BUSE 129 CH 7-10

Sheila, an entrepreneur, prepares a marketing plan for her new venture. After identifying the target market, Sheila's first decision should be to

identify candidate communities that would match the user profile

A difference between a business-to-business market and a consumer market is that advertising and promotion for the business-to-business market

include more direct sales and trade shows

As part of a business plan for a new venture, an entrepreneur reviews industry trends and competitive strategies. This is termed a(n)

industry analysis

A true statement about a focus group, which is used to gather primary data as part of the marketing research for a new venture, is that it

is a group of 10 to 12 potential customers who are invited to engage in a discussion relating to an entrepreneur's research objectives

A specific group of potential customers toward which a venture aims its marketing plan is known as a(n)

target market

In the context of the preparation of a pro forma income statement, the key element in a firm's sales budget is

the estimated sales

True or false: In a partnership, the distribution of profits and losses is based on the partnership agreement.

true

Which of the following is an example of a poorly prepared business plan?

A business plan that lacks an establishment of customer needs for the proposed product or service

The marketing plan of a new venture primarily establishes the ways in which an entrepreneur will

effectively compete and operate in the marketplace

Assessment of external uncontrollable variables that may impact a business plan of a new venture is known as a(n)

environmental analysis

As part of preparing a marketing plan for a new venture, an entrepreneur should define the business situation. When defining the business situation, the entrepreneur should

evaluate past performance of the product and the company

In the marketing research for a new venture, secondary resources should be

exhausted before gathering information from primary sources

Identify the areas in which an entrepreneur requires information when conducting a feasibility study of the manufacturing operations of a new venture. (Check all that apply.)

Locations Manufacturing operations Raw Materials Equipment Labor Skills Space Overhead Technology

The process of dividing the market into small homogeneous groups is known as

market segmentation

Statements of level of performance desired by a new venture are known as

marketing goals and objectives

A(n) ___, which is part of a business plan for a new venture, describes market conditions and strategy related to how the product(s) and service(s) will be distributed, priced, and promoted.

marketing plan

True or false: All businesses should create an operations plan as part of their business plan.

true

A written document prepared by an entrepreneur that describes all the relevant external and internal elements involved in starting a new venture is known as a(n)

Business Plan

The section of a business plan for a new venture named description of the venture should

start with the mission statement or company mission

Identify the functions served by a board of directors in an organization. (Check all that apply.)

(1) reviewing operating and capital budgets, (2) developing longer-term strategic plans for growth and expansion, (3) supporting day-to-day activities, (4) resolving conflicts among owners or shareholders, (5) ensuring the proper use of assets, or (6) developing a network of information sources for the entrepreneurs. These functions may be a formal part of the organization, with responsibilities assigned to the directors depending on the needs of the new venture.

An entrepreneur should be prepared for sudden changes or disasters that can affect the implementation of a business plan. In this context, which of the following are true about contingency plans? (Check all that apply.)

A contingency plan should be implemented immediately if there is a crisis. A contingency plan should be a step-by-step plan.

Which of the following forms of business has the most continuity if one of the entrepreneurs dies or withdraws from the business?

A corporation

Which of the following is the least expensive form of business to start?

A proprietorship

Based on the marketing strategy and action plan of a new venture, match the situations of a marketplace (in the left column) with its effects on the pricing of a product or service (in the right column). Instructions

A situation where a product or service is in a nondifferentiated market An entrepreneur has little room for price variations from the competition. A situation where a product or service is unique in the marketplace An entrepreneur has flexibility for price variations from the competition.

Which of the following is true about limited liability companies (LLCs)?

An LLC is similar to an S corporation. Currently, regulations allow an LLC to be automatically taxed as a partnership.

Identify the reasons why a business plan for a new venture fails. (Check all that apply.)

An entrepreneur lacks sense of potential threats or weaknesses to the business. An entrepreneur sets unreasonable goals.

Entrepreneurs can present their business plans for new ventures in colleges and universities or locally sponsored business meetings in a competitive and structured setting. How should an entrepreneur make use of this designated period of time? (Check all that apply.)

By mentioning the recognized risks and how he or she plans to address them By giving audiences an overview of the marketing program

A(n)___ is the most common form of corporation, regulated by statute and treated as a separate legal entity for liability and tax purposes.

C corporation

Identify the true statements about the tax rates for various forms of business after the new laws passed at the end of 2017. (Check all that apply.)

For employee-driven, passed through businesses such as restaurants and manufacturers, the tax deduction of 20 percent is limited to 50 percent of the company's payroll. For service-based businesses, the 20 percent deduction is only applicable to income after salary.

Identify the true statements about the tax rates for various forms of business after the new laws passed at the end of 2017. (Check all that apply.)

