Chapter 12 Questions

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

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

False

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

a. 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

False

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

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

True

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

False

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

b. It is important for the entrepreneur to know how to buy up troubled companies.

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

b. Orient the plan to the present.

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

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

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

c. Provides a comprehensive product-launch timetable.

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

c. organizational structure

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

a. the pro forma balance sheet.

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

False

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

True

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

False

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

True

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

b. marketing segment.

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 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.

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

a. reflections on the direction of the venture.

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

b. Determine the strengths and weaknesses of the entrepreneur.

Which of the following business plan pitfalls possible solution is to set up a timetable of specific steps to be accomplished during a specific period? a. no market niche or segment b. lack of demonstrated experience c. no realistic goals d. no commitment or dedication

c. no realistic goals

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

c. the cash flow statement

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

c. to identify the target market.