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ENTREPRENEURSHIP 2017 - Quiz Answer : Entrepreneurship and Effective Small Business Management, 11e (Scarborough) - Chapter 8

Entrepreneurship and Start Up

ENTREPRENEURSHIP 2017 - Quiz Answer and Case Study Guides

Entrepreneurship and Effective Small Business Management, 11e (Scarborough)

 

 

Entrepreneurship and Effective Small Business Management, 11e (Scarborough)

Chapter 8   New Business Planning Process: Feasibility Analysis, Business Modeling,

and Crafting a Winning Business Plan

 

1) For entrepreneurs, a business plan is:

  1. A) a systematic, realistic evaluation of a venture's chances for success in the market.
  2. B) a way to determine the principal risks facing the venture.
  3. C) a game plan for managing the business successfully.
  4. D) All the above

Answer:  D

Page Ref: 236

Topic:  Introduction

AACSB:  Analytic Skills

 

2) A business plan performs a number of functions including:

  1. A) identifying how many employees will be needed in the business start-up phase.
  2. B) attracting capital for the start-up.
  3. C) providing the entrepreneur with a plan for managing inventory.
  4. D) providing the basis for purchasing property and casualty insurance for the new company.

Answer:  B

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

 

3) The ________ becomes the document that summarizes the analysis that has been done to justify a new business.

  1. A) business plan
  2. B) cash budget
  3. C) pro forma
  4. D) financial statement

Answer:  A

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

 

4) A business plan:

  1. A) is developed through an intuitive process by which the entrepreneur records his/her plans for the business in the future.
  2. B) focuses on the internal elements of the business.
  3. C) forces an entrepreneur to think a business idea through, considering both its positive and its negative aspects.
  4. D) is a strategic plan for a business that must be supplemented by operational plans once financing is secured.

Answer:  C

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

5) A well-developed business plan provides the entrepreneur with a number of benefits, such as:

  1. A) a way to identify probable financial backers.
  2. B) a valuable tool for recruiting management to help in running the business.
  3. C) assisting the entrepreneur in going public with his/her new venture on the stock market.
  4. D) determining the principal risks confronting the business.

Answer:  D

Page Ref: 236

Topic:  Introduction

AACSB:  Analytic Skills

 

6) The primary purpose of building a business plan is to:

  1. A) raise capital.
  2. B) attract potential employees.
  3. C) provide direction, to create a "target" to shoot for.
  4. D) meet SEC requirements designed to protect lenders and investors.

Answer:  C

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

 

 

 

 

7) The second essential purpose for creating a business plan is:

  1. A) to guide the operation of the company by charting its future course and devising a strategy for following it.
  2. B) to attract lenders and investors.
  3. C) to file with the SEC before making a public stock offering.
  4. D) to attract potential managers and employees to run the new venture.

Answer:  B

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

 

8) Potential investors tend to believe that if an entrepreneur can't develop a good plan:

  1. A) he/she is probably the action-oriented sort of person they need running a business.
  2. B) he/she needs to hire a consultant to write the plan for him/her.
  3. C) he/she probably lacks the discipline to run a business.
  4. D) then the entrepreneur is just like the majority of entrepreneurs and will probably do quite well.

Answer:  C

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

 

 

9) Which one of the following is not a "test" that an entrepreneur's business plan must pass?

  1. A) The reality test
  2. B) The competitive test
  3. C) The value test
  4. D) The ability test

Answer:  D

Page Ref: 252

Topic:  Three Tests That Every Business Plan Must Pass

AACSB:  Analytic Skills

10) The real value in preparing a business plan is:

  1. A) in attracting experienced management talent to help grow the business.
  2. B) in the creative process the entrepreneur has to go through.
  3. C) in identifying viable funding sources while "fleshing out" the business concept.
  4. D) None of these

Answer:  B

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

 

11) A business plan:

  1. A) reduces the risk and uncertainty involved in starting a new company.
  2. B) is a guarantee of success for the small company.
  3. C) should be done by professional writers in consultation with the owner.
  4. D) should be kept in outline form to avoid over structuring the company.

Answer:  A

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

 

12) The ________ is the first part of the business plan. It summarizes all the relevant points of the deal, but it should be the last part written.

  1. A) executive summary
  2. B) mission statement
  3. C) industry analysis
  4. D) marketing strategy

Answer:  A

Page Ref: 255

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

 

13) The ________ expresses the entrepreneur's vision for the company and what he/she hopes it will become.

  1. A) executive summary
  2. B) mission statement
  3. C) industry analysis
  4. D) marketing strategy

Answer:  B

Page Ref: 255

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

14) The ________ highlights significant financial and operational events in the company's life and should concentrate on the company's accomplishments.

  1. A) executive summary
  2. B) company history
  3. C) business and industry profile
  4. D) marketing strategy

Answer:  B

Page Ref: 256

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

15) The ________ acquaints lenders and investors with the nature of the business and the general goals and objectives of the company.

  1. A) executive summary
  2. B) company history
  3. C) business and industry profile
  4. D) marketing strategy

Answer:  C

Page Ref: 258

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

16) ________ are long-range, broad statements of what the company plans to accomplish in the distant future, and they guide the overall direction of the company.

  1. A) Policies
  2. B) Goals
  3. C) Procedures
  4. D) Objectives

Answer:  B

Page Ref: 258

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

 

17) The company's overall direction and answer to the question, "Where do I want the company to be in 3 to 5 years?" is answered in this section of the business plan.