For service-based businesses, the 20 percent deduction is only applicable to income after salary. For employee-driven, passed through businesses such as restaurants and manufacturers, the tax deduction of 20 percent is limited to 50 percent of the company's payroll.

Which of the following should be determined by an entrepreneur as part of the first step of marketing research? (Check all that apply.)

How much would potential customers be willing to pay for the product or service? Where would potential customers prefer to purchase the product or service? Where would the customer expect to hear about or learn about such a product or service?

Which of the following is considered the primary data in the marketing research for a new venture?

Information that is new

Identify the true statements about the introductory page of a business plan for a new venture. (Check all that apply.)

It establishes the basic concept that an entrepreneur is trying to develop. It gives a brief summary of the business plan's contents.

Which of the following is true about the importance of updating an existing business plan for an entrepreneur?

It helps in being responsive to changes in the company, industry, and market.

Identify a feature of breakeven.

It is possible to find a breakeven point for each product of a firm when feasible costs are allocated to each product.

In the business context, identify a characteristic of the pro forma cash flow.

It is sometimes useful to create the pro forma cash flow based on different levels of success.

What is the implication of knowing the target market for a product or service?

It is the basis for deciding the appropriate marketing action strategy that will effectively meet the market's needs.

Identify a true statement about a board of advisors in an organization.

It lacks a legal status.

What is the implication of losses incurred by a corporation?

It results in no dividends to stockholders.

Identify the true statements about the marketing plan of a new venture. (Check all that apply.)

It should be integrated with the venture's more long-term strategic plan. It should be created annually, evaluating the goals and objectives for the next year.

Identify the requirements for an effective marketing plan of a firm.

It should be supported by facts and valid assumptions. It should provide a strategy for achieving the firm's mission or goal.

Identify a guideline to be followed when preparing the executive summary of a business plan for a new venture.

It should emphasize in a concise and convincing manner the key points in the business plan.

Lenders are considered the potential suppliers of business capital for a new venture. According to lenders, what are the requirements for a business plan? (Check all that apply).

It should show the collateral or tangible assets being secured for a loan. It should mirror an entrepreneur's credit history. It should indicate the amount of personal equity invested by an entrepreneur.

Identify a true statement about the pro forma balance sheet of a new venture.

It shows the position of the business at the end of the first year.

Which of the following is an attribute of the indirect method used to project a venture's cash flow?

Its objective is to realize the need for adjustments in the net income based on the fact that actual cash may or may not have been received or disbursed.

Arrange the steps that should be taken by an entrepreneur when creating the section named assessment of risk in a business plan for a new venture in the correct order of occurrence.

Mention the potential risks to the new venture Discuss what might happen if the identified risks become reality Discuss the plan that will be executed to prevent, minimize, or respond to the identified risks

Match the areas in which entrepreneurs can indicate to the members of an organization what is expected of them (in the left column) with their descriptions (in the right column).

Organization structure Explains members' jobs and the communication and relationship these jobs have with each other Rewarding Provides member with promotions, bonuses, praise, and so on Selection criteria Defines a set of guidelines for choosing individuals for each position

What are the legal requirements owners should fulfill before forming a corporation? (Check all that apply.)

Owners should meet the state statutory needs. Owners should register the name and articles of incorporation.

What are the basic legal forms of business formation? (Check all that apply.)

Partnership Proprietorship Corporation

Match the components of a venture's financial plan (in the left column) with their descriptions (in the right column). Instructions

Profit Obtained by subtracting expenses from sales Cash flow Calculated as the difference between actual cash receipts and cash payments

Which of the following represents the definition of marketing strategy and action plan?

Specific activities outlined to meet a venture's business plan goals and objectives

Which of the following has been the reason for the decline in the growth rate of the formation of S corporations in the last few years in the United States?

The acceptance of limited liability companies (LLCs) in all states

Identify a true statement about pro forma cash flow over a time period in a new venture.

The amount and length of time before cash flows become positive vary based on the nature of the business.

Which of the following sections of a business plan for a new venture identifies potential hazards and alternative strategies to meet business plan goals and objectives?

The assessment of risk

Which of the following is true about the definition of a product in a marketing plan?

The definition of a product is more than its physical components.

Which of the following sections of a business plan for a new venture provides complete overview of its product(s), service(s), and operations?

The description of the venture

How should an entrepreneur of a new venture deal with disbursements that are greater than cash receipts in any time period? (Check all that apply.)

The entrepreneur must invest large positive cash flows in short-term sources or deposit them in a bank to cover future time periods. The entrepreneur must either borrow money or have cash in a bank account to cover the higher disbursements.

