Entrepreneurship Exam #2 2023 6-10 chapters Oklahoma State

Two primary reasons for writing a business plan

(1) forces the founding team to think through every aspect of its new venture systematically( Internal) (2) communicates the merits of a new venture to outsiders, such as investors and bankers (external)

Purpose of a business plan

-It serves as a reality check for the entrepreneur who will be forced to think about every aspect of operating the business -It is an operating guide for the business -It is a statement of intent for interested third parties

Explain the purpose of pro forma financial statements.

A firm's pro forma financial statements are similar to its historical financial statements except that they look forward rather than track the past.

A code of conduct is also called a​ _______. Question content area bottom Part 1 A. code of ethics B. mission statement C. business model D. vision statement E. business plan

A.

Freelancers and virtual assistants are considered​ _______. Question content area bottom Part 1 A. independent contractors B. rank-and-file employees C. employees D. key employees E. dependent contractors

A.

John and Brett have determined that the​ break-even point for their educational toys business is​ 60,000 units per month. Any units that John and Brett sell above​ 60,000 represent​ ________. Question content area bottom Part 1 A. profits B. escalating costs C. diminishing returns D. diminishing revenues E. additional costs

A.

Juiced Up determined that the​ $11,000 per month rent for their store in​ Manhattan, New York was a cost the company had to pay whether it sold something or not. For Juiced​ Up, the rental cost was a​ _______ cost. Question content area bottom Part 1 A. fixed B. variable C. operating D. statutory E. discretionary

A.

On Valuations for Question 2, what is the Company Value in Year 5 A.48,000,000 B.55,000,000 C.20,000,000 D. 50,000,000

A.

Return on assets is an example of​ a(n) _____. Question content area bottom Part 1 A. ratio B. cost C. revenue source D. assumption E. projection.

A.

Tammy's Antiques sells goods both for cash and on credit. At the end of a​ month, Tammy determined that​ $23,000 was owed to her firm by customers. The​ $23,000 is​ Tammy's Antiques'​ ______. Question content area bottom Part 1 A. accounts receivable B. inventory C. accounts payable D. debt E. liquidity

A.

The results of research studies somewhat consistently suggest that​ _______ is one of the most consistent predictors of future entrepreneurial performance. Question content area bottom Part 1 A. prior entrepreneurial experience B. good looks C. good family background D. a nurturing home life E. innocence

A.

Tom, Sam, and Pete run a​ business, the Argyle Food Center. Each has invested​ $100,000 in the venture. If Tom and Sam have unlimited liability but Pete is liable only up to​ $100,000, what is the organizational form of this​ venture? Question content area bottom Part 1 A. Limited partnership B. General partnership C. Corporation D. Sole proprietorship E. Not-for-profit

A.

Various people or groups form part of a new-venture ​team; however,​ _____ are(is) not one of them. Question content area bottom Part 1 A. suppliers B. a board of directors C. key employees D. a board of advisers E. lenders

A.

Which of the following is NOT an advantage of a C​ corporation? Question content area bottom Part 1 A. Income is taxed at the corporate and shareholder levels. B. Stock is liquid if traded on a major stock exchange. C. The mechanics of raising capital are easier. D. The ability to share stock with employees through stock option or other incentive plans can be a powerful form of employee motivation. E . Owners are liable only for the debts and obligations of the corporation up to the amount of their investment.

A.

Which of the following is an issue typically covered in a​ founders' agreement? Question content area bottom Part 1 A. Relative split of the equity among the founders of the firm. B. The nature of the​ firm's mission. C. The delineation of responsibilities regarding the business plan. D. The role of each founder in developing the business model. E. The timing of the​ firm's financial statements.

A.

_______, which depict relationships between items on a​ firm's financial​ statements, are used to discern whether a firm is meeting its financial objectives and how it stacks up against its industry peers. Question content area bottom Part 1 A. Financial ratios B. Standards C. Budgets D. Forecasts E. Pro formas

A.