  1. A) executive summary
  2. B) company history
  3. C) business and industry profile
  4. D) marketing strategy

Answer:  C

Page Ref: 258

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

18) ________ are short-term, specific targets which are attainable, measurable, and controllable.

  1. A) Objectives
  2. B) Policies
  3. C) Goals
  4. D) Standard operating procedures

Answer:  A

Page Ref: 258

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

19) The business and industry profile section of the business plan includes:

  1. A) significant financial and operational events in the life of the company.
  2. B) how the entrepreneur intends to accomplish the company's goals and objectives.
  3. C) the nature and characteristics of the target market.
  4. D) the historical evolution of the market, market size, ease of entry, etc.

Answer:  D

Page Ref: 258

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

20) A solid business plan is marked by a number of characteristics including:

  1. A) broad, general market research on the overall industry and business environment.
  2. B) a description of the management team.
  3. C) a minimum of financial detail.
  4. D) an optimistic financial projection and understandable risk statement.

Answer:  B

Page Ref: 270

Topic:  Suggested Business Plan Format

AACSB:  Analytic Skills

 

 

21) Discussion of profitability and anticipated profitability of firms in the market segment, along with the entry, exit, and merger of those firms, is all part of the ________ section of the business plan.

  1. A) business strategy
  2. B) company history
  3. C) business and industry profile
  4. D) marketing strategy

Answer:  C

Page Ref: 258

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

22) In the business strategy section of the business plan, the owner needs to explain to investors:

  1. A) significant financial and operational events in the life of the company.
  2. B) how the entrepreneur intends to accomplish the company's goals and objectives.
  3. C) the nature and characteristics of the target market.
  4. D) the historical evolution of the market, market size, ease of entry, etc.

Answer:  B

Page Ref: 258

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

23) Kyoto is writing a description of her new venture's product line and how it compares to her competitors' product lines. She is writing the ________ portion of her business plan.

  1. A) description of her firm's product
  2. B) marketing strategy
  3. C) competitive analysis
  4. D) business strategy

Answer:  A

Page Ref: 257

Topic:  The Elements of a Business Plan

AACSB:  Reflective Thinking

 

24) Defining the target market's potential and describing its characteristics is part of the:

  1. A) description of the product line.
  2. B) marketing strategy portion of the business plan.
  3. C) competitive analysis.
  4. D) business strategy section of the business plan.

Answer:  B

Page Ref: 259

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

25) Proving that a profitable market exists involves:

  1. A) proving that customers in the marketplace have a need for the good or service and are willing to pay for it.
  2. B) honestly comparing your firm's products with a competitor's products, showing your advantages.
  3. C) explaining how you will achieve your business objectives and market share goals.
  4. D) showing the linkage between your plan of operation and your financial profitability.

Answer:  A

Page Ref: 259

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

26) An effective market analysis identifies:

  1. A) your product's competitive advantage.
  2. B) how you will achieve your market goals, what methods will be used.
  3. C) the officers'/owners' resumes.
  4. D) how the product will be advertised.

Answer:  D

Page Ref: 260

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

27) An explanation of how the product will be distributed is contained within the:

  1. A) description of the product line.
  2. B) marketing strategy portion of the business plan.
  3. C) competitive analysis.
  4. D) business strategy section of the business plan.

Answer:  B

Page Ref: 261

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

28) The focus of the competitor analysis section of the business plan is to:

  1. A) demonstrate the existence of the market for your product.
  2. B) show that your experienced management team is better than your competitors'.
  3. C) demonstrate your company's advantage over competitors.
  4. D) describe your overall product line.

Answer:  C

Page Ref: 259

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

 

29) Investors look for which of the following when reviewing the experience of the management team of a new venture?

  1. A) Assets that can be used as collateral for the loan/investment
  2. B) Experience, talent, and integrity
  3. C) Plans for keeping the management team in place
  4. D) A hiring strategy that has the customer clearly in focus

Answer:  B

Page Ref: 261

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

30) The organization chart is described in which section of the business plan?

  1. A) The plan of operation
  2. B) The resumes of the officers/owners
  3. C) The business strategy
  4. D) The executive summary

Answer:  A

Page Ref: 262

Topic:  The Elements of a Business Plan of Operation

AACSB:  Analytic Skills

 

31) The plan of operation of the company within the business plan should detail:

  1. A) the experience of the management team.
  2. B) the production process for the product being sold.
  3. C) the financial assets of each of the officers.
  4. D) plans for keeping the important officers in place with the company.

Answer:  D

Page Ref: 262

Topic:  The Elements of a Business Plan of Operation

AACSB:  Analytic Skills

 

32) When creating financial forecasts in a business plan for a proposed venture, an entrepreneur should:

  1. A) be sure that all forecasts are realistic.
  2. B) embellish all forecasts to make the numbers look really impressive.
  3. C) include any assets of the officers/owners that can be used as collateral.
  4. D) list all previous loans which are in default.

Answer:  A

Page Ref: 262

Topic:  The Elements of a Business Plan Pro Forma

AACSB:  Analytic Skills

 

 

33) Which of the following statements is true?

  1. A) The useful life of the financed asset must be less than the maturity of the loan.
  2. B) An entrepreneur should try to camouflage any weaknesses in the small business.
  3. C) Projected financial statements should prove the company's ability to repay the loan.
  4. D) Officers' personal assets that can be used as collateral must be included in the financial statement.

