MGT 492
Capital appreciation rights are also known as "_____ stock." a. phantom b. common c. preferred d. diluted e. founder's
a
In the business model development and testing stage, an entrepreneur will likely require _____, an initial investment typically by the founders and other sources of "friendly money." a. seed funding b. bridge financing c. a grant d. impact investing e. mezzanine financing
a
Which of the following words or phrases should an entrepreneur avoid using in an executive summary? a. Core competency b. Scalable c. All of these are correct. d. Core values e. Drinking the Kool-Aid
C
An antidilution provision ensures that the selling of stock at a later date will decrease the economic value of the venture capitalist's investment. a. True b. False
F
An economic base is the region from which an entrepreneur expects to draw customers. a. True b. False
F
As the sources of competitive advantage at startup lose their power and competition intensifies, organizational design and capabilities become less important in a company's long-term success. a. True b. False
F
Founder's stock is not restricted. a. True b. False
F
It is normally a good idea for the entrepreneur to discuss what he or she thinks the business is worth in a business plan. a. True b. False
F
Of the various areas where mobile businesses can be found, malls pose perhaps the most difficult challenge to secure. a. True b. False
F
One of the advantages of using crowdfunding as a source of funding is there is no cap on the amount of money you can raise. a. True b. False
F
Social ventures, those that are structured with a focus on providing a benefit to society, are attractive to traditional types of investors because they typically produce a significant return on investment. a. True b. False
F
The Family and Medical Leave Act provides for up to 12 weeks of paid leave for employees who are dealing with family issues. a. True b. False
F
The executive summary of a business plan should be no more than two pages. a. True b. False
F
The strongest product proof of concept (POC) is a working prototype. a. True b. False
F
Today it is much easier for a new venture to achieve total in-house control of its value chain. a. True b. False
F
A venture capital firm invests in a growing business through the use of debt and equity instruments to achieve long-term appreciation on the investment within a specified period of time, typically three to five years. a. True b. False
T
After filing a registration statement, an advertisement called a "tombstone" announces a public offering in the financial press. a. True b. False
T
Submitting a professionally crafted business plan is less important than demonstrating what the entrepreneur has accomplished in the way of securing sales from real customers. a. True b. False
T
The most popular follow-up source of capital for new ventures is private investors, typically people you know or have met through business acquaintances. a. True b. False
T
Writing a business plan is a huge undertaking that should be planned in terms of tasks and a timeline. a. True b. False
T
A _____ depends on a validated business model that has been market-tested and is reliable. a. business plan b. proof of concept (POC) c. feasibility study d. pitch presentation e. industry/market analysis
a
A(n) _____ is the region from which you expect to draw customers. a. trade area b. community center c. economic base d. market e. enterprise zone
a
A(n) _____ is an offering document that describes an investment and its risks. a. letter of intent b. prospectus c. term sheet d. antidilution provision e. registration statement
b
According to the design thinking approach, workflow should emphasize a. projects managed by specialty divisions. b. projects assigned to multidisciplinary teams. c. collective ownership and dissemination of jobs. d. jobs and tasks assigned to individuals as a permanent assignment. e. jobs and tasks assigned to functional departments as a permanent assignment.
b
All of the following are alternatives to conventional business locations EXCEPT a(n) a. temporary tenant agreement. b. long-term building lease. c. incubator. d. mobile location. e. shared space.
b
All of the following are guidelines to consider when developing the executive summary EXCEPT a. keep the pitch deck to about 10 slides that contain only the key points in large fonts. b. avoid puff words, phrases, and analogies. c. include recognizable names if there is an established relationship with the person or company. d. read each sentence multiple times to prune unnecessary words and to make sure that the summary is focusing on the critical points. e. avoid jargon and acronyms that might be foreign to the reader or listener.
b
Companies are typically distributed in all of the following ways EXCEPT a. organizationally by department or project group. b. centrally. c. by stakeholder groups. d. geographically. e. temporally by time zone.
b
During an interview, understanding who the candidate is can be effectively accomplished in part by asking a. lifestyle questions. b. open-ended questions. c. questions about personal beliefs. d. closed-ended questions. e. the age of the candidate.
b
Entrepreneurs should keep in mind that the purpose for doing a(n) _____ is to sell the business. a. prototype b. executive summary c. contingency plan d. feasibility analysis e. None of these are correct.
b
If an investor is receiving $75,000 in investment for 20 percent of the company, what is the company's post-money valuation? a. $450,000 b. $375,000 c. $15,000 d. None of these are correct. e. $60,000
b
Returning to private status once a company has been a public company a. is not allowed by the Securities and Exchange Commission (SEC). b. is an almost insurmountable task. c. is a way of raising more capital. d. occurs almost twice as often today than in the past. e. is easy to accomplish.