How should an entrepreneur respond to changes in the company, industry, and market?

The entrepreneur should determine what revisions are needed in the current business plan.

Match the perspectives an entrepreneur should consider in preparing a business plan for a new venture (in the left column) with their descriptions (in the right column).

The entrepreneur's perspective The entrepreneur should precisely articulate what the business is all about. The marketing perspective The entrepreneur should view his or her business through the eyes of the customer. An investor's perspective The entrepreneur should ensure that there are sound financial projections.

Based on a study of new ventures, match the types of ventures based on their growth rate (in the left column) with the areas on which they concentrated to gather primary data in the marketing research (in the right column).

The most successful ventures Competitors, the customer, and the industry, using networking, trade associations, and recent publications The least successful ventures General economic and demographic trends

Based on a study of new ventures, match the types of ventures based on their growth rate (in the left column) with the areas on which they concentrated to gather primary data in the marketing research (in the right column). Instructions

The most successful ventures Competitors, the customer, and the industry, using networking, trade associations, and recent publications The least successful ventures General economic and demographic trends

Which of the following sections of a business plan for a new venture goes beyond the manufacturing process (when the venture involves manufacturing) and describes the flow of goods and services from production to the customer?

The operations plan

Which of the following is true about the definition of a product or service in the marketing plan?

The product or service definition may consider more than the physical characteristics.

What is the implication of the upside-down pyramid approach to industry analysis by an entrepreneur of a new venture?

The upside-down pyramid approach helps the entrepreneur understand competitors' strengths and weaknesses.

Identify a true statement about a proprietorship and regular partnership.

There will be no distinction between the business entity and the owner(s).

What is the primary concern of an organization's manager as an entrepreneur?

To cope up with changes in the environment and attempt to find new ideas

What is the purpose of a venture's pro forma sources and applications of funds statement?

To demonstrate how net income and financing were utilized to increase assets or to pay off debt

What is the most important purpose of reviewing secondary sources as part of the marketing research for a new venture?

To gather information that will help an entrepreneur make the best decisions regarding the marketing of a product or service

An S corporation integrates the tax advantages of

a partnership and a corporation

When preparing a pro forma income statement, an entrepreneur of a new venture should consider

adjusting taxes because of the addition of new personnel or increments in salary

The most significant weakness in calculating the breakeven lies in determining if

an expense is constant or variable

Items that are owned or available to be used in the venture operations are known as

assets

Javed, an entrepreneur, starts a company that manufactures accessories for cars. The company begins manufacturing products. Due to a high demand for its products, the company needs more money as the disbursements become greater than receipts. In this scenario, Javed should

borrow funds from a bank to cover the higher disbursements

Volume of sales where the venture neither makes a profit nor incurs a loss is known as

break-even

As part of creating a capital budget for a new venture, after creating a sales budget, an entrepreneur should

concentrate on operating costs

Liability is a critical reason for establishing a Blank______ rather than any other form of business.

corporation

Owners are liable only for the amount of their investment unless there is negligence or fraud involved in the form of business called a Blank______, as it is an entity that is taxable and absorbs liability.

corporation

In the preparation of a pro forma income statement, an entrepreneur must first

create a sales budget that is an estimate of the expected volume of sales by month

As the first step of marketing research, an entrepreneur should

define the purpose of the research study

True or false: All marketing goals and objectives of a new venture must be quantified.

false

True or false: Market segmentation prevents an entrepreneur from responding to the needs of homogeneous consumers.

false

True or false: Sales in excess of the break-even point will result in a loss if the selling price remains above the costs necessary to produce each unit.

false

True or false: While preparing a pro forma income statement, the calculation of percent of sales for each year is not carried out as it is not useful.

false

An advantage of a limited liability company (LLC) over an S corporation is that an LLC

may have tax advantages depending on the state in which the business operates

Isabella, an entrepreneur, prepares a marketing plan for her new venture that manufactures consumer goods. To make her venture's marketing plan effective, which of the following should she ensure the plan does?

mentions performance criteria that will be monitored and controlled

The amount that displays the net worth of an entrepreneurial venture is

owner equity

The amount owners have invested and/or retained from venture operations is known as

owners equity

Projected net profit calculated from projected revenue minus projected costs and expenses is called ___ income.

pro forma

Projected cash available calculated from projected cash accumulations minus projected cash disbursements is known as

pro forma cash flow

As part of measuring the progress of a business plan, an entrepreneur should compare the cost figures estimated in the business plan with day-to-day operation costs. This process is part of the control element called Blank______.

production control

A(n) , ___which is part of a business plan for a new venture, details how the product(s) will be manufactured.