Answer:  C

Page Ref: 263

Topic:  The Elements of a Business Plan Pro Forma

AACSB:  Analytic Skills

 

34) The loan proposal portion of the business plan should include:

  1. A) three sets of forecasts: optimistic, realistic, and pessimistic.
  2. B) a realistic timetable for repayment or for investors to exit.
  3. C) pro forma for two to three years.
  4. D) a listing of anyone who owns more than 20% of the business.

Answer:  B

Page Ref: 263

Topic:  The Loan or Investment Proposal

AACSB:  Analytic Skills

35) The process of testing the business model on a small scale before committing serious resources to launch a business that might not work is called:  

  1. A) benchmarking.
  2. B) business prototyping.
  3. C) scaling.
  4. D) lean modeling.

Answer:  B

Page Ref: 249

Topic:  Cost Structure

AACSB:  Analytic Skills

 

36) Business plans need to pass three tests:

  1. A) the financial test, the market test, and the management test.
  2. B) the appearance test, the substance test, and the concept test.
  3. C) the reality test, the competitive test, and the value test.
  4. D) the presentation test, the content test, and the application test.

Answer:  C

Page Ref: 252

Topic:  Three Tests That Every Business Plan Must Pass

AACSB:  Analytic Skills

 

 

37) An external test of a business plan that revolves around proving that a market exists is the:

  1. A) competitive test.
  2. B) consumer test.
  3. C) value test.
  4. D) reality test.

Answer:  D

Page Ref: 252

Topic:  Three Tests That Every Business Plan Must Pass

AACSB:  Analytic Skills

 

38) When presenting the business plan it is important to:

  1. A) show enthusiasm for the venture.
  2. B) use visual aids.
  3. C) avoid technical jargon.
  4. D) do all of these.

Answer:  D

Page Ref: 266

Topic:  Making the Business Plan Presentation

AACSB:  Analytic Skills

 

39) The C of the five Cs that is a synonym for "cash flow" is:

  1. A) capital.
  2. B) character.
  3. C) collateral.
  4. D) capacity.

Answer:  D

Page Ref: 265

Topic:  What Lenders and Investors Look for in a Business Plan

AACSB:  Analytic Skills

40) The most common reason cited by banks for rejecting small business loans is:

  1. A) poor credit history.
  2. B) undercapitalization or too much debt.
  3. C) lack of collateral.
  4. D) insufficient cash flow or poor profitability.

Answer:  B

Page Ref: 265

Topic:  What Lenders and Investors Look for in a Business Plan

AACSB:  Analytic Skills

 

 

41) Any assets pledged to the bank as security for repayment of the loan are the ________ of the five Cs.

  1. A) collateral
  2. B) capacity
  3. C) capital
  4. D) conditions

Answer:  A

Page Ref: 265

Topic:  What Lenders and Investors Look for in a Business Plan

AACSB:  Analytic Skills

 

42) The intangible C that lenders examine in evaluating the business plan is that of:

  1. A) capital.
  2. B) character.
  3. C) collateral.
  4. D) capacity.

Answer:  B

Page Ref: 265

Topic:  What Lenders and Investors Look for in a Business Plan

AACSB:  Analytic Skills

 

43) The C of the five Cs that relates to the circumstances relating to the business, such as potential growth in the market, form of ownership, location, etc., is called:

  1. A) capital.
  2. B) capacity.
  3. C) conditions.
  4. D) character.

Answer:  C

Page Ref: 265

Topic:  What Lenders and Investors Look for in a Business Plan

AACSB:  Analytic Skills

 

44) The executive summary should contain which of the following information?

  1. A) A brief statement of the financial needs of the business and what the money would be used for
  2. B) A short description of potential buyers
  3. C) A brief history of the business
  4. D) A complete description of your business

Answer:  A

Page Ref: 268

Topic:  Suggested Business Plan Elements

AACSB:  Analytic Skills

 

45) A description of the key factors that will dictate the success of your business quality, price competitiveness, etc. should be contained in the ________ section of the business plan.

  1. A) market analysis
  2. B) executive summary
  3. C) description of the business
  4. D) competitor analysis

Answer:  C

Page Ref: 268

Topic:  Suggested Business Plan Elements

AACSB:  Analytic Skills

 

46) The form of ownership in your company should be explained in the ________ portion of the business plan.

  1. A) business strategy
  2. B) plan of operation
  3. C) executive summary
  4. D) market analysis

Answer:  B

Page Ref: 270

Topic:  Suggested Business Plan Elements

AACSB:  Analytic Skills

 

47) You should identify your key people, explain their backgrounds and what they bring to the business, in:

  1. A) the executive summary.
  2. B) the description of the management team.
  3. C) the strategic plan.
  4. D) the business strategy.

Answer:  B

Page Ref: 270

Topic:  Suggested Business Plan Elements

AACSB:  Analytic Skills

 

48) Your cash budget and an explanation of how much money you need to make your company and product a long-term success are the subject matter of the:

  1. A) financial plan.
  2. B) strategic plan.
  3. C) business strategic plan.
  4. D) strategic action plan.

Answer:  A

Page Ref: 271

Topic:  Suggested Business Plan Elements

AACSB:  Analytic Skills

 

 

49) A ________ is what a customer gains from the product or service feature.

  1. A) feature
  2. B) bonus
  3. C) discount
  4. D) benefit

Answer:  D

Page Ref: 257

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

50) One technique involves ________, in which entrepreneurs test their business models on a small scale before committing serious resources to a business that might not work.