b
The _____ looks at the financial health of a business at a single point in time. a. income statement b. balance sheet c. statement of cash flows d. current ratio e. profit margin
b
The _____ plan is simply a way of recognizing that sometimes even the "best laid plans" don't work the way they were intended to work. a. production b. contingency c. growth d. business e. financial
b
The entrepreneur and the founding team often perform all the functions when a business is starting, and much of the work is accomplished through a(n) _____ network of relationships. a. formal b. informal c. virtual d. hierarchical e. conventional
b
When entrepreneurs develop job descriptions, they should include _____ to prepare for the eventuality of hiring employees. a. important employment laws b. behavioral profiles c. process maps d. legal requirements e. organizational charts
b
When the value of a venture increases, but the value of its shares do not achieve a corresponding increase, this discrepancy is known as a. dilution. b. valuation divergence. c. liquidation. d. due diligence. e. factoring.
b
Which of the following is considered the weakest proof of concept (POC) approach? a. Purchase order b. Working prototype c. Customer sales d. Final product e. Letter of intent for beta test
b
Which of the following refers to a basic ownership interest in a company whereby holders share in both the successes and the failures of the business and benefit through dividends and the appreciating value of the company? a. Founder's stock b. Common stock c. Preferred stock d. Reacquired stock e. None of these are correct.
b
A _____ involves customer discovery and business model validation—testing your business model in the market with real customers to determine the conditions you must have in place to ensure a successful launch. a. business test b. business plan c. feasibility analysis d. marketing plan e. pitch presentation
c
The Age Discrimination in Employment Act applies to all companies with _____ or more employees. a. 70 b. 300 c. 20 d. 100 e. 50
c
Venture capitalists (VCs) are fundamentally risk averse, so it is an entrepreneur's job to reduce risk in the three key areas where VCs typically find it: management risk, technology risk, and _____ risk. a. legal b. investment c. business model d. research and development e. operational
c
Which of the following is the first step in the initial public offering (IPO) process? a. Filing a registration statement b. Deciding on a stock exchange c. Choosing an underwriter d. None of these are correct. e. Publishing a tombstone
c
A startup's predicted worth at the end of the valuation period is known as its a. return on investment (ROI). b. intrinsic value. c. going-concern value. d. terminal value (TV). e. fair market value.
d
In very simplistic terms, organizational culture is the _____ of an organization. a. context b. design c. purpose d. personality e. strategy
d
The _____ provides information about the projected profit or loss status of a business for a specified period of time. a. balance sheet b. current ratio c. statement of cash flows d. income statement e. profit margin
d
The initial stock issued to the first shareholders of a corporation is sometimes referred to as _____ stock. a. preferred b. reacquired c. treasury d. founder's e. tracking
d
The research and development (R&D) limited partnership is useful for entrepreneurs starting _____ ventures that carry significant risk due to the expense of R&D. a. retail b. low-end c. sales d. high-tech e. social
d
Which component of the business plan is used to include items such as résumés, calculations, and surveys that support your claims in the main body of the report? a. Timeline to launch b. Contingency plan and harvest strategy c. Founding or management team d. Appendices e. Endnotes
d
Which of the following employment laws applies to companies of any size? a. Fair Labor Standards Act Equal Pay Provisions b. All of these are correct. c. Family and Medical Leave Act d. Immigration Reform and Control Act e. Americans with Disabilities Act
d
Which of the following is NOT a formal interdependent process? a. Control mechanisms b. Compensation c. The planning system d. Team building e. Reward policies
d
Which of the following is NOT a primary flaw that investors commonly find in business plans? a. Too much hype b. Poor explanation of the business model c. Overly optimistic financial projections d. Lack of enthusiasm e. No demonstration of customer demand
d
_____ are primarily interested in a company's margins and cash flow projections. a. Strategic partners b. Suppliers c. Customers d. Lenders e. Distributors
d
_____ is/are created when a business is adequately capitalized and has highly regarded investors; an experienced management team; customers; a unique technology, product, or service; the ability to continually innovate; and a rapidly expanding market. a. Inventory turnover b. Economies of scale c. A competitive advantage d. Value e. Validation
d
A _____, or prospectus, discusses all the potential risks of investing in an initial public offering (IPO). a. term sheet b. forfeiture provision c. stop-loss statement d. tombstone e. red herring
e
An entrepreneur should strive to effectively "pitch" the essence of his or her business in a. one minute. b. five minutes. c. two minutes. d. 30 seconds. e. 15 seconds.