production plan

A business plan is primarily designed to

provide guidance to an entrepreneur through the first year of operations

An attribute of the pro forma balance sheet of a new venture is that it

provides the entrepreneur a measure of the firm's solvency

A feature of a questionnaire, which is a data collection instrument used to gather primary data in the marketing research for a new venture, is that it should include

questions that are clear and concise and are easy to answer

To prepare the actual budget as part of a business plan for a new venture, an entrepreneur should

recognize benchmarks in the industry that can be used to form the final pro forma statements in the financial plan

Before considering primary or commercial sources of information, the entrepreneur should exhaust all free ___ sources, including commercial data sources that may be available in a business library.

secondary

Entrepreneurs can present their business plans for new ventures in colleges and universities or locally sponsored business meetings in a competitive and structured setting. In this designated period of time, an entrepreneur is expected to

sell his or her business concept to the audiences

Identify an implication of starting a new business without good planning.

Employees will not understand the business goals.

Which of following is true of pro forma statements?

Entrepreneurs must make estimates for years two and three.

Which of the following are conducted as part of marketing research for a new venture? (Check all that apply.)

Estimating the size of the potential market Determining who are the prospective buyers for the product

______ is the most common approach used to gather market information for a new venture.

Interviewing

Identify a true statement about the continuity of business in a corporation if one of the entrepreneurs dies or withdraws from the business.

It seldom affects the continuity of the business.

Identify a true statement about the preparation of a business plan for a new venture.

It should be created by an entrepreneur.

A special type of corporation where profits are distributed to stockholders and taxed as personal income is called a(n)

S corporation

Identify the characteristics of a limited liability company (LLC). (Check all that apply.)

It allows a member to transfer his or her interest only with the unanimous written consent of the remaining members. It is typically treated by the Internal Revenue Service as partnerships for tax purposes.

If the manufacturing is to be carried out in whole or in part by an entrepreneur

The plan should explain the physical plant layout; the machinery and equipment needed to perform the manufacturing operations; raw materials and suppliers' names, addresses, and terms; costs of manufacturing; and any future capital equipment needs.

Identify a true statement about an organization's outside advisors such as accountants, bankers, lawyers, advertising agencies, and market researchers.

They are not part of the organization's formal board of advisors.

Identify an attribute of the owners of a limited liability company (LLC).

They are paid in the form of guaranteed payments without involving any federal or state withholding.

Which of the following are true about manufacturers' representatives used by new ventures for product distribution? (Check all that apply.)

They can be used to market to the consumer or household market. Their role is to act on behalf of noncompeting companies that will share the cost of their services.

In the context of the distribution of a product or service in the market, which of the following is true about manufacturers' representatives who help an entrepreneur reach retailers or end users?

They do not take title or physical possession of a product or service.

Identify a true statement about limited partners in a general partnership.

They lack control over business decisions.

Raj, an entrepreneur, prepares a marketing plan for his new venture. As part of preparing the plan, Raj seeks to identify candidate communities that would match the user profile. In this situation, which of the following tools should be used by Raj as a logical starting place that reveals demographic data on income, ages of children, and employment?

Town census research

True or false: Potential investors regard a marketing plan described in a business plan as critical to the success of a new venture.

True

True or false: The significance of a feasibility study of the manufacturing operations by an entrepreneur of a new venture depends on the nature of the business.

True

A true statement about a business plan for a new venture is that it is usually

a combination of functional plans like marketing, finance, manufacturing, and human resources

Before preparing the financial section of a business plan for a new venture, an entrepreneur should

create a budget including lists of possible expenditures in the first year and revenue sources

A requirement for the executive summary of a business plan for a new venture is that it should

stimulate a potential investor's interest

Patrick, the entrepreneur of Cellax Inc., determines that the average selling price of the firm's products is $5.00 per unit. The fixed costs in year 1 are $700,800, and the variable cost per unit is $2.50. Calculate the firm's break-even point (ByE) in units.

280,320 units

The standard acceptable term of a limited liability company (LLC) is

30 years

Which is the most appealing form of business for raising capital due to its advantages regarding personal liability?

A corporationA sole proprietorship An entrepreneur has the freedom to sell or transfer any assets in the business. A limited liability partnership (LLP) A single partner cannot carry out the transfer of interest.

Match the components used to gather primary data in the marketing research for a new venture (in the left column) with their descriptions (in the right column).

A data collection procedure Involves observation or networking A data collection instrument Involves a questionnaire

Match the kinds of partnerships (in the left column) with the effects on them when one of the entrepreneurs dies or withdraws from the business (in the right column). Instructions

A general partnership Death or withdrawal leads to the termination of the partnership unless the partnership agreement states otherwise. A limited liability partnership (LLP) Death or withdrawal does not affect the continuity of the business.