  1. A) a test run
  2. B) business prototyping
  3. C) duplicate business models
  4. D) model prototyping

Answer:  B

Page Ref: 249

Topic:  Cost Structure

AACSB:  Analytic Skills

 

51) An executive summary should be:

  1. A) a snapshot of the entire plan.
  2. B) 3 to 5 pages.
  3. C) written first.
  4. D) All of the above

Answer:  A

Page Ref: 255

Topic:  The Executive Summary

AACSB:  Analytic Skills

 

52) The phrase, "avoid the off-the-shelf, 'cookie-cutter' approach that produces look-alike plans" means:

  1. A) avoiding a business plan that looks ordinary.
  2. B) that every business plan is unique.
  3. C) the business plan should reflect the excitement of the entrepreneur.
  4. D) All of the above

Answer:  D

Page Ref: 254

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

 

53) An executive summary should:

  1. A) explain the basic business model and the problem the business will solve for customers.
  2. B) briefly describe the owners and key employees, target market(s), and financial highlights.
  3. C) briefly describe the company's competitive advantage.
  4. D) All of the above

Answer:  D

Page Ref: 255

Topic:  The Executive Summary

AACSB:  Analytic Skills

 

54) A great source that profiles a variety of industries and offers projections for the future trends is:

  1. A) the Handbook.
  2. B) an encyclopedia.
  3. C) the Beige Book.
  4. D) the Blue Book.

Answer:  C

Page Ref: 258

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

55) Proving that a profitable market exists involves:

  1. A) showing customer interest.
  2. B) documenting market claims.
  3. C) Both A and B
  4. D) Neither A nor B

Answer:  C

Page Ref: 259

Topic:  The Elements of a Business Plan: Marketing Strategy

AACSB:  Analytic Skills

 

56) A business plan presentation should cover:

  1. A) the company's background and its products or services with a market analysis and a description of the opportunities it presents.
  2. B) the company's competitive edge and the marketing strategies it will use to promote that edge.
  3. C) the management team and its members' qualifications and experience.
  4. D) All of the above

Answer:  D

Page Ref: 266

Topic:  Making the Business Plan Presentation

AACSB:  Analytic Skills

 

 

57) A ________ is a descriptive fact about a product or service.

  1. A) feature
  2. B) product summary
  3. C) benefit
  4. D) None of the above

Answer:  A

Page Ref: 257

Topic:  Elements of a Business Plan

AACSB:  Analytic Skills

 

58) What is the synonym for capacity?

  1. A) Capital
  2. B) Cash flow
  3. C) Collateral
  4. D) Credit

Answer:  B

Page Ref: 265

Topic:  What Lenders and Investors Look for in a Business Plan

AACSB:  Analytic Skills

 

59) What is the competitive test?

  1. A) It evaluates the company's relative position to its key competitors.
  2. B) It identifies the competitors only.
  3. C) It finds their address and phone numbers.
  4. D) None of the above

Answer:  A

Page Ref: 252

Topic:  Three Tests That Every Business Plan Must Pass

AACSB:  Analytic Skills

60) Which statement is correct?

  1. A) Lenders and investors are familiar with industry cost structures.
  2. B) A lender's main consideration in granting a loan is the reassurance that the applicant will repay.
  3. C) An investor's major concern is earning a satisfactory rate of return.
  4. D) All of the above

Answer:  D

Page Ref: 263

Topic:  The Loan or Investment Proposal

AACSB:  Analytic Skills

 

 

61) Which financial forecast should be realistic?

  1. A) Pessimistic
  2. B) Most likely
  3. C) Optimistic
  4. D) All of the above

Answer:  D

Page Ref: 262

Topic:  Pro Forma (Projected) Financial Statements

AACSB:  Analytic Skills

 

62) Competitor's analysis should identify:

  1. A) Who are the company's key competitors?
  2. B) What are their strategies?
  3. C) What images do they have in the marketplace?
  4. D) All of the above

Answer:  D

Page Ref: 259

Topic:  Competitor Analysis

AACSB:  Analytic Skills

 

63) One effective documentation technique involves ________, in which entrepreneurs test their business models on a small scale before committing serious resources to a business.

  1. A) forecasting
  2. B) business prototyping
  3. C) collateral
  4. D) None of the above

Answer:  B

Page Ref: 249

Topic:  Cost Structure

AACSB:  Analytic Skills

 

64) A well-prepared business plan helps determine the risks facing the venture.

Answer:  TRUE

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

65) The business plan has two essential functions; it helps the entrepreneur determine if the business will succeed and it helps recruit management talent to run the new company.

Answer:  FALSE

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

 

 

66) The primary purpose of building a business plan is to raise capital.

Answer:  FALSE

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

 

67) Entrepreneurs who apply for loans without having prepared business plans are less likely to get the money they need.

Answer:  TRUE

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

 

68) The quality of the entrepreneur's business plan has little impact on the first impression potential lenders and investors have of the company.

Answer:  FALSE

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

 

69) Often, the presence or absence of a quality business plan is a determining factor in a lender or investor's decision to put money into a business venture.

Answer:  TRUE

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

 

70) General requests for funds are likely to win approval.

Answer:  FALSE

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

 

71) An executive summary highlights the critical aspects of the plan.

Answer:  TRUE

Page Ref: 255

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

72) Investors read business plans in such detail that the executive summary is nice to have but it is optional.

Answer:  FALSE

Page Ref: 255

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

73) The ideal business plan should be at least 100 pages long and somewhat hard to read in order to demonstrate your thoroughness and to capture the venture capitalist's attention.

Answer:  FALSE

Page Ref: 254

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

74) The executive summary should summarize all of the relevant points of the proposed venture and should be concise—no more than two pages.

