Entreprenuership Final (semester 2)

Which of the following business plan pitfalls possible solution is to set up a timetable of specific steps to be accomplished during a specific period

No realistic goals

Which of the following statements would not be an appropriate guideline for successful business plan development?

Orient the plan to the present.

What is the one-person-band syndrome?

failure to delegate

Sales and earnings of a venture are projected from

historical financials

True or false: Participation by subordinates in a strategic plan is never appropriate

False

Which of the following describes advantages of the business plan for financial sources?

The plan identifies critical risks.

True or false: One of the most common reasons for acquiring a business is developing more growth-phase products.

True

true or False: Adjusted tangible book value is a popular method of valuation.

True

The concept of the net present value method works on the premise that

a dollar today is worth more than a dollar in the future

Unique managerial concerns of growing ventures encompass all of the following except

agency problems

Which of the following is a form of the pro forma statement?

balance sheet

Capital budgeting is designed to show

how many projects, in total, should be selected.

Emotional bias is likely to have what effect on a seller's valuation of a business?

increase the valuation

Financial information is important to entrepreneurs because it pulls together all the information presented in other segments of the business and:

it quantifies all the assumptions concerning business operations.

A reason for lack of strategic planning has been found to be

lack of expertise

An indicator of the planning pitfall of "failure to anticipate roadblocks" is

making no admission of possible flaws in the plan.

Competitive analysis, advertising plan, and pricing policy are all part of the

marketing segment

The principle objective of capital budgeting is to

maximize the value of the firm

Which of the following is the correct order of the traditional life-cycle stages of an enterprise?

new-venture development, start-up activities, growth, stabilization, and innovation or decline

Which of the following would be considered fatal mistakes in strategic planning, according to researcher Michael E. Porter

no real competitive advantage

When considering management, the entrepreneur should be concerned about

ownership positions

What hidden costs are involved when establishing the value of a firm?

personal expenses

The discounted earnings method of valuation establishes

potential earning power

The financial segment includes

pro forma balance sheet

Emerging ventures that are rapidly expanding with constantly increasing personnel size and market operations will need

to formalize planning because there is a great deal of complexity.

When considering physical facilities, the entrepreneur should be concerned about

which facilities are owned versus leased.

Which of the following questions should an entrepreneur ask when a business plan is turned down?

"If you were in my position, how would you proceed?"

Which one of the following is not a benefit of a business plan to the entrepreneur

Provides a comprehensive product-launch timetable

Contribution margin is the difference between

Selling price - variable cost per unit

A key concept in developing an expense budget is that of

fixed costs

Traditional valuation methods includes all of the following except:

high equity/low debt

Analysis of a firm's external and internal environments provides the firm with the information to develop

strategic intent and strategic mission

Formation of long-range plans for effective management in light of a venture's strengths and weaknesses is referred to as

strategic planning

True or False: Knowing a venture's pre-money valuation is not possible.

False

True or False: Lack of expertise has never been considered a reason for the lack of strategic planning in new ventures.

False

True or False: New-venture development is a result of both market conditions and the entrepreneur's efforts.

False

True or False: Pro forma statements show the firm's present financial position.

False

True or False: The first step in the preparation of the cash flow budget is the identification and timing of cash outflows.

False

True or False: The price/earnings ratio (multiple of earnings) method is determined by dividing the market price of common stock by retained earnings

False

True or False: The pro forma balance sheet is used in the critical risk segment of the business plan.

False

True or False: The set of assumptions on which financial projections are based have little meaning.

False

True or False: The traditional accounting equation is: assets + liabilities = owner's equity.

False

True or False:A business plan must illustrate the current status of the venture but not the projected results

False

True or False; The entrepreneur should expect to encounter a friendly and supportive audience when presenting the business plan to potential financial sources.

False

True or False; There are only two viewpoints from which a business plan should be written, the entrepreneur's and the financial source

False

True or False;The easiest way to avoid the pitfall of no commitment or dedication is to designate that the venture is a hobby or a whim.

False

An important guideline in putting the plan together is

Identify the target market

True of False: Why is the business being sold?" is not an important question to ask when analyzing the viability of buying a business.

False

True or False: After delivering a pitch, it is not acceptable to question venture capitalists who turn down a funding opportunity.

False

True or False: Contribution margin is the difference between the selling price and the fixed cost per unit.

