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EXAMINATION : ENTREPRENEURSHIP (ENT)

ENTREPRENEURSHIP (ENT001)

DATE : 28 OCTOBER 2014

TIME ALLOWED : 3 HOURS

TOTAL MARKS : 100

MATERIAL SUPPLIED : ANSWER BOOK

COMMUNITY FARMS AND PRODUCE
CASE STUDY

INSTRUCTIONS TO CANDIDATES

1. Please refer to the examination rules and regulations as found in the

examination answer book.

2. SECTION A is COMPULSORY and is worth 20 marks.

3. SECTION B is COMPULSORY and is worth 40 marks.

4. Answer ANY TWO (2) questions from Section C. Each question is worth
20 marks.

5. Read each question carefully to determine exactly what is required before

attempting the answer.

6. Set your answers out in a systematic way under appropriate headings and sub-
headings.

7. Number your answers clearly.

8. IMPORTANT: Indicate the questions attempted by drawing a circle around the

question number on the front cover of the answer book.

NOTE:

 Examination answer books are the property of the IMM GSM and may not be
removed from the examination hall.

 Answers to examination questions should not include appendices in the form of

personal notes to the examining panel.

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October 2014 Examination ENT/ENT001
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SECTION A (20 MARKS)

COMPULSORY
Answer all the MULTIPLE-CHOICE QUESTIONS

References are to the prescribed textbook: Petty, J.W., Palich, L.E., Hoy, F. and
Longenecker, J.G., 2012. Managing Small Business: An Entrepreneurial Emphasis.
16th ed. South Western College CENGAGE Learning.

QUESTION 1 (MULTIPLE CHOICE) [20]

Indicate your answers to each of the following questions in your answer book
provided. Each question is worth one (1) mark.

Select the MOST APPROPRIATE answer for each question from the choices given
below. Mark your answer with an X in the correct block in the ANSWER BOOK.

1.1 Based on Petty et al. (2012), which one is not an entrepreneur?

a. Founder
b. Second generation owner-manager
c. Franchisee
d. Innovative salaried manager

1.2 A person who initiates a new business is classified as a ________.

a. founder
b. general manager
c. franchisee
d. two of the above are correct

1.3 Ethical issues

a. seldom involve legal issues.
b. are questions of right and wrong.
c. are always clearly defined.
d. often resolve themselves.

1.4 In a small business, the most important key to ethical performance is

a. a code of ethics.
b. the personal integrity of the founder or owner.
c. a training program based on the code of ethics.
d. the amount of legislation affecting the organisation.

1.5 A Type C idea involves

a. a technically new process.
b. performing an old function in a new and improved way.
c. using prior work experience as a basis for starting a new business.
d. providing customers with a product or service absent in their market but
available elsewhere.

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1.6 An example of an idea for a new start-up from an accidental discovery is

a. a coin collector, who bought and sold coins for years to build a personal
collection, deciding to become a coin dealer.
b. a furniture salesperson seeing the possibility of opening a new furniture
store in a different area of the city.
c. a sharpshooter, who shot holes in a pair of her boyfriend's jeans during
an argument, hearing him get complimented on the way they look.
d. all of the above are examples.

1.7 A legal agreement between two parties in a franchise arrangement is referred

to as a ________.
a. master licence
b. franchise contract
c. requirements contract
d. franchise consent draft

1.8 The purchase price of a business is determined by negotiation between the

________ and ________.
a. lender; seller
b. seller; broker
c. buyer; seller
d. lender; buyer

1.9 The key to strong management in a new business is

a. balance, with each member having competence in at least one area.
b. financial competence of the chief executive.
c. a strong marketing manager who understands financial statements.
d. close friendship among all members of the team.

1.10 Which group best defines a partnership?

a. A business owned and operated by one person who hires part time
employees
b. A voluntary association of two persons to have a business for profit
c. The governing body for a corporation
d. A group of three persons in which each person has limited personal
liability

1.11 Facilities that rent shared space, services and management only to new
businesses are called
a. industrial parks.
b. community development centres.
c. shopping centres.
d. business incubators.

1.12 For small businesses, the Internet tends to blur ________ boundaries.
a. industry
b. geographic
c. skill-dependent
d. technological

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1.13 Andrew is working on his financial statements for his new business that has
both fixed and variable costs. Therefore, administrative expenses should be
included in the ________ area of the financial statements.
a. taxes
b. operating expenses
c. cost of goods sold
d. interest expense

1.14 The conventional measure of an organisation’s liquidity is the

a. debt ratio.
b. cash flow statement.
c. current ratio.
d. asset turnover ratio.

1.15 Assets that are relatively liquid are classified as

a. current assets.
b. fixed assets.
c. short-term assets.
d. other assets.

1.16 On the balance sheet, every rand or dollar of assets must equal to a rand or
dollar of financing in the form of debt or ________.
a. owner’s equity
b. accounts receivable
c. accumulated depreciation
d. net profit

1.17 An example of a current asset is ________.

a. equipment
b. land
c. leased property
d. accounts receivable

1.18 Exiting or harvesting encompasses

a. merely selling and leaving a business.
b. the creation of future options.
c. the establishment of a benchmark for organisation risk.
d. capturing future profitability.

