Small Business Management (MGTPT205) Chapter Test Fall 2008
Chapter 7 “Home-Based Businesses”
1) Insurance for a home-based business A) is usually not necessary. B) is automatically included with regular home-owner's insurance. C) is necessary only if the entrepreneur maintains an inventory. D) must be purchased in addition to homeowner's insurance. 2) Which of the following is NOT an advantage of home-based businesses? A) flexible hours. B) decreased wardrobe costs. C) lack of structure. D) less time spent commuting. 3) Home-based businesses A) are usually not covered by regular homeowners insurance. B) have special insurance needs. C) may need liability insurance if customers come to the home. D) all of the above 4) Most laws against home-based businesses were A) recently developed to protect quiet neighborhoods. B) enacted decades ago to protect neighborhoods from factories. C) were enacted before the industrial revolution. D) enacted recently to protect agricultural areas. 5) Property is usually zoned in one of four ways. Which of the following is not one of those ways? A) agricultural B) wholesale C) residential D) commercial 6) If an entrepreneur gets legal permission to operate a home-based business in a municipality where it is otherwise illegal, this is known as a A) zoning restriction. B) variance. C) revision. D) ordinance. 7) Prior to the Taxpayer Relief Act of 1997, an entrepreneur who spent most of the day at customers’ locations could A) take a deduction for a home office only if the business was in the service industry. B) take a large deduction for a home office. C) take a deduction for a home office as long as it was furnished with appropriate office furniture. D) not take a take a tax deduction for a home office. 1) _______
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8) Because of the Taxpayer Relief Act, entrepreneurs A) cannot take a tax deduction for a home office if the business is very
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small. B) will not qualify for the tax deduction if they use their home office mainly for administrative tasks. C) may qualify for the tax deduction even if they use their home office mainly for administrative tasks. D) will not qualify for the tax deduction if they are in a townhouse or condo. 9) Before beginning a home-based business, entrepreneurs should consider A) utility requirements. B) tax issues. C) insurance requirements. D) all of the above 10) In the past ten years, the image of home-based businesses has A) not been determined. B) improved. C) remained the same. D) declined. 11) Which of the following is false? A) Home-based businesses are now evenly distributed across the United States. B) In recent years, there has been an increase in the number of home-based businesses. C) Home-based businesses were very common before the development of railroads. D) all of the above 12) A recent survey found many home-based entrepreneurs A) were overinsured. B) had the right amount of insurance. C) did not believe insurance was a good investment. D) were underinsured. 13) As industrial parks and office complexes became more common, the number of cottage industries A) decreased. B) remained the same. C) increased rapidly. D) was not measured. 14) Compared to franchises that have a commercial location, home-based franchises are usually A) simpler to operate. B) more accommodating to the owner's lifestyle. C) less expensive. D) all of the above 15) Before the development of railroads and communication systems in the U.S., the economy depended on A) small factories. B) industrial parks. C) large corporations. D) home-based businesses. 9) _______
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16) Home-based businesses were very common A) during the 1930s. B) before the development of railroads and communications systems.
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C) right after World War II. D) during the 1960s. 17) A home-based entrepreneur must A) be self-disciplined. B) be prepared for family interruptions. C) be able to tolerate isolation. D) all of the above 18) Before the development of railroads and communication systems in the U.S., the economy depended on A) cottage industries. B) large corporations. C) industrial parks. D) office complexes. 19) Cities and municipalities have a legal right to A) prohibit home-based businesses. B) prohibit home-based businesses from hiring employees. C) limit the amount of space in a home that can be used for business purposes. D) all of the above 20) If a home is depreciated as part of the home office tax deduction, and the entrepreneur sells the home, A) the home-office tax deduction may not be taken for the next five years. B) no tax deduction can be taken for a home office in the next home that is purchased. C) the IRS will automatically audit the business. D) a capital gains tax may be due. 21) According to an article in Kiplinger’s Personal Finance Magazine, the most successful home entrepreneurs had a tendency toward A) skepticism. B) idealism. C) negativism. D) workaholism. 22) According to the U.S. Small Business Administration, the Taxpayer Relief Act A) will have no effect on small businesses. B) could cost small business owners a lot of money. C) is unconstitutional. D) could save small businesses a lot of money. 23) If an entrepreneur uses a home office for his company’s administrative tasks, a tax deduction may be allowed if the entrepreneur A) does not conduct substantial administrative or management activities anywhere else. B) has sales of less than $100,000. C) has sales of greater than $100,000. D) is not in the service industry. 24) In the early years of a home-based business, the entrepreneur's ability to combat ______ may make the difference between success and failure. 17) ______
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A) financial losses C) sales rejections
B) isolation D) poor marketing skills 25) ______
25) Before beginning a home-based business, entrepreneurs should consider A) insurance requirements. B) zoning ordinances. C) utility requirements. D) all of the above 26) In a home-based business, the lack of separation between work and home makes it easier to become a(an) A) self-disciplined entrepreneur. B) optimist. C) pessimist. D) workaholic. 27) The number of home-based franchises A) has decreased in recent years because independent home-based businesses have increased. B) has not been measured because they are relatively new. C) has increased in recent years to capitalize on the home-based business trend. D) has not changed in the past ten years but is likely to show a decrease over the next ten years. 28) The increase in home businesses has occurred because of A) the increasing use of the internet. B) greater concern for family issues. C) recessions and corporate downsizing. D) all of the above. 29) Property is usually zoned in one of four ways. Which of the following is not one of those ways? A) agricultural B) commercial C) institutional D) industrial 30) The home office tax deduction is advantageous in the short run, but may result in a tax burden if A) the home office is used for mailing advertising literature. B) the home is sold at a profit. C) there is no separate business phone. D) the company loses money
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