Answer:  TRUE

Page Ref: 255

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

75) The executive summary should highlight significant financial and operational events.

Answer:  FALSE

Page Ref: 255

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

76) The business plan should cover key people, the opportunity, provide a business context, and explain the risks and rewards involved.

Answer:  TRUE

Page Ref: 255

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

77) The company history should explain why the company was formed, its past successes, and its image in the marketplace.

Answer:  TRUE

Page Ref: 256

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

78) Objectives are long-range, broad statements of what the company plans to accomplish in the distant future.

Answer:  FALSE

Page Ref: 258

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

79) Company goals address the question, "Why am I in this business?"

Answer:  TRUE

Page Ref: 258

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

80) The industry analysis should cover existing profitability and anticipated profitability of firms in the targeted market segment, and any significant entry or exit of firms.

Answer:  TRUE

Page Ref: 258

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

81) Business strategy outlines how the owner plans to achieve business objectives in the face of a competitive environment.

Answer:  TRUE

Page Ref: 258

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

82) A feature is what a customer gains from a product.

Answer:  FALSE

Page Ref: 257

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

83) The executive summary should be written first and should be a broad general discussion of the business plan.

Answer:  TRUE

Page Ref: 255

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

84) The "competitor analysis" section of the business plan is optional since few lenders and investors are concerned about a small company's rivals in the marketplace.

Answer:  FALSE

Page Ref: 259

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

85) The business strategy section addresses how the firm will meet the key success factors necessary for success.

Answer:  TRUE

Page Ref: 258

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

86) When the entrepreneur describes the product in terms of what the customer gains through its purchase and use, he/she is describing it in terms of its features.

Answer:  FALSE

Page Ref: 257

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

87) Defining the target market is one of the hardest and most important things the entrepreneur can do in the business plan.

Answer:  TRUE

Page Ref: 260

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

88) Some feel the worst mistake an entrepreneur can make is to fail to define the target market.

Answer:  TRUE

Page Ref: 260

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

89) In the marketing strategy portion of the business plan, the entrepreneur should explain the promotional strategy, pricing strategy and distribution strategy.

Answer:  TRUE

Page Ref: 260

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

90) How the product will be distributed should be explained in the plan of operation.

Answer:  FALSE

Page Ref: 261

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

91) The focus of the "competitor analysis" section of the business plan should be demonstrating how the company has an advantage over its competitors.

Answer:  TRUE

Page Ref: 259

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

92) The business plan needs to address, in the management section, how important officers will be encouraged to remain with the company.

Answer:  FALSE

Page Ref: 261

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

93) Essential pieces of information for potential investors and lenders are the assumptions the entrepreneur used to derive forecasts, projections, etc.

Answer:  TRUE

Page Ref: 263

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

94) General requests for funds e.g., "working capital" are sufficient for most loan offices.

Answer:  FALSE

Page Ref: 263

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

95) Entrepreneurs should artificially inflate the amount of a loan request and expect the loan officer to "talk them down."

Answer:  FALSE

Page Ref: 263

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

96) A business plan's financial forecasts should reflect the company's ability to repay loans.

Answer:  TRUE

Page Ref: 262

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

97) An entrepreneur should not include an exit strategy as a way to "cash out" for investors in the initial plan.

Answer:  FALSE

Page Ref: 263

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

98) A business plan should always have a cash flow projection.

Answer:  TRUE

Page Ref: 264

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

99) Always tell the truth, even if it's bad news, in the business plan.

Answer:  TRUE

Page Ref: 264

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

100) The internal competitive test focuses on management's ability to create a company that will gain a competitive edge.

Answer:  TRUE

Page Ref: 252

Topic:  Three Tests That Every Business Plan Must Pass

AACSB:  Analytic Skills

 

 

101) The reality test of a business plan is the explanation of how much of a return is expected, and when investors can expect it.

Answer:  FALSE

Page Ref: 252

Topic:  Three Tests That Every Business Plan Must Pass

AACSB:  Analytic Skills

 

102) The business plan presentation should be slow, methodical, and detailed to show the depth of understanding and preparation the entrepreneur has gone to.

Answer:  FALSE

Page Ref: 266

Topic:  Making the Business Plan Presentation

AACSB:  Analytic Skills

 

103) Regardless of how good the plan or its presentation, the entrepreneur should always be prepared for questions when he/she presents the venture.

Answer:  TRUE

Page Ref: 266

Topic:  Making the Business Plan Presentation

AACSB:  Analytic Skills

 

104) The entrepreneur should begin the presentation with an explanation of the opportunity, the benefit to the investors, and what the new venture is.

Answer:  TRUE

Page Ref: 266

Topic:  Making the Business Plan Presentation

AACSB:  Analytic Skills

105) In today's financial climate, more banks are becoming the primary and often only source of capital for new ventures.

Answer:  FALSE

Page Ref: 265

Topic:  What Lenders and Investors Look for in a Business Plan

AACSB:  Analytic Skills

 

106) A common reason cited by banks which reject small business loan applications is "undercapitalization or too much debt."

Answer:  TRUE

Page Ref: 265

Topic:  What Lenders and Investors Look for in a Business Plan

AACSB:  Analytic Skills

 

 

107) Most loans banks make to start-up businesses are not secured by collateral but by the character of the entrepreneur.

Answer:  FALSE

Page Ref: 265

Topic:  What Lenders and Investors Look for in a Business Plan

AACSB:  Analytic Skills

 

108) Even though it is an intangible factor, the entrepreneur's "character"—and the quality of the presentation—are important factors in evaluating a loan proposal.

