ENT Test 2 Review

A business plan must illustrate the current status of the venture but not the projected results. a. True b. False

b. False

The completed business plan provides the entrepreneur with a. a sense of well-being. b. a tool for communicating with financial sources. c. a product-launch timetable. d. a nicely designed booklet.

b. a tool for communicating with financial sources.

The decision of an entrepreneur to ignore the market is a safe one if he or she is sure that the idea will be a success. a. True b. False

false

The type of venture that is expected to attract venture capital would most likely be a a. corporate venture. b. high-growth venture. c. lifestyle venture. d. smaller venture.

high-growth venture.

Venture classifications include which of the following types of venture? a. hobby ventures b. smaller copycat ventures c. high-growth ventures d. survival ventures

high-growth ventures

Which of the following is a major reason for the failure of a new venture? a. inadequate market knowledge b. good product performance c. opening in the wrong location d. good product/poor marketing

inadequate market knowledge

Which of the following statements is true? a. Innovation is the specific function of entrepreneurship. b. Innovation is the process by which entrepreneurs consume marketable ideas. c. Innovation does not involve change. d. Innovation is the government's responsibility.

innovation is the specific function of entrepreneurship

Many entrepreneurs lack _____ for their new venture. a. innovation b. intelligence c. objectivity d. both a and b

objectivity

The individual who buys the franchise is the a. franchisee. b. franchisor. c. franchisette. d. franchatter.

a. franchisee.

The person who sells the franchise is usually required to do all of the following except: a. pay a fee. b. provide professional management training to the unit's staff. c. help out with financial assistance. d. provide continuing aid and a guidance to the person buying the franchise.

a. pay a fee.

When should a potential franchisee receive the FDD (Franchise Disclosure Document)? a. two days before signing a contract or paying any money b. at least ten days before signing a contract or paying any money c. two days before signing a contract d. at least ten days before paying any money

b. at least ten days before signing a contract or paying any money

The entrepreneurial motivations of individuals usually relate to which of the following factors? a. the environment b. the entrepreneur c. the venture d. all of the above

all of the above

The basic suggested venture legitimation strategies include which of the following: a. conformance b. manipulation c. creation d. all of these

all of these

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

b. False

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

b. False

Which of the following is not a key question a prospective buyer needs to ask in buying a business? a. Why is the owner selling? b. What is the owner's personal net worth? c. How many of the personnel will remain with the firm? d. What type of competition exists?

b. What is the owner's personal net worth?

An agreement not to compete is also known as a. a trade restriction clause. b. a legal restraint of trade. c. a waiver of competition clause. d. a deferential sale of business clause.

b. a legal restraint of trade.

Which of the following statements is true? a. The right brain is more important in the creative process than the left brain. b. The left brain is more important in the creative process than the right brain. c. Both sides of the brain are important to the creative process. d. Motivation is the key to the creative process rather than the brain's functionality.

both sides of the brain are important in the creative process

Market feasibility analysis relies on a. organizational competence b. the entrepreneur's vision c. venture capital d. general economic trends and competitor data

general economic trends and competitor data

Overnight package delivery is illustrative of which source of innovation? a. incongruities b. unexpected occurrences c. process needs d. change in perception

incongruities

What are the four types of innovation? a. invention, extension, synthesis, duplication b. extension, retention, analysis, duplication c. synthesis, extension, retention, analysis d. analysis, synthesis, duplication, retention

invention, extension, synthesis, duplication

Logical and analytical skills are developed in the a. left hemisphere of the brain. b. right hemisphere of the brain. c. central hemisphere of the brain. d. anterior hemisphere of the brain.

left hemisphere of the brain

The combination of existing concepts and factors into a new formulation would define which of the following terms? a. synthesis b. extension c. invention d. analysis

synthesis

Which of the following statements is true? a. The right brain helps people analyze and verbalize. b. The right brain helps people understand analogies and imagine things. c. The left brain helps people understand analogies and imagine things. d. Right and left brain concepts are meaningless.