False

Return on investment

Is net profit divided by investment

What is the significance of a harvest strategy segment in a business plan?

It is important for the entrepreneur to plan for a liquidity event as an exit strategy.

Closely held ventures usually suffer from which of the following shortcomings?

Lack of management depth

A business plan is

a written document that details the proposed venture.

Which of the following statements may be the most important in new venture creation?

cash flow statement

The cash flow budget describes

cash inflows - cash outflows

A variable cost

changes in the same direction and in direct proportion to changes in operation activity

Which of the following would not be considered a key step in the strategic planning activities of a growing firm?

changing the short-term goals according to the political climate

A harvest plan

defines when and how business owners will realize a cash return on investment.

If cash flow is deemed the most important consideration in buying a business, which valuation method is likely to be used?

discounted earnings

Small business owners are often guarded about their businesses, which leads to

distrust of others when formulating a strategic plan

The price/earnings ratio is determined by

dividing market price of common stock by earnings per share.

A fixed cost

does not change in response to changes in activity for a given period of time.

Which of the following refers to the conducting of a thorough analysis of every facet of an existing business?

due diligence

Break-even analysis is a technique commonly used to assess the

expected product profitability

True or False: Emotional bias is not an underlying issue in valuing a business.

False

In which of the following situations is it essential to have a business evaluation?

All are correct

Specific factors of a venture being offered for sale that should be examined include

All of the above

The traditional accounting equation that verifies the accuracy of the entrepreneur's balance sheet is

Assets = Liabilities + Owner's Equity

Which of the following statements is not part of the "five-minute reading" by venture capitalists?

Determine the strengths and weaknesses of the entrepreneur.

True of False: Financial information pulls together all the information presented in the other segments of the business.

True

True of False: Tangible assets as well as intangible assets of a business need to be assessed for proper venture evaluation.

True

True or False: The entrepreneurial strategy matrix measures risk and innovation.

True

True or False: A "SWOT" analysis refers to analyzing strengths, weaknesses, opportunities, and threats.

True

True or False: A "niche" is a homogeneous group with common characteristics (i.e., all the people who have a need for a newly proposed product or service).

True

True or False: A budget is one of the most powerful tools that an entrepreneur can use in planning business operations

True

True or False: Break-even analysis is used to tell how many units must be sold in order to break even at a particular selling price.

True

True or False: Business valuation is essential when attempting to buy out a partner.

True

True or False: Buyers and sellers assign different values to a business.

True

True or False: During the growth stage of a venture, entrepreneurs shift into a managerial style.

True

True or False: In administrative cultures, there is a need for clearly defined authority and responsibility.

True

True or False: Many research studies suggest that strategic planning influences a venture's survival.

True

True or False: Misunderstanding industry attractiveness can be a fatal flaw in strategic planning.

True

True or False: Replacement value of a business is based upon the value of each asset if it had to be replaced at a certain cost.

True

True or False: The "best" strategic plan will be influenced by the abilities of the entrepreneur, the complexity of the venture, and the nature of the industry.

True

True or False: The principal objective of capital budgeting is to maximize the value of the firm.

True

True or False:The business plan is the entrepreneur's road map for a successful enterprise.

True

True or False;Factors that must be addressed when planning a new venture include setting realistic goals, determining milestones, making a commitment, and having flexibility

True

In the context of buying a business, a known commodity may command a higher price for what reason?

avoiding start-up costs has value

A budget that is a statement of estimated income and expenses over a specified period of time is referred to as an

operating budget

Which of the following is a critical factor to be considered in the management segment?

organizational structure

Which of the following fatal mistakes entrepreneurs continually fall prey to in their attempt to implement a strategy concerns pursuing a position of dominance in a fast-growing industry?

pursuing an unattainable competitive position

Comparing financial numbers in order to make decisions is referred to as:

ratio analysis

The comprehensive business plan should be the result of

reflections on the direction of the venture.

The entrepreneurial strategy matrix measures:

risk and innovation

In the strategy matrix model, innovation is defined as

something new and different

A "SWOT" analysis refers to

strengths, weaknesses, opportunities, threats

"Harvest" does not mean

the challenges and responsibilities of the entrepreneur are over.

A reason new venture managers lack knowledge in the strategic planning process is because

they have minimal exposure to the planning process.

When using the internal rate of return method, the future cash flows are discounted at a rate that makes the net present value equal to

zero