Answer:  TRUE

Page Ref: 265

Topic:  What Lenders and Investors Look for in a Business Plan

AACSB:  Analytic Skills

 

109) The conditions in the business environment have little influence on lenders' decision to invest in a business start-up.

Answer:  FALSE

Page Ref: 265

Topic:  What Lenders and Investors Look for in a Business Plan

AACSB:  Analytic Skills

 

110) While every business plan will be unique, there are several areas of information that should be common to all good business plans.

Answer:  TRUE

Page Ref: 265

Topic:  What Lenders and Investors Look for in a Business Plan

AACSB:  Analytic Skills

 

111) A benefit is a descriptive fact about a product or service.

Answer:  FALSE

Page Ref: 257

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

112) Business prototyping recognizes that every business idea is a hypothesis that needs to be tested before an entrepreneur takes it to full scale. 

Answer:  TRUE

Page Ref: 249

Topic:  Cost Structure

AACSB:  Analytic Skills

 

113) Lenders and investors look for the experience, qualifications and age of the people who will breathe life into the plan.

Answer:  FALSE

Page Ref: 254

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

114) Lean startup is the process of rapidly developing simple prototypes to test key assumptions by engaging real customers.

Answer:  TRUE

Page Ref: 249

Topic:  Cost Structure

AACSB:  Analytic Skills

 

115) To summarize the presentation to each potential financial institution or investor, the entrepreneur should write an executive summary. It should be concise—a maximum of four pages—and should summarize all of the relevant points of the proposed deal.

Answer:  FALSE

Page Ref: 255

Topic:  Executive Summary

AACSB:  Analytic Skills

 

116) The executive summary is a written version of what is known as "the elevator pitch."

Answer:  TRUE

Page Ref: 255

Topic:  Executive Summary

AACSB:  Analytic Skills

 

117) Executive summary is the broadest expression of a company's purpose and defines the direction in which it will move.

Answer:  FALSE

Page Ref: 255

Topic:  Mission Statement

AACSB:  Analytic Skills

 

118) It is not necessary for the industry analysis to address the profitability of the businesses in the targeted market segment.

Answer:  FALSE

Page Ref: 258

Topic:  Business and Industry Profile

AACSB:  Analytic Skills

119) Objectives are short-term, specific performance targets that are attainable, measurable, and controllable.

Answer:  TRUE

Page Ref: 258

Topic:  Objectives

AACSB:  Analytic Skills

 

 

120) A benefit is a descriptive fact about a product or service (e.g., "an ergonomically designed, more comfortable handle").

Answer:  FALSE

Page Ref: 257

Topic:  Description of Firm's Product/Service

AACSB:  Analytic Skills

 

121) A benefit is what the customer gains from the product or service feature.

Answer:  TRUE

Page Ref: 257

Topic:  Description of Firm's Product/Service

 

122) Why does the entrepreneur need to develop a business plan? What functions does it fulfill?

Answer:  A business plan serves two essential functions. First and most important, it guides the company's operations by charting its future course and devising a strategy for following it. The second function of the business plan is to attract lenders and investors. Applying for loans or attempting to attract investors without a solid business plan rarely attracts needed capital. Rather, the best way to secure the necessary capital is to prepare a sound business plan.

Page Ref: 251

Topic:  The Benefits of a Business Plan

AACSB:  Analytic Skills

 

123) Outline the elements of the feasibility plan with a one to two sentence explanation of each element.

Answer:  A feasibility analysis consists of three interrelated components: (1) an industry and market feasibility analysis; (2) a product or service feasibility analysis, and (3) a financial feasibility analysis. The goal of the feasibility analysis is to determine whether or not an entrepreneur's idea is a viable foundation for creating a successful business.

Page Ref: 237-245

Topic:  Introduction

AACSB:  Analytic Skills

 

124) What are the components of a successful business plan?

Answer:  Although a business plan should be unique and tailor-made to suit the particular needs of a small company, it should cover these basic elements: an executive summary, a mission statement, a company history, a business and industry profile, a description of the company's business strategy, a profile of its products or services, a statement explaining its marketing strategy, a competitor analysis, owners' and officers' résumés, a plan of operation, financial data, and the loan or investment proposal.

Page Ref: 254-263

Topic:  The Elements of a Business Plan

AACSB:  Analytic Skills

 

125) What should be included in the section on the firm's product/service? How should the product or service be described?

Answer:  The business plan should describe the company's overall product line, giving an overview of how customers use its goods or services. A statement of the product's position in the product life cycle is also helpful.

Page Ref: 257

Topic:  The Elements of a Business Plan: Description of a Firm's Product/Service

AACSB:  Analytic Skills

 

126) What are the primary steps to proving that a market exists in the market strategy section? What should an effective market analysis include?

Answer:  An effective market analysis should identify the following:

∙     Target market. Who are the company's target customers? How many of them are in the company's trading area? What are their characteristics (age, gender, educational level, income, and others)? What do they buy? Why do they buy? When do they buy? What expectations do they have about the product or service? How can the company set itself apart from the competition in its customers' minds?

∙     Advertising and promotion. Only after entrepreneurs understand their companies' target markets can they design a promotion and advertising campaign to reach those customers most effectively and efficiently. Which media are most effective in reaching the target market? How will they be used? How much will the promotional campaign cost? How will the promotional campaign position the company's products or services? How can the company benefit from publicity? How large is the company's promotional budget?

∙     Market size and trends. Assessing the size of the market is a critical step. How large is the potential market? Is it growing or shrinking? Why? Are customers' needs changing? Are sales seasonal? Is demand tied to another product or service?

