Small Bus & Entrep- Smartbook 5 & 6

What is a brief statement that summarizes how and where the firm will compete?

Mission statement

A key part of building a competitive advantage is having a deep understanding of your _______ needs.

customers'

For the mission statement of a business to be utilized effectively, the founders must make it ______ to every employee within the company.

directly applicable

Current assets minus current liabilities are referred to as _____.

the firm's working capital

Into which two categories are the five to eight measures of success for a venture broken up?

Quantitative Qualitative

A well-developed mission statement will:

be a short, direct statement for guiding the firm.

A firm's _____ statement is a brief statement that summarizes how and where the firm will compete. (Enter one word in the blank.)

mission

Implementing a(n) ______ is about fit and alignment within the business.

strategy

______ costs are costs that vary according to the number of units produced.

Variable

A ________ exists when a firm finds a unique position in the market through a product or service.

differentiation approach

In the context of the financial tools used by entrepreneurs, the time value of money refers to the value of _____.

money over time at a given rate of inflation or other type of return

Along with being rare, durable, and not easily substituted, the resource must also be ______, which means the customer is willing to pay extra because of the uniqueness.

valuable

Gareth is the owner of a popular car wash facility. He has a small cafe set up beside the facility where customers can have a quick snack while waiting for their vehicles. Also, he ensures that each and every customer gets the best service in town. Customers do not mind paying extra because of these reasons. In fact, Gareth noticed that in the last 6 months, he has received several new customers who were previously engaged with his competitors. In the context of the components of resource-based analysis, Gareth's product or service is ________.

valuable

What is a set of advantages that provides a firm with the opportunity to make money where other businesses cannot easily copy its advantages?

sustainable competitive advantage

New business owners should ______ in order to develop an accurate cash flow projection.

talk to suppliers and vendors about payment terms and interest rates

The financial analysis for a proposed business focuses on _____.

the business's ability to generate positive cash flow quickly

A firm's budget is its cash flow statement.

False

A business's revenues often ______ sources that may not automatically be recognized.

come from a variety of

Cash flow ______ as a business's profits.

is not the same

A(n) ______ is a summary of the business's assets and liabilities.

balance sheet

Entrepreneurial breakeven by a new business is achieved when _____.

a new venture's net cash flow is more than the initial investment plus the time value of the money invested

All ______ expenses must be accounted for in the cash flow statement.

actual

In the context of the financial tools used by entrepreneurs, the time value of money is calculated as the value of _____.

an entrepreneur's investment in time and money if he or she did not engage in the proposed venture

The focus on _____ in a new business is due in part to the firm's management also being the firm's owners.

cash flow

Entrepreneurs of a new firm should focus on the viability of the firm; the firm's viability will be decided by ______, not ______.

cash flow; profitability

All of these are intangible items except

initial financing.

The greatest reason for an entrepreneurial business's failure _____.

is the absence of sufficient cash flow

For every resource and capability that an entrepreneur determines to be indeed rare, the entrepreneur should initially evaluate the _____.

market for a close substitute

The firm's ______ help(s) the venture by targeting its efforts in specific opportunities.

mission

Stella walks Holly and Chad through the inventory turnover ratio for the boutique's top sellers. Why is it important to consider inventory turnover in the retail industry?

Selling products with a higher inventory turnover ratio will lead to greater profitability.

______ assets are those assets that have a physical presence.

Fixed

______ costs are expenses that must be paid no matter how many goods are sold.

Fixed

Which of the following are key characteristics that should drive the new-business owner in developing the mission statement?

Keep it simple. Be specific. Keep it applicable. Keep it short.

Which measures are tied to the strategic goals of the organization but have more to do with the feel of the organization?

Qualitative

Implementing a strategy is about:

-Alignment within the business -fit within the business

Match the features of a mission statement with their descriptions.

Short-> The statement should be able to fit on a coffee mug. Simple-> Everyone in the company should be able to learn and understand the mission. Applicable-> The statement should be able to guide every individual in the company. Specific-> The statement clearly tells everyone what the company does. Measurable-> Metrics for every part of the statement can be developed.

Both categories of measures are tied to the strategic goals of the organization, but _____ measures have more to do with the feel of the organization.

qualitative

The firm's assets minus its liabilities should equal ______.

zero

How is the durability of a new firm's unique resource or capability evaluated by the entrepreneur?

By analyzing whether the competitors of the firm would actually try to match the firm

Step 3 in the process of identifying a sustainable competitive advantage involves:

evaluating the competitiveness of unique resources and capabilities.

