PRACTICE TEST QUESTIONS TO MEMORIZE: EXAM 1

Which three characteristics help identify a business opportunity?

Service Price Quality

You recently started a small affiliate marketing service. Last month, you spent $1,000 on a Pay-Per-Click (PPC) online advertising campaign that resulted in $1,200 in sales. What was last month's Return on Investment (ROI) for your affiliate marketing service?

(Total Return - Amount Invested) / Amount Invest The amount invested was $1,000. It resulted in a $1,200 return. Your net profit is ($1,200 - $1,000) = $200. So, your ROI is $200 (profits) divided by $1,000 (investment) = 0.20, or 20%

What three statements help define a Market/Fit Hypothesis?

- A fit exists when people need your product rather than just seeing a potential benefit of using it. - Product/market fit exists when you have the right solution to a problem worth solving. - When users love your product so much they tell other people to use it.

What two are benefits of equity funding?

- Can be used to raise working capital - Investors do not get paid if the business does not make profit

You create a new type of electric shaver that is light-weight, portable, and holds a longer charge. What are three things you will need to consider regarding the mass production of your electric shaver?

- Creating your prototype to demonstrate the product's function to potential customers. - Finding a manufacturer - Sourcing materials needed for the components of the products

Select TRUE statements about requirements for Equity vs. Debt Financing. - Creditors look favorably upon a relatively low debt-to-equity ratio, which benefits the company if it needs to access additional debts financing in the future. - Debt financing requires borrowing money whereas equity financing requires selling a portion of the company - Equity financing places a large financial burden on the company - The main advantage of equity financing is that there is no obligation to repay the money acquired through it

- Creditors look favorably upon a relatively low debt-to-equity ratio, which benefits the company if it needs to access additional debts financing in the future. - Debt financing requires borrowing money whereas equity financing requires selling a portion of the company - The main advantage of equity financing is that there is no obligation to repay the money acquired through it

Select TRUE statements about Direct Competition and Indirect Competition - Indirect Competition is a business whose services are different from yours but satisfy the same need. - All companies that sell goods and services are Indirect Competitors - Direct Competition is a company that offers the same thing you offer. - When your target audience buys products from a competitor instead of from you, that is Indirect Competition

- Indirect Competition is a business whose services are different from yours but satisfy the same need. - Direct Competition is a company that offers the same thing you offer. - When your target audience buys products from a competitor instead of from you, that is Indirect Competition

Which two ways can Customer Service and Support affect sales?

- More sales through customer evangelists - Increased sales through responsiveness and personalization

What two should be included when calculating star-up costs for a business?

- Permits, licenses, and incorporation fees - Business cards

Select TRUE statements about the Selection of Distribution Channels. - Product price affects the length of distribution channel - Products that are bulky, large in size, and technically complicated are usually sold through multiple handlers before reaching the end customer. - Perishable products require more direct distribution

- Product price affects the length of distribution channel - Perishable products require more direct distribution

Select TRUE statements about the Sales Process. - Closing the deal is the last and final element in the Sales Process - Presentation is best done with a PowerPoint slide deck - Prospecting is usually the first step in the Sales Process - Determining is the potential customer can afford your product is part of Prospecting - Handling objections involves listening to potential customer's concerns and addressing them

- Prospecting is usually the first step in the Sales Process - Determining is the potential customer can afford your product is part of Prospecting - Handling objections involves listening to potential customer's concerns and addressing them

Which three elements are required to have a Trade Secret?

- Subject to reasonable efforts to maintain its secrecy - Others cannot legitimately obtain the information - Information has economic value not generally known

Select TRUE statements about the components of Business Plans and Pitch Decks. - Business plans are text-based documents - The goal of a pitch deck is to get investors' attention - A pitch deck is a visual slide presentation - Business plans are highly visual - The goal of a business plan is to get investors' to buy-in - A typical pitch deck has between 20-100 slides

- The goal of a business plan is to get investors' to buy-in - A pitch deck is a visual slide presentation - Business plans are text-based documents - The goal of a pitch deck is to get investors' attention

What are two characteristics of direct distribution that differ from fulfillment centers?

- The manufacturer controls all aspects of distribution - Direct distribution is also known as zero level channel

A law was passed increasing the minimum wage by 30%. The owner of a small landscaping business must now pay all of her laborers 30% higher wage. What is the minimum amount the owner must now charge customers for labor to balance her increased operational expenses? Note: Disregarded associated increase in taxes, such as FICA

30%

businesses that sell to other businesses who are the intended end user of the product

B2B

Which Sales Channel has been opened to manufactures because of digital tools?

Direct-to-Consumer

when a brand or manufacturer sells direct to consumers and the end users of their products, as opposed to selling to them solely through retailers

Direct-to-Consumer

You have an idea for a new product. Market research suggests the product is needed to solve a problem and will be enthusiastically embraced by customers. What is one of the first steps you must do before creating a product prototype?

Identify materials

Which documents summarize the business plan of a company?

Lean canvas Pitch deck

A hair salon acquired 100 new customers last year. Costs in the marketing and sales areas were the following: Marketing Costs = $1,000 Sales Costs = $10,000 Salaries = $96,000 What was the customer acquisition cost?

Marketing costs/new customers = customer acquisition cost $1,000/100 = $10

You operate a small insurance office with a partner. What expense is a fixed cost?

Property lease for the office

Selling products directly to end customers for a profit, either in store, online, mail-order, or by phone

Retail

You are examining the year-end balance sheet for business. According to the information in the Balance Sheet, what is your equity in the business? Balance Sheet for year ending December 31 Assets Cash: $10,000 Inventory: $2,000 Equipment: $5,000 Total Assets: $17,000 Liabilities Credit card balance: $2,500 Long-term: $0 Unearned revenues: $3,500 Total Liabilities: $6,000

Total Assets - Total Liabilities = Equity $17,000 - $6,000 = $11,000

selling products in bulk to various outlets or retailers for onward sale

Wholesale