Page Ref: 259

Topic:  The Elements of a Business Plan: Marketing Strategy

 

127) What financial data will lenders want to see in your financial section?

Answer:  The lenders would like pro-forma projected financial statements—income statements, balance sheet, and cash flow statement.  It is essential for these forecasts to be realistic and it is also important to clearly state the assumptions.

Page Ref: 262

Topic:  The Elements of a Business Plan: Financial Forecasts

AACSB:  Analytic Skills

 

128) What are the three tests any business plan should be put to? Name and explain the purpose of each.

Answer: 

∙     Reality test. The external component of the reality test revolves around proving that a market for the product or service really does exist. The internal component of the reality test focuses on the product or service itself.

∙     Competitive test. The external part of the competitive test evaluates the company's relative position to its key competitors. The internal competitive test focuses on the management team's ability to create a company that will gain an edge over existing rivals.

∙     Value test. To convince lenders and investors to put their money into the venture, a business plan must prove to them that it offers a high probability of repayment or an attractive rate of return.

Page Ref: 252

Topic:  Three Tests That Every Business Plan Must Pass

AACSB:  Analytic Skills

 

129) Review the business plan process, outlining the important elements of the presentation.

Answer:  Lenders and investors are favorably impressed by entrepreneurs who are informed and prepared when requesting a loan or investment. Tips include: Demonstrate enthusiasm about the venture, but don't be overemotional; "hook" investors quickly with an up-front explanation of the new venture, its opportunities, and the anticipated benefits to them; use visual aids; hit the highlights of your venture; don't get caught up in too much detail in early meetings with lenders and investors; avoid the use of technological terms that will likely be above most of the audience; rehearse your presentation before giving it; close by reinforcing the nature of the opportunity; and be prepared for questions.

Page Ref: 266-267

Topic:  Making the Business Plan Presentation

AACSB:  Reflective Thinking

 

130) What are the five Cs that creditors look for in the business plan? Name and explain each.

Answer:  Small business owners need to be aware of the criteria bankers use in evaluating the creditworthiness of loan applicants—the five Cs of credit: capital, capacity, collateral, character, and conditions.

∙     Capital—Lenders expect small businesses to have an equity base of investment by the owner(s) that will help support the venture during times of financial strain.

∙     Capacity—A synonym for capacity is cash flow. The bank must be convinced of the firm's ability to meet its regular financial obligations and to repay the bank loan, and that takes cash.

∙     Collateral—Collateral includes any assets the owner pledges to the bank as security for repayment of the loan.

∙     Character—Before approving a loan to a small business, the banker must be satisfied with the owner's character.

∙     Conditions—The conditions (interest rates, the health of the nation's economy, industry growth rates, etc.) surrounding a loan request also affect the owner's chance of receiving funds.

Page Ref: 265-266

Topic:  What Lenders and Investors Look for in a Business Plan

AACSB:  Reflective Thinking

131) What information should be included in the executive summary? Outline the main points.

Answer:  Executive Summary (not to exceed one page)

  1. Company name, address, and phone number
  2. Name(s), addresses, and phone number(s) of all key people
  3. Brief description of the business, its products and services, and the customer problems they solve
  4. Brief overview of the market for your products and services
  5. Brief overview of the strategies that will make your firm a success
  6. Brief description of the managerial and technical experience of key people
  7. Brief statement of the financial request and how the money will be used
  8. Charts or tables showing highlights of financial forecasts

Page Ref: 268

Topic:  Suggested Business Plan Elements

AACSB:  Communication

 

 

 

 

 

-----
Entrepreneurship: Starting and Operating A Small Business, 4th Edition, 2016, Steve Mariotti
Entrepreneurship: Successfully Launching New Ventures, 5th Edition, 2016, Bruce R. Barringer
Essentials of Entrepreneurship and Small Business Management, 8th Edition, 2016, Norman M. Scarborough
Fundamentals for Becoming a Successful Entrepreneur: From Business Idea to Launch and Management, 2016, Malin Brannback, Alan Carsrud
Entrepreneurship and Effective Small Business Management, 11th Edition, 2015, Norman M. Scarborough

------
PART 1: Decision to Become an Entrepreneur
1. Introduction to Entrepreneurship
PART 2: Developing Successful Business Ideas
3. Feasibility Analysis
4. Developing an Effective Business Model
5. Industry and Competitor Analysis
6. Writing a Business Plan
PART 3: Moving from an Idea to an Entrepreneurial Firm
7. Preparing the Proper Ethical and Legal Foundation
8. Assessing a New Venture’s Financial Strength and Viability
9. Building a New-Venture Team
10. Getting Financing or Funding
PART 4: Managing and Growing an Entrepreneurial Firm
11. Unique Marketing Issues
12. The Importance of Intellectual Property
13. Preparing for and Evaluating the Challenges of Growth
14. Strategies for Firm Growth
15. Franchising

------
PART I. STARTING THE PROCESS
Chapter 1. Why Plan?
PART II. WHAT TO DO BEFORE THE BUSINESS PLAN IS WRITTEN
Chapter 2. Developing and Screening Business Ideas
Chapter 3. Feasibiity Analysis
PART III. PREPARING A BUSINESS PLAN
Chapter 4. Introductory Material, Executive Summary, and Description of the Business
Chapter 5. Industry Analysis
Chapter 6. Market Analysis
Chapter 7. Marketing Plan
Chapter 8. Management Team and Company Structure
Chapter 9. Operations Plan and Product (or Service) Design and Development Plan
Chapter 10. Financial Projections
PART IV. PRESENTING THE BUSINESS PLAN
Chapter 11. Presenting the Plan with Confidence