the right brain helps people understand analogies and imagine things

Which of the following is NOT true of creative people? a. They must be gifted or highly intelligent. b. Some people have a greater aptitude for creativity than others. c. They are able to see relationships among things that others have not seen before. d. They have been taught to think and act creatively as well as encouraged to develop their creativity.

they must be gifted or highly intelligent

Creativity, in the entrepreneurial context, is the generation of ideas that result in the improved efficiency or effectiveness of a system. a. True b. False

true

Feasibility analysis includes technical, market, financial, organizational, and competitive analysis. a. True b. False

true

Incongruities are gaps or differences between expectations and reality. a. True b. False

true

Innovation is the process by which entrepreneurs convert opportunities into marketable ideas. a. True b. False

true

Many inventions and innovations are a result of inventors seeing new and different relationships among objects, processes, materials, technologies, and people. a. True b. False

true

New venture legitimacy is a major challenge for every entrepreneurial start-up. a. True b. False

true

Obtaining external financing is considered one of the major types of problems for a new venture during its first year True or False

true

Solid analysis and evaluation of the feasibility of the product/service idea are critical tasks in starting a new business. a. True b. False

true

The entrepreneurial motivations of individuals relate to the entrepreneur, the environment, and the venture. a. True b. False

true

The four basic types of innovation are invention, extension, duplication, and synthesis. a. True b. False

true

The four phases of the creative process are knowledge accumulation, incubation, idea experience, and evaluation. a. True b. False

true

The left hemisphere of the brain is responsible for logical and analytical skills. a. True b. False

true

Which of the following are sources of innovation? a. unexpected occurrences and incongruities b. duplication and processes c. synthesis and technology d. industry changes and extension

unexpected occurrences and incongruities

Using the failure prediction model discussed in the chapter, the risk of failure can be reduced by: a. using less debt as initial financing and generating revenue in the initial stages. b. using more debt as initial financing and generating less revenue in the initial stages. c. using more revenue to enhance more debt in the initial stage. d. all of the above.

using less debt as initial financing and generating revenue in the initial stages.

The incubation process involves which of the following? a. working harder b. letting the subconscious work c. talking with friends d. changing jobs

letting the subconscious work

There is a great abundance of reliable data concerning the start-up, performance, and failure of new ventures. a. True b. False

False

Which of the following is an intangible asset? a. goodwill b. inventory c. plant d. machinery

a. goodwill

Which of the following is critical to a product's success? a. timing b. marketing approach c. objectivity d. all of the above

all of the above

Which of the following statements may be the most important in new venture creation? a. the pro forma balance sheet b. the cash flow statement c. the income statement d. the profit statement

b. the cash flow statement

Competitive analysis, advertising plan, and pricing policy are all part of the a. financial plan segment. b. milestone schedule segment. c. research, design, and development segment. d. marketing segment.

d. marketing segment.

An approach developed as a criteria selection list from which entrepreneurs can gain insights into the viability of their venture is the a. feasibility criteria approach. b. time-essence of a venture approach. c. marketability feasibility approach. d. comprehensive feasibility approach.

feasibility criteria approach.

Which of the following learning mechanisms are important for converting ideas into form in design methodology? a. feedback b. prototyping c. qualitative research d. all of these

all of these

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

b. False

Poor financial understanding is characterized by which of the following? a. failure to anticipate technical difficulties b. inadequate understanding of costs and funding requirements c. failure to realize the life cycle of a product d. lack of product differentiation

inadequate understanding of costs and funding requirements

The elimination of time and effort associated with starting a company is an advantage of acquiring an ongoing venture. a. True b. False

a. True

The prospective investor should get as much information as possible on the franchisor. a. True b. False

a. True

The rise of incubators, accelerators, and entrepreneurial ecosystems may be an important pathway for entrepreneurs to pursue. a. True b. False

a. True

The terms upside gain and downside loss refer to the profits the business can make and the losses it can suffer. a. True b. False

a. True

Uniqueness in a product or service can be demonstrated through a new-new approach or a new-old approach. a. True b. False