e
Generally, banks make loans on the basis of what are termed the five Cs: character, capacity, capital, collateral, and condition. In the case of entrepreneurs, _____ and _____ become the leading consideration, because the new business's performance estimates are based purely on forecasts. a. character; collateral b. capacity; condition c. capital; character d. capital; collateral e. character; capacity
e
In order to not incur the tremendous costs of purchasing equipment for a manufacturing plant, an entrepreneur may a. plan a harvest strategy. b. take loans from lenders. c. downsize the plant's operations. d. reduce the volume of production. e. form a strategic alliance.
e
Which of the following is NOT one of the principal concerns that anyone investing in a new venture has? a. Degree of risk b. Rate of growth c. Return on investment d. Protection e. Customer acquisition
e
_____ is a particular type of receivable financing wherein the lender takes ownership of a receivable at a discount and then collects against it. a. Foreclosure b. Crowdfunding c. Discounting d. Dilution e. Factoring
e
The _____ of a region or community is simply the major source of income for the area. a. municipality b. economic base c. market d. enterprise zone e. trade area
b
The higher the _____, the more liquid the company is and the more easily its assets can be converted to cash to pay off short-term obligations. a. return on investment b. current ratio c. profit margin d. operating cash inflows e. inventory turnover
b
_____ refers to techniques for getting by on as few resources as possible and using other people's resources whenever feasible. a. Impact investing b. Bootstrapping c. Factoring d. Crowdfunding e. Underwriting
b
All of the following disadvantages are associated with being a public company EXCEPT a. public scrutiny. b. being subject to stringent disclosure rules. c. pressure to perform in the long term. d. high cost. e. loss of control.
c
An early-stage investment in a growing business by a venture capital firm characteristically demands a higher rate of return, as much as _____ percent or more annual cash-on-cash return, whereas a later-stage investment demands a lower rate of return. a. 30 b. 60 c. 50 d. 40 e. 80
c
An executive summary should demonstrate a clear link between the _____ and the _____. a. return on investment; cash flow b. business; industry c. problem or pain; solution d. founder; team e. customer; market
c
Bill is a lender and is considering a loan for Joann and her new business venture. Which of the following would NOT be one of Bill's concerns? a. How the lender will be protected if the business doesn't meet its projections b. The entrepreneur's stake in the business c. The number of strategic partners the venture has d. The kinds of assets the business has for collateral that can be pledged as security for the loan e. The kind of positive impact the loan will have on the business
c
Many investors suggest structuring a(n) _____ deal for friends and family because this tactic avoids having to place a valuation on the company that is likely to be wrong. a. convertible equity b. impact investing c. convertible debt d. valuation divergence e. due diligence
c
The income statement is called a "statement of financial position." a. True b. False
F
The marketing plan is quite similar to market analysis. a. True b. False
F
The principal disadvantage of a public offering is that it provides the offering company with a tremendous source of interest-bearing capital for growth and expansion, paying off debt, or product development. a. True b. False
F
All of the following are costs an entrepreneur may incur after acquiring capital EXCEPT a. prospectus printing costs. b. legal fees. c. brokerage fees. d. investment banking fees. e. marketing costs.
a
At startup, the organization chart is more likely to be _____, reflecting the fact that the entrepreneur and the founding team often perform all the functions when the business is starting. a. flat b. open c. tall d. virtual e. hierarchical
a
In addition to explaining the business model, an executive summary should include a well-thought-out summary financial plan with _____ to _____ years of projected revenues, expenses, cash flow, and headcount or personnel requirements at various milestones. a. three; five b. five; ten c. two; three d. one; two e. one; three
a
Industrial parks are common locations for a. manufacturing companies. b. retail businesses. c. distributors. d. service businesses. e. wholesale businesses.
a
Most venture capitalists (VCs) invest in the _____ stage, because this stage is more likely to bring them to the liquidity event they need in three to five years to make the investment worthwhile. a. rapid growth b. proof of concept c. startup d. business model e. early growth
a
Private investors, who are called _____, are part of the informal risk-capital market a. angels b. debtors c. assets d. creditors e. guarantors
a
Recommendations for a successful pitch include all of the following EXCEPT a. standing behind a podium. b. maintaining eye contact. c. using colorful visual aids. d. using minimal text in the slides. e. doing a live demonstration of the product or service.