------
BRIEF CONTENTS
UNIT 1 Entrepreneurial Pathways
Chapter 1 Entrepreneurs Recognize Opportunities
Chapter 2 Franchising
Chapter 3 Finding Opportunity in an Existing Business
Chapter 4 The Business Plan: Road Map to Success
Honest Tea Business Plan
Unit 1 Case Study: Spanx
UNIT 2 Who Are Your Customers?
Chapter 5 Creating Business from Opportunity
Chapter 6 Exploring Your Market
Unit 2 Case Study: Kitchen Arts & Letters, Inc.
UNIT 3 Integrated Marketing
Chapter 7 Developing the Right Marketing Mix and Plan
Chapter 8 Pricing and Credit Strategies
Chapter 9 Integrated Marketing Communications
Chapter 10 Marketing Globally
Chapter 11 Smart Selling and Effective Customer Service
Unit 3 Case Study: Empact
UNIT 4 Show Me the Money: Finding, Securing, and Managing It
Chapter 12 Understanding and Managing Start-Up, Fixed, and Variable Costs
Chapter 13 Using Financial Statements to Guide a Business
Chapter 14 Cash Flow and Taxes
Chapter 15 Financing Strategy: Debt, Equity, or Both?
Unit 4 Case Study: Lee’s Ice Cream
UNIT 5 Operating a Small Business Effectively
Chapter 16 Addressing Legal Issues and Managing Risk
Chapter 17 Operating for Success
Chapter 18 Location, Facilities, and Layout
Chapter 19 Human Resources and Management
Unit 5 Case Study: ONLC
UNIT 6 Leadership, Ethics, and Exits
Chapter 20 Leadership and Ethical Practices
Chapter 21 Franchising, Licensing, and Harvesting: Cashing in Your Brand
Unit 6 Case Study: Honest Tea
Appendix 1 Sample Student Business Plan: University Parent, Inc.
Appendix 2 BizBuilder Business Plan
Appendix 3 Resources for Entrepreneurs
Appendix 4 Useful Formulas and Equations
------
Section 1: The Rewards and Challenges of Entrepreneurship
1. Entrepreneurs: The Driving Force Behind Small Business
2. Ethics and Social Responsibility: Doing the Right Thing
3. Creativity and Innovation: Keys to Entrepreneurial Success
4. Strategic Management and the Entrepreneur
Section 2: Launching a Venture: Entry Strategies
5. Choosing a Form of Ownership
6. Franchising and the Entrepreneur
7. Buying an Existing Business
8. New Business Planning Process: Feasibility Analysis, Business Modeling, and Crafting a Winning Business Plan
Section 3: Building a Marketing Plan
9. Building a Bootstrap Marketing Plan
10. Creative Use of Advertising and Promotion
11. Pricing and Credit Strategies
12. Global Marketing Strategies
13. E-Commerce and Entrepreneurship
Section 4: Building a Financial Plan
14. Creating a Solid Financial Plan
15. Managing Cash Flow
16. Sources of Equity Financing
17. Sources of Debt Financing
Section 5: Building an Operating Plan
18. Location, Layout, and Physical Facilities
19. Supply Chain Management
20. Managing Inventory
21. Staffing and Leading a Growing Company
Section 6: Legal Aspects of Small Business: Succession, Ethics, and Government Regulation
22. Management Succession and Risk Management Strategies in the Family Business
23. The Legal Environment: Business Law and Government Regulation
------
Section I: The Challenge of Entrepreneurship 
1. The Foundations of Entrepreneurship
2. Ethics and Social Responsibility: Doing the Right Thing
3. Inside the Entrepreneurial Mind: From Ideas to Reality
Section II: The Entrepreneurial Journey Begins
4. Conducting a Feasibility Analysis and Designing a Business Model
5. Crafting a Business Plan and Building a Solid Strategic Plan
6. Forms of Business Ownership and Buying an Existing Business
7. Franchising and the Entrepreneur
Section III: Launching the Business
8. Building a Powerful Bootstrap Marketing Plan
9. E-commerce and the Entrepreneur
10. Pricing and Credit Strategies
11. Creating a Successful Financial Plan
12. Managing Cash Flow
Section IV: Putting the Business Plan to Work: Sources of Funds
13. Sources of Financing: Equity and Debt
14. Choosing the Right Location and Layout
15. Global Aspects of Entrepreneurship
16. Building a New Venture Team and Planning the Next Generation
------

 

ENTREPRENEURSHIP 2017 - NEW COLLECTION 2016 - 2017

1. Youtube Playlist: See the collection of videos - www.youtube.com/ecomftu2012

2. Download Power Point Slides Free

Entrepreneurship: Starting and Operating A Small Business, 4th Edition, 2016, Steve Mariotti - LINK
Entrepreneurship: Successfully Launching New Ventures, 5th Edition, 2016, Bruce R. Barringer  - LINK
Essentials of Entrepreneurship and Small Business Management, 8th Edition, 2016, Norman M. Scarborough - LINK
Fundamentals for Becoming a Successful Entrepreneur: From Business Idea to Launch and Management, 2016, Malin Brannback - LINK
Entrepreneurship and Effective Small Business Management, 11th Edition, 2015, Norman M. Scarborough - LINK

 

For Test Bankz, Quiz Answers and Case study Guides, email toThis email address is being protected from spambots. You need JavaScript enabled to view it.

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