a. True

An additional consideration to keep in mind when negotiating to purchase an existing business includes requesting that the seller retain _____ in the firm. a. a minority interest b. a majority interest c. either a minority or majority interest d. none of these

a. a minority interest

Which of the following is an entity that helps new ventures to develop by providing services such as management training and office space? a. business incubator b. business accelerators c. entrepreneurial ecosystem d. franchise

a. business incubator

When one designs a unique good or service, the individual is said to have used a(n) _____ approach to starting the business. a. new-new b. old-old c. old-new d. new-old

a. new-new

Which of the following is a critical factor to be considered in the management segment? a. organizational structure b. product design c. suppliers d. location of the plant

a. organizational structure

The comprehensive business plan should be the result of a. reflections on the direction of the venture. b. investor's promises of capital. c. the entrepreneur's best guesses. d. continuous operations of the venture.

a. reflections on the direction of the venture.

Franchisees have the option of whether to use the logo and symbols of the franchisor. a. True b. False

b. 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. a. True b. False

b. False

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

b. False

A business plan is a. the result of the new business. b. a written document that details the proposed venture. c. a blueprint of the product. d. an instance of entrepreneurial passion.

b. a written document that details the proposed venture.

The social and economic environment affecting the local and regional entrepreneurship is now commonly referred to as: a. venture incubator b. entrepreneurial ecosystem c. new venture accelerator d. venture ecology

b. entrepreneurial ecosystem

A _____ is a system of distribution that enables a supplier to arrange for a dealer to handle a specific product or service under certain mutually agreed upon conditions. a. franchisee b. franchise c. franchisor d. franchiser

b. franchise

The financial segment includes a. the cost statement. b. the pro forma balance sheet. c. the R & D statement. d. the profit statement.

b. the pro forma balance sheet.

An important guideline in putting the plan together is a. to over diversify. b. to identify the target market. c. to not highlight critical risks. d. to impress with excessive detail

b. to identify the target market.

Most entrepreneurs are objective when they evaluate their new idea. a. True b. False

false

Most entrepreneurs are well schooled in the technology associated with their ventures. a. True b. False

false

Surprisingly, growth of sales is generally not considered a critical factor in assessing new ventures. a. True b. False

false

The cognitive ability of entrepreneurs to acquire and transform information has yet to be studied. a. True b. False

false

The phase of the creative process when the idea or solution the individual is seeking is discovered is the a. background or knowledge accumulation. b. incubation process. c. idea experience. d. evaluation and implementation.

idea experience

Name the pitfall described by the statement, "Engineers and technically trained people are particularly prone to falling in love with an idea for a product or service." a. inadequate understanding of technical requirements b. lack of venture uniqueness c. no real insight into the market d. lack of objective evaluation

lack of objective evaluation

A common pitfall in selecting a new venture is a. poor financial understanding. b. proper objective evaluation. c. real insight into the market. d. none of the above.

poor financial understanding.

Which of the following is NOT one of the phases in the creative process? a. background or knowledge accumulation b. evaluation and implementation c. the incubation process d. preliminary investigation

preliminary investigation

Three specific phases that a new venture goes through are a. prestart-up, start-up, poststart-up. b. start-up, poststart-up, evaluation. c. beginning start-up, start-up, ending start-up. d. prestart-up, start-up, evaluation.

prestart-up, start-up, poststart-up.

Which of the following as a factor contributing to new-venture failure? a. product/market problems. b. family issues. c. personality clashes. d. good management/poor product.

product/market problems.

Rapid technological advances in many industries cause a concern for in new venture development. a. faulty product performance b. rapid product obsolescence c. inadequate awareness of competitive pressures d. undercapitalization

rapid product obsolescence

Check My Work Which one of the following is not a benefit of a business plan to the entrepreneur? a. Provides a comprehensive product-launch timetable. b. Quantifies objectives, providing benchmarks for comparing forecasts with actual results. c. Provides a communication tool for outside financial sources. d. Allows the entrepreneur to view the venture critically and objectively.

a. Provides a comprehensive product-launch timetable.

