ENT 396 Chapter 12

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

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.

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?"

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

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

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

a. True

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

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.

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.

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

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.

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 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

The ten major segments of a business plan are below. Identify the order in which each segment will appear in the plan by placing a 1 next to the first part, a 2 next to the second part, and so on (through 10). A. Financial segment B. Marketing segment C. Management segment D. Summary E. Operations segment F. Business description segment G. Critical-risks segment H. Appendix I. Harvest strategy segment J. Milestone schedule segment

A. 6 B. 3 C. 5 D. 1 E. 4 F. 2 G. 7 H. 10 I. 8 J. 9

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.

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.

Choose the appropriate business plan segment that corresponds with the following descriptions. 1. Describes the potential of the new venture 2. Discusses the advantages of location 3. Discusses price-cutting by the competition 4. Provides strategy for an initial public offering 5. Most crucial part of the plan 6. Describes any prototypes developed 7. Analyzes case if any sales projections are not attained 8. Shows the relationship between events and deadlines for accomplishment 9. Provides résumés of all key personnel 10. Contains support material such as blueprints and diagrams 11. Discusses pricing strategy 12. Should be written after the business plan is completed 13. Provides a budget 14. Explains proximity to suppliers 15. Sets forth timetables for completion of major phases of the venture 16. Provides industry background 17. Explains costs involved in testing 18. Identifies target markets 19. Describes legal structure of the venture 20. Provides balance sheet and income statement

1. business description segment 2. operations segment 3. critical risks segment 4. harvest strategy 5. executive summary 6. milestone schedule segment 7. marketing segment 8. milestone schedule segment 9. management segment 10. appendix 11. marketing segment 12. executive summary 13. financial segment 14. operations sement 15. milestone schedule segment 16. business description segment 17. research and development segment 18. marketing segment 19. management segment 20. financial segment

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.

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

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.

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

b. False

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

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.