Match the plans involved in starting a venture (in the left column) with their descriptions (in the right column). Instructions

A marketing plan It primarily concentrates on all marketing activities of a venture for one year or more. A business plan It involves marketing, research and development, operations, manufacturing, personnel, financial projections and analysis, and future growth strategies.

Identify the forms of business that are the least attractive for raising capital, primarily owing to the problem of personal liability. (Check all that apply.)

A partnership A proprietorship

Identify the formula used for calculating the break-even sales point of a venture.

Total fixed costs/(Selling price − Variable costs per unit)

True or false: It is mandatory for the members of a limited liability company (LLC) to file estimated taxes on a regular basis.

True

Based on the given formula for calculating the breakeven value of a venture (B/E (Q)), match the letters (in the left column) with their values (in the right column).

X Total fixed costs Y Selling price Z Variable costs per unit

Shareholders are allowed to transfer their shares in a business at any time without consent from the other shareholders in the form of a business called a

corporation

In a business plan for a new venture, a section projects key financial data that determine economic feasibility and necessary financial investment commitment. This section is known as the .

financial plan

A function served by a board of directors in an organization is that it

finds solutions to conflicts among owners or shareholders

As part of forecasting sales, it is advisable for an entrepreneur of a new venture to

give sales estimates at various levels of activity

A true statement about the indirect method used to project a venture's cash flow is that it

gives a fast indication of the venture's cash position at a point in time

When considering the pricing of a product or service in a situation where the product or service is unique in the marketplace, an entrepreneur should

have a precise understanding of the inherent costs

A marketing plan of a new venture differs from its business plan in that the marketing plan

is a standalone document that should be managed on a short-term basis to ensure whether the venture is meeting its goals and objectives

An important point that entrepreneurs should remember about the pro forma cash flow is that

it is based on best estimates

Money that is owed to creditors by an entrepreneur of a business is known as

liabilities

Before conducting a quick feasibility study of the business concept of a new venture, an entrepreneur should

precisely state the goals and objectives of the business

A description of past and present business achievements of a new venture is called a(n) ___. It is part of preparing a marketing plan for a new venture.

situation analysis

A feature of a venture's pro forma sources and applications of funds statement is that it

summarizes all the projected sources of funds available to the venture and how these funds will be disbursed

True or false: An entrepreneur of a new venture can gain information on competitors initially by utilizing as much public information as possible and then complementing this with a marketing research project.

true

True or false: An entrepreneur should be able to assign responsibility to people in order to create a vibrant organizational culture.

true

True or false: Capital budgets are aimed to provide a basis for assessing expenditures that will impact a business for more than one year.

true

True or false: The relationship of an entrepreneur of a new venture and external advisors can be enhanced by seeking out the best advisors and involving them thoroughly and at an early stage of the development of the venture.

true

Match the forms of business formation (in the left column) with their features related to their ownership (in the right column). Instructions

A proprietorship A form of business with single owner who has unlimited liability, controls all decisions, and receives all profits A partnership A form of business with two or more individuals having unlimited liability who have pooled resources to own a business A corporation A form of business with a separate legal entity that is run by stockholders having limited liability

Shane plans to start a venture that sells customized furniture. Before starting the venture, he conducts market research. Which of the following steps should be taken by Shane as part of the research?

He should determine the most appropriate mode of selling the furniture.

Match the forms of business (in the left column) with the descriptions on their capital requirements (in the right column). Instructions

A proprietorship Any new capital can be gained only from loans by any number of sources or by additional personal contributions by an entrepreneur. A partnership Loans can be obtained from banks but will likely need a change in the agreement involved in the business. A corporation New capital can be raised in a number of ways such as selling stocks or bonds.

What are the perspectives an entrepreneur should consider in preparing a business plan for a new venture? (Check all that apply.)

His or her own perspective An investor's perspective The marketing perspective

In an S corporation, the maximum number of shareholders is limited to

100

An entrepreneur should be prepared for sudden changes or disasters that can affect the implementation of a business plan. In this context, identify the issues that need to be addressed by an entrepreneur to have a contingency plan.

The entrepreneur should make a list of any factors that can impact his or her venture. The entrepreneur should ensure that the contingency plan includes details of who should be contacted and how in event of a disaster.

If some or all of the manufacturing process is to be subcontracted

The plan should mention the subcontractor(s), including location, reasons for selection, costs, and any contracts that have been completed.

Roger, an entrepreneur, plans to segment and target customers of his firm as part of developing a marketing plan. Arrange the steps he should take to segment and target the customers in the correct order of occurrence.