a
The _____ plan contains a detailed description of those processes that the new venture will own and undertake in-house and those that will be outsourced to a strategic partner. a. operations b. financial c. growth d. marketing e. industry
a
To design a business effectively, it's important for the entrepreneur to identify the _____ for the business—what the business has to do to be successful. a. key success factors (KSFs) b. organizational culture c. strategic focus d. business processes e. core values
a
Today, most investors want to see a well-written _____ that tells a compelling story and grabs their interest. a. executive summary b. proof of concept (POC) c. contingency plan d. elevator speech e. marketing plan
a
Which component of the business plan provides the timeline for completion of the prototype and final product or service? a. Product/service development plan b. Operations plan c. Founding or management team d. Marketing plan e. Industry/market analysis
a
Which of the following gives employees the right to participate in the profits of a company at a specified percentage, even though they are not full shareholders with voting rights? a. Capital appreciation rights b. Bonus plans c. None of these are correct. d. Profit-sharing plans e. Deferred compensation plans
a
Which of the following is NOT a core tenet of the design thinking approach? a. Design thinking is about objective target markets or employees who perform functions. b. Design thinking is about flexibility and adaptability to uncertainty. c. Design thinking involves telling stories. d. Design thinking is about people's behaviors and emotions. e. Design thinking is more about doing than talking.
a
Which of the following is an important benefit of demonstrating proof of concept (POC) with a prototype? a. Changes in the prototype can be made early in the process when changes are less costly. b. Requisite technologies to create the final product can be developed early when technology resources are not in demand. c. Creating a prototype establishes an implicit patent on your product. d. It will indicate how much room there is for error between the cost to produce a product or deliver a service and the selling price. e. The prototype is an asset that can be used as collateral when securing financing for a loan.
a
With _____, a series of goals are set by a company with input from an employee, and as the employee reaches each goal, the bonus is given. a. a bonus plan b. a deferred compensation plan c. a personal incentive plan d. capital appreciation rights e. a profit-sharing plan
a
_____ are subject to the ERISA rules for employee retirement programs. a. Profit-sharing plans b. Capital appreciation rights c. Bonus plans d. Deferred compensation plans e. Stock options
a
_____ value refers to the amount that could be recovered by selling off all a company's assets. a. Liquidation b. Intrinsic c. Investment d. Book e. Going-concern
a
Which of the following uses net income and net sales from the income statement to give the percentage of each dollar of sales remaining after all costs of normal operations are accounted for? a. Current ratio b. Inventory turnover c. Profit margin d. Statement of cash flows e. Return on investment
c
_____ refers to an organization's tendency to develop its own characteristic way of doing things. a. Design thinking b. Organizational process c. Corporate culture d. Organizational structure e. Corporate strategy
c
Any investment deal consists of all of the following components EXCEPT a. the return on investment to investors. b. the level of risk involved. c. the amount of money to be invested. d. a liquidation strategy. e. the timing and use of the investment moneys.
d
Software companies are a classic example of a(n) _____ organization. a. centralized b. matrix c. informal d. distributed e. hierarchical
d
The time from idea generation through product development, market testing, and product launch is often referred to as the a. rapid growth stage. b. tornado. c. early adopter stage. d. valley of death. e. technological imperative.
d
A way in which startups become more flexible and responsive, as well as grow more rapidly, is by forming _____, or teams of businesses, to share resources and reduce costs. a. research teams b. centralized databases c. virtual partners d. temporary networks e. strategic alliances
e
Once a new venture has passed the startup stage, additional value is created by all of the following EXCEPT a. significant customers. b. its position in the market. c. effective operating systems. d. a strong gross margin. e. a low return on equity
e
The _____ plan outlines the strategy that will be used to ensure that the business model is sustainable and continues to scale over its life. a. operations b. industry c. marketing d. financial e. growth
e
The marketing plan includes all of the following EXCEPT a. tools that will be used to reach the customer. b. a media plan for specific marketing tools. c. the market niche. d. the business's identity. e. the location strategy for the business.
e
Title VII of the Civil Rights Act amended the original Civil Rights Act to include discrimination a. on the basis of religion. b. on the basis of sex. c. on the basis of national origin. d. on the basis of gender identity. e. against people with physical or mental disabilities.
e
Using a(n) _____ agreement is one way to make sure that only stock that has been earned will be distributed. a. preferred stock b. employee stock ownership c. shareholder d. minority ownership e. stock-vesting
e
Which of the following is the formula for the current ratio? a. Net income/Total current assets and liabilities b. Net income/Net sales c. Total current assets - Total current liabilities d. Net sales/Total current liabilities e. Total current assets/Total current liabilities
e
_____ value is the price at which a willing seller would sell and a willing buyer would buy in an arm's-length transaction. a. Going-concern b. Investment c. Liquidation d. Intrinsic e. Fair market
e