Identify the four main financial objectives of entrepreneurial ventures.

Profitability, liquidity, Efficiency, Stability

pro forma finacial statements

Projections for future periods based on a firms forecast, and typically completed for two to three years in the future.

operational buisness plan

Commonly running between 40 and 100 pages in length, these plans can obviously feature a great amount of detail that provides guidance to operational managers.intended primarily for an internal audience

A buyback clause legally obligates the​ ____ to sell to the remaining founders their interest in the firm if the remaining founders are interested. Question content area bottom Part 1 A.​ rank-and-file employees B. outside shareholders C. venture capital firms D. departing founders E. key employees

D.

A​ ___ is a written​ narrative, typically between 25 and 35 pages​ long, that describes what a new business intends to accomplish and how it intends to accomplish it. Question content area bottom Part 1 A. mission statement B. business model C. budget D. business plan E. feasibility analysis

D.

If a new venture organizes as a​ corporation, it is legally required to have​ _________. Question content area bottom Part 1 A. suppliers B. a network board C. a board of advisers D. a board of directors E. a board of professionals

D.

On Valuations for Question 3 What is the % of equity required at Exit A.20% B.30% C.22% D. 25%

D.

Prior entrepreneurial​ experience, relevant industry​ experience, and​ ____ are the attributes that strengthen the chances of a​ founder's success. Question content area bottom Part 1 A. a good personality B. good family background C. good home life D. networking E. a high school education

D.

The board at Nuance Opticals offers help in providing direction and advice to the​ company, but it possesses no legal responsibility for the firm and gives nonbinding advice. The board at Nuance Opticals is​ a(n) ________. Question content area bottom Part 1 A. board of directors B. stakeholder board C. board of customers D. advisory board E. employee board

D.

The most common sources of debt financing are commercial banks and​ _______. Question content area bottom Part 1 A. venture capital firms B. not-for-profit loans C. angel firms D. Small Business Administration-guaranteed loans E. equity networks

D.

The three most common​ _____ for a new venture are when it goes​ public, finds a​ buyer, or merges with another company. Question content area bottom Part 1 A. liquidation moments B. ​low-water marks C. high points D. liquidity events E. milestone moments

D.

There are three reasons that most entrepreneurial ventures need to raise money during their early​ life: cash flow​ challenges, capital​ investments, and​ _____. Question content area bottom Part 1 A. the need for customers B .to declare dividends to venture capital firms C. the need for profits D. lengthy product development cycles E. the need for suppliers

D.

The​ three-member founding team at OnTime Cleaning Services consists of​ Tom, who has 14 years of operations​ experience, Billy, an accountant with 2 years of experience and​ Jane, a marketer with 22 years of work experience. The founding team at OnTime Cleaning Services is​ ________. Question content area bottom Part 1 A. monogenous B .homogeneous C. entrepreneurial D. heterogeneous E. hubris

D.

Which of the following is NOT an advantage of a general​ partnership? Question content area bottom Part 1 A. Having more than one owner may make it easier to raise funds. B. Business losses can be deducted against the​ partners' other sources of income. C. Creating one is relatively easy and inexpensive compared with a corporation or a limited liability company. D. Liability on the part of each general partner is unlimited.. E. It is not subject to double taxation.

D.

he pro forma​ ________ provides a firm a sense of how its activities will affect its ability to meet its​ short-term liabilities and how its finances will evolve over time. Question content area bottom Part 1 A. budget B. business model C. mission D. balance sheet E. vision

D.

he​ _______ reflects the results of the operations of a firm over a specified period of time. Question content area bottom Part 1 A. forecast B. budget C. balance sheet D. income statement. E. statement of cash flows

D.

​Jim's Handicrafts' main product sells for​ $100 and the cost of goods sold is​ $40. The​ $60 (the difference between the​ two) is called​ ______. Question content area bottom Part 1 A. net income B. revenues C. sales D. contribution margin E. bottom line

D.

