D. basic business idea, product line, product line, product range

31. Promotional mix includes A. Advertizing B.personal selling C.publicity D. sale promotion E. all

32. ------refers to any factor that offer to promise or potential to closer or more quick towards firm’s goal.

A. opportunity B. threat C. strength D. weakness E. none

33. When the business plan prepared?

A. at start of new business b. At time of business purchase c. On progress of the business d. at decision making e.all

34. ---call for the market in to geographical unit such as nation, state, region, countries, cities or nghiboring.

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A. geographical segmentation b.demogrphical segmentation c. pyphlogical segmentation d. behavioral segmentation.

35. Grouping an overall market in to homogeneous group based up on population characteristics such as age, sex,
and income level. A. geographical segmentation b. pyphlogical segmentation c. demographical segmentation d.
behavioral segmentation

A B.
_______1. Blacksmith A. Establishing a hotel near tourist attraction
area
_______2. Exploiting opportunity B. Economic control criteria
_______3. Qualitative approach used to define small business firm C. Artisan Entrepreneur
_______4. Threat D. An inherent limitation or constraint, which creates a strategic disadvantage.
_______5. Weakness E. Any factor that may limit or impede the business in the pursuit of its goals
F. Opportunistic Entrepreneur G. Size criteria
1.why small business and or Entrepreneurship is important to economy of a country and what are the
causes for their failure? Give at least four reasons for each. [8pts]

1. The innovative capacity of an entrepreneur and more accurately, of companies operating in that
field, is a key determinant of its capability to enhance the economic development and to upgrade the
standard of living of a country. It is widely accepted that one of the indicators of this innovative
capacity is the rate of creation of New Technology-Based firms. Write the main catalytic factors for
the success of high technology-based enterprises? [5pts]
2. Define briefly Entrepreneur and Entrepreneurship relative to traditional businessman and traditional
business development respectively? [6pts]
3. A business organization wants to obtain legal business ownership as a partnership business between
three individuals. One of the three partners wants to take an active role in managing the partnership
business, but he wants to hide his identities from the public. If the majority of the partnership
business is assumed to be contributed by the other two members of the partnership, by what kind of
partner can this individual be represented in the business?_ secret partner ________ [5 pts]
4. A certain enterprise manufactures a limited line of sports equipment, including water skis and
skateboards. Historically the enterprise has priced its products on a cost plus basis. Because of the
strong demand for its products the enterprise has given little attention to controlling manufacturing
costs. They have passed cost increase along to the consumer in the form of higher prices. In recent
months, increased competition and a sluggish economy have made management more conscious of
costs. As the production manager and owner for the enterprise, you have been asked to develop a
system to insure that costs are under control and the pricing policy is changed. Which pricing
policy would you choose for such an enterprise at such a condition?______premium pricing ___
Justify your answer briefly. [4+4pts]
5. An entrepreneur wants to start business in the area of information technology. To start with, he
outlines and analyzes several alternatives or methods of achieving business success in the area

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 which will help him to narrow the scope of the project to identify the best business model. The
entrepreneur identifies and defines a number of scenarios or alternatives. In doing so which basic
step of business setting up is being done by the Entrepreneur, Feasibility study or business plan?
____________________________________. Justify your answer [4+4 pts].
6. Risk exists whenever the future is unknown. Since no one knows the future exactly, everyone is a
risk manager for himself i.e., not by choice, but by sheer necessity.
A) Describe risk management process in business enterprise? [5pts]
1. To recognize exposure to loss
2. To estimate the frequency and size of loss,
3. To decide the best and most economical method of handling the risk if loss.
4. Implementing the decision (risk response control)
5. Revaluating the decision
B) Once the risk manager has identified and measured the risks facing the firm, the next task is to
seek for appropriate tools and decide how best to handle them. Explain at least five tools of risk
management. [5pts]
1. Avoidance 2. Retention/Acceptance =Bearing all the risk by that person/organization. Types of retention

3. Loss Prevention and Reduction Measures

Prevention is defined as a measure taken before the misfortune occurs. Generally speaking, loss prevention programs
intend to reduce the chance of occurrence. 
4. Separation /Diversification 5 Transfers
Part III: Answer the following Questions (3 pts each)
1. Explain why it is important to consider opportunity cost when making a business decision.
2. Explain in brief the difference between Artisan Entrepreneurs and Opportunistic Entrepreneur.
3. Describe three potential rewards of becoming an entrepreneur that appeal to you.
4. Explain what market segmentation is and how it applies to marketing in small businesses.

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

6. Write the four legal forms of business owner ship .in your explanation; raise at least the ownership
process of the business in each type.

7. Describe the four pricing strategies, and which strategy is important to new enterprise ?

8. Define small business using economic and size criteria.

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