1.19 Harvesting owners generally prefer ________ over ________.

a. cash; stock
b. debt; equity
c. equity; debt
d. stock; cash

1.20 A financial incentive based on pay according to number of units produced is

a. a bonus plan.
b. called piecework.
c. part of a salary level.
d. included in stock incentives.

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Consider the attached case study in order to answer the questions in

SECTIONS B AND C

SECTION B (40 MARKS)

COMPULSORY
Consider the attached case study and answer ALL the questions

QUESTION 2 [40]

2.1 Phil is planning to expand ‘Community farms and produce’, to set up a similar
business in the southern parts of the country. You need to assist him in
developing a business plan for expansion of his business venture. You are
required to:

 Provide a complete framework for a business plan. (10)

 Explain the theory relating to each component of the business plan. (10)

 Apply the scenario given in the question to each of items of the framework
of the business plan. (10)

(You need to clearly structure your answer using headings and numbering the
different sub-sections. Suggestion: You can use different colours/highlighters
to answer the three sections.)

2.2 Phil also wants to develop an ethics policy in order to prove to his investors
that ethical conduct is a number one priority at ‘Community farms and
produce’. Name and discuss the five (5) fundamental principles to consider
when compiling an ethics policy, as proposed by Blanchard and Peale, and
discussed in Petty et al. (2012). (10)

SECTION C (40 MARKS)

Consider the attached case study and answer ANY TWO (2) questions

QUESTION 3 [20]

3.1 Phil is contemplating the opportunity of opening-up his own retail chain, selling
his own produce throughout the country. He is not sure what it will entail but
knows that a good business location is always a key consideration. Present
and discuss five (5) key factors in determining a good business location. (10)

3.2 Phil is married and hopes that his three children will one day join the business.
His wife already works in the morning, assisting with some administration and
she oversees the emotional health of all staff. A family business demands that
the founder and the senior generation should take on various responsibilities.
Identify and explain five (5) such responsibilities which Phil and his wife as the
senior generation should consider for when his whole family is working in the
business. (10)

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QUESTION 4 [20]

4.1 At “Community farms and produce” risks are part of its business as Phil recalls
typical problems experienced. Tort liability can arise from a number of
business activities. Identify and explain eight (8) of the more significant
sources of tort liability. (16)

4.2 Should Phil and his team decide to franchise their business, various aspects
should be considered such as the costs they will charge their franchisees.
What are the four (4) key components of franchise costs that will be charged
to a franchisee of “Community farms and produce”? (4)

QUESTION 5 [20]

5.1 Phil indicated that he appointed staff, sourcing mostly from the local
community. Identify and explain the five (5) steps Phil should consider when
evaluating job applicants. (15)

5.2 Phil has never liked finances and, therefore, the day Martha joined the
business, was certainly one of his happiest. He believes that good judgement
is critical when forecasting but still finds it very stressful to do. Provide five
(5) suggestions for effective financial forecasting they should keep in mind
based on the research presented in Petty et al. (2012). (5)

EXAM TOTAL: 100

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‘Community farms and produce’

Phil is a passionate entrepreneur who decided not only to make a success of his
business but also to give back to the same community that has supported him during
his childhood and allowed him the wonderful opportunity of studying after school.
Today Phil runs a group of community farms and a food processing plant in the
northern part of the country, employing more than 60 members of staff. He appointed
people from his community and also allowed them over the years to up-skill by
attending school or courses for further training and education. Phil believes that
knowledge is the only true power for a nation to be healthy, successful and
economically independent.

Phil’s values are based on practices of ethical conduct within his business and no
form of corrupt behaviour is tolerated. In fact ethical behaviour is rewarded at
‘Community farms and produce’, during its annual prize-giving ceremony. The key
senior management are the functional managers whom include Martha (financial
manager); Mohammed (marketing manager); Lefu (human resources manager);
Gatiep (operations manager) and Joy (logistics manager).

All fresh produce such as vegetables and fruits, as well as processed goods, such as
maize and tinned food are distributed to wholesale retailers. All facilities of
‘Community farms and produce’ are centralised within a 20 kilometres radius. The
processing plant and warehousing facilities are positioned strategically central to all
farm land and the management offices are adjacent to all operational facilities.

Today this business seems to function smoothly but Phil still recalls how difficult it
was in the early days to obtain finance to buy the first piece of farm land and later-on
to set-up the warehouse and plant. Typical problems experienced are, for example,
theft, and one of the tractor drivers fell off while the tractor was moving and got
seriously injured. One of the local school kids once hacked the computer system
trying to plant a virus. But with all these headaches there are also the good
memories such as the smiles of happy employees, Phil’s memory of paying-off this
first farm, the opening day of the processing plant, and seeing a farm with the most
beautiful crop ready for harvesting.

Source:
Nieuwenhuizen, C. & Rossouw, D., 2014. Business Management a Contemporary
Compilation. 2nd ed. Juta.

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October 2014 Examination ENT/ENT001