ENT Ch. 8

A process map details how information flows through the business

true

Bootstrapping refers to minimizing of resources at startup in order to keep fixed costs as low as possible.

true

Determining what resources are needed, when they are needed, and how to acquire them is a critical piece of the feasibility puzzle.

true

How a product or service is priced is a function of a company's goals.

true

Pricing is not designed to cover total costs but to maximize total contribution⎯ that is, unit price minus unit variable costs.

true

When an entrepreneur is attempting to gauge levels of demand, the customer is the prime source of information.

true

Where the new venture lies in the value chain will determine what its margins are, who its customer is, and how much it can charge for its products and services.

true

Which of the following would not be considered a startup resource? a. feasibility analysis b. founding team c. independent contractors d. equipment e. equity

a. feasibility analysis

Creating a ____ is the first step in calculating startup capital requirements. a. process map b. feasibility analysis c. business plan d. balance sheet e. timeline

a. process map

____ represent(s) how the startup uses its cash to cover its overhead before it generates a positive cash flow from operations. a.Monthly burn rate b.Contribution margin c.Financial metrics d.Bootstrapping e.Process map

a.Monthly burn rate

____ starts with a high price to establish uniqueness; then drops the price as competitors enter the market. a.Price skimming b.Premium pricing c.Product bundle pricing d.Captive product pricing e.Demand-based pricing

a.Price skimming

Which of the following is not part of direct selling expenses? a.Telephone expenses b.Advertising costs c.Travel costs d.Sales salaries e.Commissions

a.Telephone expenses

In figuring ____, entrepreneurs must convert time to dollars and consider an opportunity cost. a.customer acquisition cost b.revenue for direct sales c.revenue per sales person d.lifetime value per customer e.customer retention cost

a.customer acquisition cost

A/an ____ statement is, essentially, a cash budget or sources and uses statement, a.direct cash flow b.in-process flow c.return on investment d.cost of goods sold e.pro forma

a.direct cash flow

Determining what resources are needed, when they are needed, and how to acquire them is a critical piece of the ____. a. business plan b. feasibility analysis c. founding team experience d. marketing plan e. profit and loss statements

b. feasibility analysis

Which of these pricing strategies will help a new firm maximize cash flow? a. lower price to raise volume b. raise price and reduce direct costs c. set a higher price to raise perceived value d. sell online e. none of these choices

b. raise price and reduce direct costs

One mistake that entrepreneurs make is to set their prices so that they cover ____ costs plus a margin the entrepreneur is expecting to achieve. a.inventory b.total c.marginal d.variable e.All of these choices

b. total

__ is found by subtracting variable costs from revenues and dividing the difference by revenues to yield a percentage. a.Return on investment b.Contribution margin c.Profit margin d.Cash flow e.None of these choices

b.Contribution margin

Pro forma financials are a key part of the ____. a. feasibility analysis b. business launch c. cash flow d. startup capital e. business plan

e. business plan

Entrepreneurs need to remember that ____ costs are the biggest costs the business will bear. a.production b.startup c.overhead d.inventory e. employee

e. employee

The bottom line for any new venture is to have ____. a. positive inventory b. good income statements c. great employees d. a strong founding team e. positive cash flow

e. positive cash flow

Which of the following is not one of the categories into which the resources of a company are often divided? a. human b. social c. financial d. physical e. value chain

e. value chain

A month-by-month timeline shows a year in the life of a business with key milestones and anticipated ____. a.pricing b.growth c.financial metrics d.losses e.triggers

e.triggers

A new venture's health is measured by its balance sheet.

false

Price skimming is finding out what customers are willing to pay for the product and pricing it accordingly.

false

The least important part of any financial plan is the assumptions on which it is based.

false

The best way, and sometimes the only way, to accurately gauge customer demand is to ____. a.test a prototype b.go into limited production c.do market research d.do a feasibility study e.None of these choices

b.go into limited production

In service businesses, the cost of goods sold (COGS) is equivalent to the time expended to ____ and ____ the service. a.sell / deliver b.produce / deliver c.produce / market d.test / produce e.None of these choices

b.produce / deliver

For ____ companies, the actual delivery costs must be based initially on information gathered from other companies in the industry. a.product b.service c.technology d.All of these choices e.None of these choices

b.service

Whenever there is competitive rivalry, prices tend to be ____. a. the same b. slightly higher c. lower d. 50 percent higher e. none of these choices

c. lower

Which of the following is not a technique that can help entrepreneurs arrive at a realistic forecast of demand for their product or service? a.Talk to customers b.Interview prospective end-users and intermediaries c.Prepare revenue forecasts d.Apply the entrepreneur's knowledge and experience e.Go into limited production

c.Prepare revenue forecasts

Internet ventures have unique metrics because they typically start with three types of "customers": visitors, contributors, and ____. a.investors b.end users c.distributors d.partners e.traffickers

c.distributors

Indirect selling expenses are not linked to the sale of a specific product and include interest, telephone expenses, and ____. a.cost of promotional supplies b.salaries of non-sales personnel c.postal charges d.rent e.utilities

c.postal charges

It is important to ensure that the final price to the customer or end user is tolerable, given all the mark-ups along the value chain. This is called ____. a.premium pricing b.price skimming c.product bundle pricing d.captive pricing e.demand-based pricing

c.product bundle pricing

How a product or service is priced is a function of the company's ____. a. business plan b. feasibility analysis c. process map d. goals e. product demand

d. goals

Once the entrepreneur determines where the new venture lies in the value chain, he or she must create a ____ a. process map b. feasibility analysis c. business plan d. timeline e. none of these choices

d. timeline

Entrepreneurs can reach a price that can be tested in the market by considering costs, competitor pricing, and ____. a.feedback from customers b.feedback from value chain partners c.customer behavior d.Both "feedback from customers" and "feedback from value chain partners" e.Both "feedback from customers" and "customer behavior"

d.Both "feedback from customers" and "feedback from value chain partners"

In a manufacturing business, which of the following is not part of the calculations used to forecast the costs of goods sold (COGS)? a.Direct labor b.Cost of materials c.Direct factory overhead d.Product delivery e.Work-in-process flow

d.Product delivery

In manufacturing businesses, forecasting expenditures is a bit more complex because ____ must be derived first. a.salaries b.inventory expenses c.factory overhead d.cost of goods sold e.in-process flow

d.cost of goods sold

The ____ is an amount of cash that is often based on the sales and collection cycle of the business. a.cash flow b.in-process flow c.risk factor d.safety margin e.None of these choices

d.safety margin