What actions are taken in new firms to effectively deal with legal issues

Select. / Hiring a Attorney

Identify and describe the different forms of organization available to new firms. Ch7

Sole Proprietorship, General Partnership, Corporations, Limited Liability Company

Identify and explain the three steps involved in properly preparing to raise debt or equity financing.

Step 1- Determine precisely how much money is needed Step 2 Determine the most appropriate type of financing or funding Step 3 Develop a strategy for engaging potential investors or bankers.

sales forecast

The total sales of a product that a firm expects to sell during a specified time period under specified environmental conditions and its own marketing efforts

Provide an overview of the business licenses and permits that startups up obtain before it begins operating Ch 7

Federal, state, local license/ permits 1. business registration 2. Sales tax permit 3. Professional and Occupational Licenses and Permits 4. Federal Employee Identification Number

historical financial statements

Financial statement that reflects past performance and are usually prepared on a quarterly basis

Explain why a new-venture team might use consultants to obtain advice.

For professional advice and expert advice as there is different types of consultants that specialize in their area

What is the role of forecasts in projecting a firm's future income and expenses?

Forecast Provide the basis for its pro forma financial statement for the business

Discuss the actions founders can take to establish a strong ethical culture in their entrepreneurial ventures Ch 7

Lead by Example by 1. Communicating ethics as a priority 2. Set good examples of ethical conduct 3. Support following organizational standards

equity funding

Means exchanging partial ownership in a firm, usually in the form of stock, for funding.

Identify and describe the three sources of personal financing available to entrepreneurs.

Personal Funds, Friends and Family, Bootstrapping

what are the different historical financial statements?

income statement, balance sheet, statement of cash flows

Homogenous

of a similar kind

Solo proprietorship

ownership of a business by one person

General partnership

partnership in which partners share equally in both responsibility and liability

liability of newness

situation that often causes new firms to falter because the people who start the firms can't adjust quickly enough to their new roles, and because the firm lacks a "track record" with customers and suppliers.

What are the three types of business plans

summary, full, operational business plan

new-venture team

the group of founders, key employees, and advisors that move a new venture from an idea to a fully functioning firm

Income Statement

A financial statement showing the revenue and expenses for a fiscal period.

Statement of Cash Flows

A financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time.

Balance Sheet

A financial statement that reports assets, liabilities, and owner's equity on a specific date.

Explain the three most important sources of equity funding that are available to the entrepreneurial firm.

1. Business angels 2. Venture capital 3. Initial public offerings

Factors critical in selecting a form of business Organization

1. Cost of setting up and maintaining the legal form 2. The extent to which personal assets can be shielded from the liabilities of the business 3. Tax considerations 4. The number and types of investors involved.

Identify and describe a suggested outline of a business plan

1. Cover Page/ table of content 2. Industry Analysis 3. Company description 4. market analysis 5. Economies of business 6. marketing plan 7. Design and development plan 8. Operations plan 9. management team and company structure 10. Overall shedule 11. Financial preditions

red flags in business plan

1. Founders with none of their own money at risk 2. A poorly cited plan 3. Defining the market size too broadly 4. Overly aggressive financials 5. Sloppiness in any area

business plan

25-35 pages, works best for new ventures who are at the point where they need funding or financing; serves as a "blueprint" for the company's operations.

Four methods of estimating a new firm's initial Sales

1. Multiplication method, 2. Find a Comparable firm 3. Contact industry trade associations 4. conduct internet searches

What are the four processes of financial management

1. Preparation of historical financial statements 2. Preparation of forecasts 3. Preparation of proforma 4. Ongoing analysis of financial results

Describe common sources of debt financing entrepreneurial firms use.

1. Small Business Administration-guaranteed 2. . commercial banks

guidelines to follow to write an effective business plan

1. The business plan should give clear and concise information on all the important aspects of the proposed new venture 2. The plan's appearance must be carefully thought out. 3. A final guideline for writing a business plan is to recognize that the plan will usually change as it is written and as the business evolves.