Entrepreneurs should begin with a business's ______ when generating a cash flow statement.

expenses

Which of the following are examples of the impact of the mission statement?

-The mission will impact the major ways in which the firm will compete. -The mission will impact the market in which the firm will compete. -The mission may impact how broad a geographic range the firm will serve.

Equity is an investment into the entrepreneurial business made by the _____.

owners of the firm

Businesses earn _____ when sales revenues are higher than expenses.

profits

If a resource is matched by more than one competitor, then it is not rare and is simply the ______ expectation in the industry.

standard

Along with the mission, what else has the power to guide the business as it develops?

Strategy

Which of the following statements regarding pro forma statements are correct?

-Pro forma statements are helpful in planning the business's future financial situation. -Pro forma statements are estimates. -Pro forma means "as a matter of form."

A ______ analysis is a tool for estimating when a business's income will exceed its expenses.

break-even

A focus differentiation strategy revolves around

crafting a business with small geographic approach.

Financial analysis is a(n) ______ step in the due diligence effort.

critical

Which capabilities are the source of motivation to convince customers to change to do business with your new business?

Unique

The mission statement must be understood by everyone who will come in contact with the business so that they will understand what the company does not do.

True

A ________ projects all the expenses incurred by a business over a specified period of time.

budget

_____ measures are tied to the strategic goals of the organization but have more to do with the feel of the organization?

Qualitative

As a business grows, it gets progressively less difficult to change its direction.

False

Which of the following motivate potential customers to select a new business venture?

Unique resources Unique capabilities

A small percent of credit accounts will _____.

go past due and ultimately become uncollectible

A ________ occurs when a firm seeks to be the most economical competitor in the industry.

low-cost strategy

Stella advises Holly to consider forming an LLC or other corporate structure for her business. She says this will protect Holly financially in case any fiscal problems should arise and also

lower Holly's tax liability.

The ______ helps a small business stay away from things that opportunistically sound promising, but which take the business away from its principal focus.

mission statement

If the mission statement is so clear that it tells everyone exactly what the firm does and by definition what the firm does not do, which key characteristic of its development does it satisfy?

Keep it specific.

_______ liabilities are those liabilities that the business owes and are ultimately due more than a year from the current date.

Long-term

Which measures are tied to the financial or strategic goals of the organization?

Quantitative

Which of the following are likely expense categories that the typical business will have?

Rent Advertising Salaries

Which of the following is used by entrepreneurs to judge whether their businesses can survive the worst-case or successfully implement the best-case cash flow scenarios?

Sensitivity analysis

Which of the following is not a characteristic of firms that are followers?

They are often more successful than the first-mover firms because they do not repeat their predecessor's mistakes.

Which of the following terms is used to describe assets that can be easily converted to cash?

current assets

A(n) ______ ______ _____ is a set of advantages that provides a firm with the opportunity to make money where other businesses cannot easily copy that firm's advantages. (Enter one word in each blank.)

sustainable competitive advantage

One of the keys to developing an income statement for a new business is predicting _____.

sales for the business

Which of the following is a financial obstacle that has a strong impact on Holly's Boutique and the fashion industry in general?

seasonality of cash flow

To ensure that every employee can understand the mission statement, the new-business owner must keep the statement ______.

simple

The key to the ability to communicate a mission easily is that the statement be:

simple. appropriate. direct.

In order for the mission statement to be short, simple, and applicable, the mission statement must be ______.

specific

It is necessary that the mission statement be so _____ that it clearly tells every employee what not to do.

specific

The firm's _____ is how the firm plans to use the competitive advantage of the business to accomplish its mission.

strategy

Which category of metric is easily measured?

Quantitative

Stella shows Holly and Chad several financial reports to use when considering financial plans for Holly's Boutique. The report that focuses on the reporting of revenue and expenses over a defined period of time is the

income statement.

a business grows, the degree of difficulty in changing direction _____.

increases progressively

Which of the following are examples of fixed assets?

Land Machinery Buildings

Cash flow statements are the ______ a budget.

exact opposite of

Which TWO elements have the power to guide the business as it develops?

Mission Strategy

The assets of a firm minus its liabilities reflected in the balance sheet should total

to zero.

_____ have little do with the long-term viability of a business.

Profits

Cash flow statements for a new business are very similar to the typical publicly traded corporate annual reports.

False

The cash crunch faced by a new business with a negative cash flow is resolved when sales are growing.