Researchers developed a "Newness Framework" to help depict the differing dimensions of newness that ventures could exhibit, which include which of the following dimensions: a. Technology newness b. Scientific newness c. Analytical newness d. None of the above

a. Technology newness

Which of the following describes advantages of the business plan for financial sources? a. The plan identifies critical risks. b. The plan helps assess the entrepreneur's family. c. the plan identifies sources of capital. d. all of these.

a. The plan identifies critical risks.

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). a. True b. False

a. 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. a. True b. False

a. True

In negotiating a deal to purchase an existing business, it is possible to request that the seller retain a minority interest in the firm. a. True b. False

a. True

Perhaps the greatest advantage of buying a franchise, as compared to starting a new business or buying an existing one, is that the franchisor will usually provide both training and guidance to the franchisee. a. True b. False

a. True

The Franchise Disclosure Document (FDD) is a legally required disclosure document that must be presented to potential franchisees during presale discussions. a. True b. False

a. True

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

a. True

What is the significance of a harvest strategy segment in a business plan? a. It is important for the entrepreneur to know how to buy up troubled companies. b. It is important for the entrepreneur to indicate how the business will increase in value. c. It is important for the entrepreneur to designate how the business will recruit new talent to the enterprise. d. It is important for the entrepreneur to plan for a liquidity event as an exit strategy.

c. It is important for the entrepreneur to designate how the business will recruit new talent to the enterprise.

Check My Work Which of the following statements would not be an appropriate guideline for successful business plan development? a. Highlight critical risks. b. Do not overdiversify. c. Orient the plan to the present. d. Avoid exaggeration.

c. Orient the plan to the present.

Who must negotiate a final deal to purchase a business? a. A lawyer b. A CPA c. The potential buyer d. All of these

c. The potential buyer

Which of the following statements is not part of the "five-minute reading" by venture capitalists? a. Read the latest balance sheet. b. Determine the financial structure of the plan. c. Determine the characteristics of the venture and industry. d. Determine the strengths and weaknesses of the entrepreneur.

d. Determine the strengths and weaknesses of the entrepreneur.

The inventory should be examined for which of the following? a. salability b. correspondence between the physical count and the book count c. up-to-datedness d. all of these

d. all of these

An advantage to buying an ongoing business is a. reduced concern over future operations. b. time and effort are reduced. c. it may be purchased at a bargain price. d. all of these.

d. all of these.

An indicator of the planning pitfall of "failure to anticipate roadblocks" is a. pursuing a good work force. b. recognition of future problems. c. having a contingency or alternative plan. d. making no admission of possible flaws in the plan.

d. making no admission of possible flaws in the plan.

The four phases in the creative process in order are a. background or knowledge accumulation, incubation, idea experience, and evaluation and implementation. b. idea experience, background or knowledge accumulation, incubation, and evaluation and implementation. c. incubation, background or knowledge accumulation, idea experience, and evaluation and implementation. d. evaluation and implementation, idea experience, incubation, and background or knowledge accumulation.

background or knowledge accumulation, incubation, and evaluation and implementation

Looking for different or unorthodox relationships among elements and people is one way to develop creativity. How might a person develop this capacity? a. by perceiving in a relational mode b. by perceiving in a restraining mode c. by perceiving in a restructured mode d. by perceiving in a retinal mode

by perceiving in a relational mode

Check My Work Which of the following questions should an entrepreneur ask when a business plan is turned down? a. "That means you do not know how to evaluate a good plan?" b. "Can you identify friends who would like this kind of deal?" c. "If you were in my position, how would you proceed?" d. none of these.

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

Which of the following mental habits inhibit creativity and innovation? a. either/or thinking, stereotyping b. functional perspective, mind-sets c. security hunting, risks d. stereotyping, incubation

either/or thinking, stereotyping

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

a. True

When purchasing an existing business, the prospective owner should conduct an assessment of the business's current group of employees. a. True b. False

a. True