The process of segmenting and targeting customers by the entrepreneur should proceed as follows: Decide what general market or industry you wish to pursue. Divide the market into smaller groups based on characteristics of the customer or buying situations. Characteristics of the customer Geographic (e.g., state, country, city, region) Demographic (e.g., age, sex, occupation, education, income, and race) Psychographic (e.g., personality and lifestyle) Buying situation Desired benefits (e.g., product features) Usage (e.g., rate of use) Buying conditions (e.g., time available and product purpose) Awareness of buying intention (e.g., familiarity of product and willingness to buy) Select segment or segments to target. Develop a marketing plan integrating product, price, distribution, and promotion.

Identify the true statements about middlemen in the context of the distribution of a product or service in the market. (Check all that apply.)

They possess important experience in the marketplace that can help an entrepreneur build his or her marketing strategy. They are able to provide functions such as storage, delivery, a sales staff, promotion or advertising, and maintenance.

Identify a true statement about decisions on the marketing strategy and action plan of a new venture.

They reflect on the marketing mix variables.

What is the primary focus of the industry analysis carried out by an entrepreneur of a new venture?

To give sufficient knowledge of the environment that impacts marketing strategy decision making

Stella, the entrepreneur of a firm, determines that the average selling price of the firm's products is $10.00 per unit. The fixed costs in year 1 are $980,500, and the variable cost per unit is $5. Calculate the firm's break-even point (ByE) in units.

196,100 units

Match the situations in the market that are related to the distribution of a product or service (in the left column) with the guidelines an entrepreneur should follow in those situations (in the right column). Instructions

A situation in which the market for a new venture is highly concentrated, such as a major metropolitan area It is advisable for an entrepreneur to consider direct sales to the customer or to a retailer rather than using a wholesaler. A situation in which the market is dispersed across a wide geographic area It is advisable for an entrepreneur to utilize a longer channel with wholesalers and retailers as the cost of direct sales may be prohibitive.

Identify the reasons why business-to-business marketing strategy typically involves a more direct channel of distribution than does a consumer market. (Check all that apply.)

Because of the volume of each transaction Because of the need to relate product knowledge to business buyers

An advantage of an S corporation over a C corporation is that

Capital gains or losses from the corporation are treated as personal income or losses by the shareholders on a pro rata basis (determined by number of shares of stock held). The corporation is thus not taxed. Shareholders retain the same limited liability protection as the C corporation. The S corporation is not subject to a minimum tax, as is the C corporation. Stock may be transferred to low-income-bracket family members (children must be 14 years or older). Stock may be voting or nonvoting. This form of business may use the cash method of accounting. Corporate long-term capital gains and losses are deductible directly by the shareholders to offset other personal capital gains or losses.

Identify the advantages of an S corporation over a C corporation. (Check all that apply.)

Capital gains or losses from the corporation are treated as personal income or losses by the shareholders on a pro rata basis (determined by number of shares of stock held). The corporation is thus not taxed. Shareholders retain the same limited liability protection as the C corporation. The S corporation is not subject to a minimum tax, as is the C corporation. Stock may be transferred to low-income-bracket family members (children must be 14 years or older). Stock may be voting or nonvoting. This form of business may use the cash method of accounting. Corporate long-term capital gains and losses are deductible directly by the shareholders to offset other personal capital gains or losses.

What do lenders, as the potential suppliers of business capital for a new venture, typically focus on? (Check all that apply.)

Collateral Cash flow Equity contribution Character

Match the types of assets of a business (in the left column) with their descriptions (in the right column). Instructions

Current assets Cash and anything else that is expected to be converted into cash or consumed in the operation of a business during a period of one year or less Fixed assets Those that are tangible and will be used over a long period of time

What are the functions the management team of an organization must accomplish? (Check all that apply.)

Execute the business plan. Identify fundamental changes in the business as they occur. Make adjustments to the plan based on changes in the environment and market that will maintain profitability.

True or false: A proprietorship is likely to require a larger sum of capital than the capital needed for a partnership or corporation.

False

True or false: In an organization, a board of advisors is more closely tied to the organization than its board of directors.

False

Which of the following are true when a limited partner in a general partnership is given some control over business decisions? (Check all that apply.)

He or she assumes personal liability. He or she is not considered a limited partner.

Jason is a manufacturing representative of Share Notes Inc., a company that manufactures notebooks, and is a supplier of office stationery for different offices in his city. He adds Share Notes Inc.'s notebooks as a complement to other products that he supplies. Which of the following is true about Jason in this scenario?

He would be paid a commission only when a notebook is sold.

What is the most difficult problem with projecting cash flows over a time period in a new venture?

Identifying the exact monthly receipts and disbursements

Identify the advantages of a limited liability company (LLC) over an S corporation. (Check all that apply.)