False

The mission of the firm is to make money.

False

Organizations should develop between ______ measures of success for its venture.

5 and 8

______ is the actual cash that flows into the business minus the cash that goes out of the firm.

Cash flow

Which of the following are examples of fixed costs?

Rent Insurance Equipment leases

The balance sheet should ______ the relevant types of current and fixed asset.

separate

Which of the following statements about profits are correct?

-All expenses must be paid before the business earns a profit. -Profits are not the same as cash in the bank. -Products can be sold without cash coming into the business.

A firm's mission statement

All of the answers are correct.

Which of the following is an example of intangible assets?

All of the answers are correct.

Most capabilities and assets listed by the firm are _____ for the industry.

standard

What is the measure used to evaluate whether a person or firm is meeting its goals?

A metric

Which of the following statements are true about the differences between cash flow and budget statements?

-Budgets project costs over a period of time, while cash flow statements focus on actual dispersement. -Budgets are helpful for planning purposes, while cash flow statements help owners understand what they must have in cash to pay a period's bills. -Cash flow statements recognize expenses in the month they are paid, while budgets allocate expenses evenly over the time period.

Which of the following are examples of long-term liabilities?

-Stockholders' equity -Owners' equity -Mortgages payable

Which step involves developing a complete list of tangible and intangible assets?

Step 1

Which of the following are steps in identifying a sustainable competitive advantage?

-Evaluate the unique resources/capabilities. -Break the list into two groups: standard and unique. -Develop a list of your business assets and capabilities.

________ costs must be paid regardless of how many products or services are sold.

fixed

Which of the following techniques can be ideally used by entrepreneurs to predict sales for their firms when developing income statements?

-Communicating with other entrepreneurs in the same domain against whom they will not compete -Studying similar enterprises and trying to estimate or research their sales levels

Identify the true statements about the role of cash in new businesses.

-For new businesses, carrying inventory of any type results in payments for supplies taking place long before any cash is received by these businesses. -New businesses usually utilize cash to pay for their goods and supplies.

Which of the following statements are true regarding the rarity of a resource?

-If a resource is rare, it is considered unique. -Judgments about how rare a resource may be are qualitative. -A resource can be considered rare if it is matched by one competitor.

Which of the following statements about deviation analysis are correct?

-It assists entrepreneurs in developing realistic forecasts. -It helps to maximize flexibility in making changes as the business grows. -It should be done each month.

Businesses often offer credit to their customers with terms that range between _____.

30 and 90 days

Identify the true statements about the sensitivity analysis of a new business.

-It helps examine the responsiveness of the potential cash flow to dramatic changes in either the revenue or cost stream. -It should be conducted during the due diligence phase of studying a business idea.

A pro forma _____ ______projects the future income of an entrepreneurial firm. (Enter one word in each blank.)

income statement

What is the first step in identifying a sustainable competitive advantage?

Develop a list of assets and capabilities.

Which assets typically provide a business with a competitive advantage for some period of time?

Unique

Entrepreneurs must ______ to avoid going out of business.

understand and monitor the business's cash flow

If the customer is willing to pay extra because of the unique resources and/or capabilities, then it is considered ______.

valuable

A company is more likely to make money if the mission statement is:

widely known. memorable. succinct. clear.

Which of the following are examples of a current asset?

Accounts receivable Cash Notes receivable

Before the founders can start building their new business, they must be clear about where and how they will compete.

True

Which of the following are examples of current liabilities?

Accrued payroll Bank notes Accounts payable

_______ are easier to accurately forecast than ______.

Expenses; revenues

The book mentions that organizations should develop quantitative measures of success. Which of the following are characteristic of quantitative measures?

They are tied to the strategic or financial goals of an organization.

Acme Corporation has introduced a new probiotic product in the market. It has the benefit of being the first to introduce a probiotic product in the market and has gained tremendous customer loyalty. This is an example of ________.

sustainable competitive advantage

What is the area of separation where a firm performs better than anyone else in the market that it serves?

Competitive advantage

Which of the following expenses are examples of variable costs?

Direct labor Raw materials

The _____ is the foundation on which the firm's _____ is built.

mission; strategy

______ assets are those assets that can be easily converted to cash.

Current

______ liabilities are those liabilities or debts that the business has to pay within one year.

Current

______ is an investment into the business made by the firm's owners.

Equity

Which step involves splitting the list of tangible and intangible assets into standard and unique assets?

