ENT 396 Exam 2 Review

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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?"

The registration of a trademark has a lifetime of

10 years plus 10-year renewable periods.

Works created after January 1, 1978, have a copyright for the life of the author plus

70 years

When considering bankruptcy, entrepreneurs as sole proprietors normally prefer

Chapter 13

Which of the following is a type of equity financing?

Common stock

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

Determine the strengths and weaknesses of the entrepreneur.

A business plan must illustrate the current status of the venture but not the projected results.

False

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

False

It often is possible to obtain more capital and a better range of skills in a sole proprietorship than in a partnership.

False

Laws governing intellectual property rights include copyrights, trademarks, and leases.

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

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

False

Which is an important question for the entrepreneur to ask when evaluating the venture capitalist?

Is the person someone with whom the entrepreneur can work?

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

Orient the plan to the present.

Which of the following is not a type of debt financing?

Private Placement

A disadvantage of debt financing is

Regular interest payments

From where does an S corporation take its name?

Subchapter S of the Internal Revenue Code

Which of the following falls under Chapter 7 bankruptcy?

The debtor is relieved of obligations.

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

The plan identifies critical risks.

Which of the following statements is not true of venture capitalists?

They are interested in trying to manage firms themselves.

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

A budget is one of the most powerful tools that an entrepreneur can use in planning business operations.

True

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

True

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

True

One of the principal advantages of a corporate form of ownership is that liability (the most money a person can lose) is limited to an individual's investment.

True

The business plan is the entrepreneur's road map for a successful enterprise.

True

The two parts of a patent application are specification and claims.

True

Which is one of the most important questions for entrepreneurs to ask regarding venture capitalists?

What is it like to work with their firm?

An informal risk capitalist is referred to as:

a business angel.

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.

The completed business plan provides the entrepreneur with

a tool for communicating with financial sources.

A business plan is

a written document that details the proposed venture.

Which of the following does not represent a category of angel investors?

amateur angels

The entrepreneur should ask the venture capitalist _____ questions.

an unlimited number of

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

assets = liabilities + owner's equity.

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

balance sheet

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.

That part of a patent application which identifies the features that are protected is known as the

claim

All of the following are ways of invalidating a trademark except

clearing-out proceedings.

The most common source of debt financing is

commercial banks

Which of the following terms is not synonymous with social lending?

commercially viable lending

The owner of a copyright may do all of the following except

deduct the intrinsic value of the rights from one's taxes.

A fixed cost

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

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

expected product profitability.

Because of the _____ doctrine, it is sometimes difficult to establish infringement.

fair use

Because the advantages of going public outweigh the disadvantages, it is in a corporation's best interest to go public.

false

Equity financing is money invested in the venture with legal obligations to repay the principal amount of interest or interest rate on it.

false

Regulation D augments the regulations for reports and statements required for selling stock to private parties, friends, employees, customers, relatives, local professionals.

false

Venture capitalists, surprisingly, require little information before they make an investment.

false

A key concept in developing an expense budget is that of

fixed costs

When a trademark becomes the name of a general group of products or services, the trademark protection may be lost because of

generic meaning

Which of the following are not trademarks?

generic words

Capital budgeting is designed to show

how many projects, in total, should be selected.

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.

All of the following are recognized as advantages of partnerships except:

lack of continuity

Major trends in the venture capital field today include all of the following except

less specialized and more homogenous funds

Specific forms of partnership include which of the following?

limited partnerships and limited liability partnerships

One of the advantages of public offerings is

liquidity

The main objective of Regulation D is to

make it easier and less expensive for small ventures to sell stock.

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

To effectively pursue a patent violation, experts recommend that the entrepreneur

prepare a realistic budget for infringement.

Contribution margin is the difference between

selling price and variable cost per unit.

There are two parts to a patent application, claims and

specification

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

the cash flow statement

The financial segment includes

the pro forma balance sheet.

An important guideline in putting the plan together is

to identify the target market.

Informal risk capitalists are often referred to as "business angels."

true

Informal risk capitalists are those who have already made their money and now seek to help new ventures.

true

Private placement is a method of raising capital through the private placement of securities.

true

Sophisticated investors are wealthy individuals who invest more or less regularly in new and/or early- and late-stage ventures.

true

Sources of debt financing include trade credit, accounts receivables, factoring, and finance companies.

true

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

Chapter 7, Chapter 9, and Chapter 11 are the most common forms of bankruptcy.

False

Contribution margin is the difference between the selling price and the fixed cost per unit.

False

Pro forma statements show the firm's present financial position.

False

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

False

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

False

The registration of a trademark lasts for 40 years, with continuous renewal every 10 years.

False

The set of assumptions on which financial projections are based have little meaning.

False

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

False

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

False

The principle objective of capital budgeting is to

maximize the value of the firm.

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

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.

Advantages of debt financing include all of the following except:

regular interest payments

Use of debt to finance a new venture involves a payback of funds plus an interest fee for the use of the money.

true

The principal objective of capital budgeting is to maximize the value of the firm.

True

Three primary legal forms of organization are the sole proprietorship, the partnership, and the corporation.

True

Works created and copyrighted after January 1, 1978, are protected for the life of the author plus 70 years.

True

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.

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

Provides a comprehensive product-launch timetable.

A copyright provides exclusive rights to creative individuals for the protection of their artistic productions.

True

A trademark is a distinctive name, mark, or symbol that is identified with a company's product.

True

An entrepreneur is much better off preparing his or her own business plan rather than hiring someone else, even if more experienced, to prepare it.

True

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

True

The cash-flow budget provides an overview of cash inflows and outflows for the budget period.

True


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