In a highly leveraged enterprise, the LLC offers the partnership a distinct advantage over an S corporation in that the partners can add their proportionate shares of the LLC liabilities to their partnership interests. States vary on the requirements of taxation but the LLC may have tax advantages depending on the state in which the business operates. One or more (without limit) individuals, corporations, partnerships, trusts, or other entities can join to organize or form an LLC. This is not feasible in an S corporation. Members are allowed to share income, profit, expense, deduction, loss and credit, and equity of the LLC among themselves. This is the only form of organization that offers all these features.)

Identify a widely used small business accounting software package.

Intuit's Quickbooks

Identify a true statement about a business's cash flow.

It occurs only when actual payments are received or made.

What happens to a sole proprietorship if its owner dies?

It results in the termination of the business.

Which of the following statements are true about the tax rates for various forms of business after the new tax laws passed at the end of 2017? (Check all that apply.)

Pass through businesses receive 20 percent reduction of their business income. All C Corporations receive a tax cut from 35 percent to 21 percent.

Match the components of a pro forma balance sheet of a venture (in the left column) with their effects (in the right column). Instructions

Revenue Increases assets and owners' equity Expense Decreases owners' equity and either increases liabilities or decreases asset

What is the first thing that must be calculated by an entrepreneur in the preparation of a pro forma income statement?

Sales by month

Which of the following is an act passed due to irregularities in accounting, fraud, bankruptcy, insider trading, excessive management compensation, and other illegal or unethical practices that have become newsworthy in the years leading up to 2002?

Sarbanes-Oxley Act

Which of the following is a guideline that should be followed by an entrepreneur when forecasting sales for his or her new venture?

The entrepreneur should research about other new ventures in the same industry to set reasonable expectations for early sales.

Identify the disadvantages of an S corporation. (Check all that apply.)

There are still some restrictions regarding qualification for this form of business. More recent legislation has also had some impact on the S corporation and should be consulted when considering this form of organization. Depending on the actual amount of the net income, there may be a tax advantage to the C corporation. (See earlier discussion on tax implications of various forms of organization.) This will depend on the company payout ratio, the corporate tax rate, the capital gains tax rate for the investor, and the personal income tax rate of the investor. Page 248 The S corporation may not deduct most fringe benefits for shareholders. The S corporation must adopt a calendar year for tax purposes. Only one class of stock (common stock) is permitted for this form of business. The net loss of the S corporation is limited to the shareholder's stock plus loans to the business. S corporations cannot have more than 100 shareholders.

Which of the following is a disadvantage of an S corporation?

There are still some restrictions regarding qualification for this form of business. More recent legislation has also had some impact on the S corporation and should be consulted when considering this form of organization. Depending on the actual amount of the net income, there may be a tax advantage to the C corporation. (See earlier discussion on tax implications of various forms of organization.) This will depend on the company payout ratio, the corporate tax rate, the capital gains tax rate for the investor, and the personal income tax rate of the investor. Page 248 The S corporation may not deduct most fringe benefits for shareholders. The S corporation must adopt a calendar year for tax purposes. Only one class of stock (common stock) is permitted for this form of business. The net loss of the S corporation is limited to the shareholder's stock plus loans to the business. S corporations cannot have more than 100 shareholders.

Which of the following is true about limited partners in a general partnership?

They are liable for only their contribution to the partnership.

In the business context, identify a true statement about pro forma income statements.

They include estimates of all operating expenses for each of the months during the first year of operations.

What is the intention of Sarbanes-Oxley Act of 2002?

To introduce a more independent functioning board of directors in organizations

Which of the following make a business plan for a new venture difficult to control and implement?

Goals and objectives that are too general Goals and objectives that are not feasible

Which of the following sections of a business plan for a new venture contains backup material that is not necessary in the text of the document?

The appendix

Which of the following is part of a business plan for a new venture that describes a venture's form of ownership—proprietorship, partnership, or corporation?

The organizational plan

How should an entrepreneur decide whether to hire a consultant or to make use of other resources when preparing a business plan for a new venture?

By assessing his or her own skills objectively

In the context of the upside-down pyramid approach to industry analysis, how should an entrepreneur of a new venture begin competitor analysis?

By documenting the present strategy of each primary competitor

Which of the following is a factor of the marketing mix that provides utility to the customer?

Distribution

Match the environmental factors entrepreneurs analyze as part of a business plan for a new venture (in the left column) with their descriptions (in the right column). Instructions

Economy Trends in the GNP, unemployment by geographic area, disposable income, and so on Culture Shifts in the population by demographics and shifts in attitudes Technology Powerful technological developments determined from resources committed by major industries or the U.S. government Legislation Any future restrictions that may affect the product or service, channel of distribution, price, or promotion strategy

True or false: Focus groups are a more formal method for gathering in-depth information as part of the marketing research for a new venture than questionnaires.