Step 2

In developing a cash flow projection, a new business owner should contact vendors and suppliers to ask about payment terms.

True

Which of the following statements about cash flow analysis statements for an established business are true?

-The data generated will include an actual cash flow statement. -Owners will develop a series of financial reports for either themselves or for investors over some time period such as a month or a quarter. -Owners will run several other statements in addition to the cash flow statement to provide a more complete picture of the business.

Mark, a new business owner, creates two cash flow statements for his firm. The first increases the monthly revenue of his firm by 40 percent, while the other reduces the monthly revenue by 40 percent. He compares the effect of each scenario on his firm's business to understand its financial situation. In this scenario, Mark is developing a ________.

sensitivity analysis

In order to make the mission statement understandable and memorable, it is essential that the statement be kept ______.

short

Which of the following are true about an entrepreneurial firm's pro forma income statement?

-It focuses on profit rather than cash flow. -It helps in understanding the business's overall cost picture.

Which of the following statements regarding a break-even analysis are correct?

-It helps the entrepreneur determine the viability of a new venture. -It includes both fixed and variable costs in its calculation. -It recognizes that sales grow incrementally once the firm is started.

A new business needs to focus on:

-performing activities where it has a competitive advantage. -doing some set of activities better than everyone else. -what the business does best in its industry.

_____ assets are those assets that can be easily converted to cash.

Current

Which step in the process of identifying a sustainable competitive advantage involves evaluating the competitiveness of unique resources and capabilities?

Step 3

A(n) ______ analysis examines the differences between the business's predicted cash flow and the actual cash flow performance.

deviation

A(n) _____ statement projects all the costs that will be incurred by a business over some period of time and allocates those expenses evenly over that time.

budget

Which of the following statements regarding a cash flow statement's revenues are correct?

-Separating revenue lines aids both in predicting where the firm's revenues come from and in analyzing the actual revenue sources. -Revenues come from a wide variety of sources. -Cash inflows should be separated into many categories to provide insight to the owner.

Which of the following statements are true of the financial analysis aspect of the due diligence process?

-The financial analysis of a business is the most critical step of the due diligence process. -The financial analysis determines whether there is an actual financial opportunity.

Which of the following are important features of the mission statement?

-The mission statement must be understood by all the business's stakeholders. -The mission statement must be concise. -The mission statement must describe what the company does or does not do.

What are the characteristics of a substitute that an entrepreneur should evaluate for every resource and capability of his or her business?

-The substitute satisfies the same basic need that is satisfied by his or her product or service. -The substitute is evaluated based on its similarity to the entrepreneur's unique resource and capability.

List the steps in identifying a sustainable competitive advantage for a business in the order starting from step one to step three.

1. develop a list of the assets and capabilities of one's business 2. break the list of assets and capabilities into smaller: standard and unique 3. evaluate the unique resources/capabilities of one's business

Identify the purposes of a business's cash flow statement.

=It helps the owners display the ability of the company to meet its obligations. =It helps the owners accurately keep track of the business's overall cash position.

The three types of financial statements that are generated on a monthly or quarterly basis include which of the following?

Cash flow Balance sheet Income statement

Stella advises Holly to consider consignment for her line of fashion accessories. Why does consignment make sense for Holly's Boutique?

Consignment allows Holly to increase her sales with little additional upfront costs.

Until a new venture's positive cash flow exceeds its initial investment, entrepreneurial breakeven has not been achieved.

True

A mission statement is said to be _____ if it helps the employees of a firm make active decisions in the moment without having to refer everything to the firm's founder.

actionable

When the mission of the business is ______, the employees can make active decisions in the moment without having to refer everything to the founder of the firm.

actionable

Besides keeping the mission statement short, simple, and specific, the statement must be utilized effectively by every member of the company, which requires the statement to be ______.

applicable

A key part of building a(n) _____ ______ is having a deep understanding of your customers' needs.

competitive advantage

A(n) _____ _____ is the area of separation where a firm performs better than anyone else in the market that it serves.

competitive advantage

The unique assets and capabilities possessed by a new business will help form its _____ _____.

competitive advantage

The evaluation of the _____ of a new business's competitive advantage is done by the entrepreneur by estimating the amount of time it would take for his or her business competitor to match the firm in a particular area.

durability

When developing a mission statement, the new business founder should keep the statement short, simple, specific, and applicable. The mission statement should also:

establish measurable goals

Pro forma financial statements help entrepreneurs _____.

estimate what the business's financial position will look like in the future