Who reads a business plan

1. a firm's employees 2. investors and other external stakeholders

the primary elements that form A new- venture team is?

1. key employees 2. Managment team 3. Board of directors 4. Board of advisors 5. lenders and investors 6. Other professionals

Explain how to effectively present a business plan to potential investors

1. make a 15- to 20-minute presentation using PowerPoint slides 2. 40-minute question-and-answer period, 3. presentation format calls for the use of 12 slides.

Which of the following is NOT an example of a bootstrapping​ method? Question content area bottom Part 1 A. Hire interns B. Buy new instead of used equipment C. Minimize personal expenses D. Coordinate purchases with other businesses E. Share office space or employees with other businesses

B.

​_____ refers to the process investors go through after they tentatively commit to an investment. Question content area bottom Part 1 A. Shareholding B. Due diligence C. Stakeholding D. Fundraising E. Financing

B.

​______ financing means exchanging partial ownership of a​ firm, usually in the form of​ stock, for funding. Question content area bottom Part 1 A. Factor B. Equity C. Liquidity D. Bank E. Venture capital

B.

All research scientists at Apex Biotechnology are required to sign a​ ________ agreement that binds the employee not to disclose a​ company's trade secrets. Question content area bottom Part 1 A .business B. nondisclosure C. partnership D. noncompete E. corporate

B.

An ethical dilemma is a situation that involves doing something that is beneficial to oneself or the​ organization, but may be​ _____. Question content area bottom Part 1 A. unprofitable B. unethical C impersonal D. illegal E. mission-unfriendly

B.

Dollar Shave​ Club's "Shave​ Time, Shave​ Money" is an example of​ a(n) _____. Question content area bottom Part 1 A. advertisement B. tagline C. mission statement D. commercial E. vision statement

B.

Historical financial statements include the income​ statement, the balance​ sheet, and the statement of​ _______. Question content area bottom Part 1 A. processes B. cash flows C. forecasts D. products E. budgets

B.

On Valuations for Question 1, what is the Required Captial returns? A. 12,500,000 B. 12,000,000 C. 12,100,000 D. 13,000,000

B.

On Valuations for Question 5. What is the Pre-money Valuation A. 2,000,000 B. 1,800,000 C. 1,500,000 D. 1,000,000

B.

On Valuations for Question 4 What is the Post-money Valuation A. 2,600,000 B. 3,000,000 C. 2,400,000 D. 2,000,000

C.

The Southwest Airlines quote​ "Our planes​ don't make any money sitting on the ground—we have to get them back into the​ air" relates to which of the main financial​ objectives? Question content area bottom Part 1 A. Affordability B. Profitability C. Efficiency D. Liquidity E. Stability

C.

​______ refers to the fact that companies often falter because the people who start them​ aren't able to adjust quickly enough to their new roles and because the firm lacks a​ "track record" with outside buyers and suppliers. Question content area bottom Part 1 A. Managerial overconfidence B. Liability of foreignness C. Liability of newness D. Hubris E. Entrepreneurial failure

C.

A(n) ______ chart is a graphic representation of how authority and responsibility are distributed within the company. Question content area bottom Part 1 A. control B. entrepreneurial C. organization D. start-up E. stakeholder

C.

A​ firm's _____ is an analysis of its fixed versus variable costs. Question content area bottom Part 1 A. profit B. income leverage C. operating leverage D. entrepreneurial leverage E. financial leverage

C.

Billy Stamos is​ self-employed, works on his own time with his own tools and​ equipment, and performs computer services for a number of clients. Billy Stamos is​ a(n) _________. Question content area bottom Part 1 A. intern B. job sharer C .freelancer D. freeloader E. employee

C.

Defining the market size too broadly is​ ________ in a business plan. Question content area bottom Part 1 A. rarely discouraged B. always done C. an example of a red flag D. encouraged E. normal practice

C.