False

True or false: In an organizational plan as part of a business plan for a new venture, it is important to detail the shares of stock authorized and share options if the venture is a partnership.

False

Fatima, an entrepreneur, plans to start a retail store in her neighborhood. She plans to use an upside-down pyramid approach to gathering market information. Arrange the groups of trends that she needs to analyze as part of using this approach in the order in which they should be analyzed. (Place the group of trends that needs to be analyzed first at the top.)

General Environmental and demographic finds National Food Industry trends Local Environmental and demographic trends Local food industry trends Local competition strengths and weaknesses == Marketing positions --> Market Objectives

Stella, an entrepreneur, plans to develop a marketing plan for her new venture. As part of the process, she divides the market into smaller groups based on characteristics of the customer. Match the factors she should consider in this process of dividing the market (in the left column) with their components (in the right column). Instructions

Geographic State, country, city, or region Demographic Age, sex, occupation, education, income, or race Psychographic Personality or lifestyle

Match the factors entrepreneurs study as part of an industry analysis in a business plan of a new venture (in the left column) with their descriptions (in the right column).

Industry demand Involves recognizing whether the market is growing or declining, the number of new competitors, and possible changes in consumer needs Competition Involves preparing for potential threats from larger corporations and being aware of who the competitors are and what their strengths and weaknesses are

Arrange the contents that should be included in the introductory page of a business plan for a new venture starting from the information that should appear at the beginning to the information that should appear at the end.

Introductory Page Name and address of business Name(s) and address(es) of principal(s) Nature of business Statement of financing needed Statement of confidentiality of report Executive Summary—Two to three pages summarizing the complete business plan Industry Analysis Future outlook and trends Analysis of competitors Market segmentation Industry and market forecasts Description of Venture Product(s) Service(s) Size of business Office equipment and personnel Background of entrepreneur(s) Production Plan (if necessary) Manufacturing process (amount subcontracted) Physical plant Machinery and equipment Names of suppliers of raw materials Operations Plan Description of company's operation Flow of orders for goods and/or services Technology utilization Marketing Plan Pricing Distribution Promotion Product forecasts Controls Organizational Plan Form of ownership Identification of partners or principal shareholders Authority of principals Management team background Roles and responsibilities of members of organization Assessment of Risk Evaluate weakness(es) of business New technologies Contingency plans Financial Plan Assumptions Pro forma income statement Cash flow projections Pro forma balance sheet Break-even analysis Sources and applications of funds Appendix (contains backup material) Letters Market research data Leases or contracts Price lists from suppliers

Match the control elements that are assessed by an entrepreneur as part of measuring the progress of a business plan (in the left column) with their descriptions (in the right column).

Inventory control Making sure that maximum service is provided to customers Production control Controlling machine time, worker hours, process time, delay time, and downtime cost Quality control Making sure that a product performs satisfactorily

A questionnaire is a data collection instrument used by an entrepreneur to gather primary data in the marketing research for a new venture. Identify a true statement about a questionnaire.

It should have questions specifically created to achieve objectives the entrepreneur listed earlier.

Which of the following are examples of information that should be included in the appendix of a business plan for a new venture? (Check all that apply.)

Secondary research data Letters from distributors

Select the accurate statement(s) about entrepreneurs' and venture firms' use of secondary data sources in market research (select all that apply).

Sources for secondary data at the state and local levels are the State Department of Commerce, chambers of commerce, local banks, state departments of labor and industry, and local media. A review of secondary data sources will determine if more data are needed, in which case a plan to gather primary data will be required. An important purpose of reviewing secondary sources is that it is a good starting point in developing the most effective marketing plan by providing an early assessment of the opportunities and threats to the venture. Using secondary sources will likely produce sufficient data to eliminate the need for gathering primary source data. Improvements in information technology today make secondary source reviews a very effective basis for gathering information on customers, competitors, and market trends. Before considering either primary or commercial sources of information, the entrepreneur should exhaust all free, accessible secondary sources, including commercial data sources that may be available in a business library.

Match the sections included in the section of a business plan for a new venture named the financial plan (in the left column) with their descriptions (in the right column).

Summary of the forecasted sales and the appropriate expenses for at least the first three years Includes estimated sales, cost of goods sold, and the general and administrative expenses Cash flow figures for at least three years Includes the demands on money on a monthly basis, especially in the first year Projected balance sheet Summarizes the assets of a business, its liabilities (what is owed), the investment of an entrepreneur and any partners, and retained earnings (or cumulative losses)