If the​ _____ of a firm have similar areas of​ expertise, it can be problematic. Question content area bottom Part 1 A. suppliers B. investors C. founders D. customers E. lenders

C.

_____ include(s) obligations that are payable within a year. Question content area bottom Part 1 A. Private equity B. Current assets C. Miscellaneous assets D. Owners' equity E. Current liabilities

E.

​_______ allows entrepreneurs to raise money in exchange for some type of amenity or reward. Question content area bottom Part 1 A. Bootstrapping B. Bootlegging C. Private placement D. Bartering E. Rewards-based crowdfunding

E.

​A(n) _____ is a panel of individuals elected by a​ corporation's shareholders to oversee the management of the firm. Question content area bottom Part 1 A. advisory group B. board of advisers C. shareholder group D. stakeholder group E. board of directors

E.

A(n) _____ is a snapshot of a​ company's assets,​ liabilities, and​ owners' equity at a specific point in time. Question content area bottom Part 1 A. statement of cash flows B. budget C. income statement D. financial statement E. balance sheet

E.

In June​ 2017, Blue Apron made a first sale of its stock to the public. This was Blue​ Apron's ________. Question content area bottom Part 1 A. launch sale B. stock market offering C. stockholder issue D. secondary market offering E. initial public offering

E.

In a​ _____, the person and the business are essentially the same. Question content area bottom Part 1 A. limited partnership B. corporation C. partnership D. subchapter S corporation E. sole proprietorship

E.

John invested​ $25,000 in Marlo​ Ventures, a home flipping business. While Sammy invested​ $20,000 in the​ venture, Daniel did not put in any money in the​ venture, but became a 50 percent equity owner because he had contributed enormous time and expertise into the venture. The 50 percent is​ ________ equity that represents the value of the time and effort that Daniel put into Marlo Ventures. Question content area bottom Part 1 A. entrepreneurial B. Start-up C. emotional D. corporate E. sweat

E.

Marci Luner is going over the finances of her clothing boutique firm. If her firm has a net income of​ $131,000 and net sales of​ $586,000, its profit margin is​ _______ percent. Question content area bottom Part 1 A. 20 B. 17.9 C. 18.8 D. 13.6 E. 22.3

E.

Wanderberg Machines went on a whirlwind tour that consisted of meetings in 12 key cities where the firm presented its business plan to groups of investors. This tour was a​ ______. Question content area bottom Part 1 A. investment show B. securities show C. placement show D. junket E. road show

E.

When a venture has high risk with an uncertain return​ (characterized by weak cash​ flow, high​ leverage), its most appropriate source of funding is​ ______. Question content area bottom Part 1 A. the Small Business Administration B. debt financing C. not-for-profit financing D. equity financing E. personal​ funds, family and​ friends, and/or bootstrapping

E.

Which of the following is NOT a standard that a business must meet to qualify for status as a subchapter S​ corporation? Question content area bottom Part 1 A . It can issue only one class of stock. B. The business cannot be a subsidiary of another corporation. C. It can have no more than 100 members. D. All shareholders must agree to have the corporation formed as a subchapter S corporation. E. Its shareholders need not be U.S. citizens.

E.

fiancial statement

Written report that quantitatively describes a firms health

Executive Summary

a brief overview of the entire marketing plan

Summary business plan

a business plan 10 to 15 pages long that works best for companies very early in their development that are not prepared to write a full plan

Limited Liability Company (LLC)

a form of business ownership that offers both limited liability to its owners and flexible tax treatment

C Corporations

a legal entity that, in the eyes of the law, is separate from its owners.

advisory board

a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis

Corporation

a separate legal entity formed by documents filed with a state

assumptions sheet

an explanation in a new firm's business plan of the sources of the numbers for its financial forecast and the assumptions used to generate them

Hetrogeneous

composed of different kinds, diverse

forecasts

estimates of a firm's future income and expenses, based on its past performance, its current circumstances, and its future plans