Entp. Chapter 8-

According to the textbook, studies show that more than one individual starts ________ percent of all new firms. 20 to 25 30 to 40 5 to 15 75 to 90 50 to 70

50 to 70

The Partnering for Success feature in Chapter 8 focuses on buying groups, and recommends that small businesses seek out buying groups to participate in. What is a "buying group" in the context of the feature? A partnership that bands small businesses together to get the best prices possible from foreign importers and manufacturers A partnership that bands small businesses together to get the best possible rates on property and liability insurance A partnership that bands small businesses together to attain volume discounts on common products and services that they buy A partnership that bands small businesses together to get the best possible terms from finance companies A partnership that bands small businesses together to collectively make the commitment to "buy local" at every available opportunity

A partnership that bands small businesses together to attain volume discounts on common products and services that they buy

Match the financial term with its proper definition. Budget - itemized forecasts of a company's income, expenses, and capital needs Financial ratios - written report that quantitatively describes a firm's financial health Forecasts - written reports that quantitatively describe a firm's financial health Forecasts - depict relationships between items on a firm's financial statements Financial statements - an estimate of a firm's future income and expenses

Budget - itemized forecasts of a company's income, expenses, and capital needs

________ are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control. Financial statements Budgets Statements of cash flows Profitability statements Owners' equity statements

Budgets

For startup firms, the cost of buying real estate, building facilities, and purchasing equipment often exceeds the firm's ability to provide funds for those needs on its own. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example? Personnel costs Capital investments Costs associated with building a brand Lengthy product development cycles Cash flow challenges

Capital investments

________ is a financial transaction whereby a business sells its accounts receivable to a third party at a discount in exchange for cash. Peer-to-peer lending Crowdfunding Leasing Vendor credit Factoring

Factoring

________ depict relationships between items on a firm's financial statements. Fiscal projections Monetary balances Fiscal relations Financial proportions Financial ratios

Financial ratios

Which of the following statements is NOT true regarding the attributes of the founder(s) of a firm? Evidence suggests that important entrepreneurial skills are enhanced through higher education. New ventures that are started by a team rather than an individual have an advantage. Founders with experience in the same industry as their new ventures will typically have "blinders" on and are typically not as effective as founders new to the industry. Founders with prior entrepreneurial experience are more likely to avoid costly mistakes. Founders with broad social and professional networks have an advantage.

Founders with experience in the same industry as their new ventures will typically have "blinders" on and are typically not as effective as founders new to the industry.

Which of the following is incorrect regarding the typical role of consultants in business startups? Help manage the day-to-day activities of the firm International consulting firms (e.g., Accenture and Bearing Point) are financially beyond the reach of most small firms. Give professional advice Give expert advice Consultants fall into two categories-paid consultants and consultants who are made available for free.

Help manage the day-to-day activities of the firm

________ financial statements reflect past performance and are usually prepared on a quarterly and annual basis. Concurrent Ad-hoc Chronological Historical Pro forma

Historical

Which of the following statements is incorrect regarding boards of directors? A board is typically made up of both inside and outside directors. If a new venture organizes as a corporation, it is not legally required to have a board of directors, but it is strongly recommended. Most boards meet formally three or four times a year. The board is responsible for declaring dividends. The boards for publicly-traded companies are required by law to have audit and compensation committees

If a new venture organizes as a corporation, it is not legally required to have a board of directors, but it is strongly recommended.

________ financial statements are projections for future periods based on forecasts and are typically completed for two to three years into the future. Ad-hoc Pro forma Historical Chronological Concurrent

Pro forma

Which of the following statements about pro forma financial statements is incorrect? Pro forma financial statements are strictly planning tools. Pro forma financial statements are projections for future periods based on forecasts. Pro forma financial statements are required by the SEC. Pro forma financial statements are typically completed for two to three years into the future. Most companies consider their pro forma financial statements to be confidential and reveal them to outsiders only on a "need to know basis."

Pro forma financial statements are required by the SEC.

Which of the following was NOT identified in the textbook as an element of a new venture team? Key employees Lenders and investors Suppliers and vendors Management team Board of advisors

Suppliers and vendors

Kinvolved, the company profiled in the opening feature of Chapter 10, is an EdTech startup that involves an app to track student absences. The company was co-founded by Miriam Altman and Alexandra Meis. Which of the following is true about Kinvolved's founding story? Both Altman and Meis attended Stanford University. Both Altman and Meis were college professors before starting the venture. The co-founders raised money via an Indiegogo crowdfunding campaign. Altman and Meis met while they were teaching at Harvard University. Altman and Meis went public via an IPO soon after launch.

The co-founders raised money via an Indiegogo crowdfunding campaign.

According to the textbook, which of the following statements is inaccurate regarding the size and composition of the founding team of a firm? A founding team can be too big, causing communication problems and increasing potential for conflict. The members of a heterogeneous founding team are diverse in terms of their abilities and experiences. The members of a homogeneous founding team are similar in terms of their abilities and experiences. A founding team larger than four people is typically too large to be practical. There is no relationship between a founding team's size and its effectiveness.

There is no relationship between a founding team's size and its effectiveness.

Which of the following sets of characteristics places a startup in the strongest position to apply for equity funding? Strong cash flow, low leverage, audited financials, good management, healthy balance sheet Strong cash flow, high leverage, low-to-moderate growth, unproven management Weak cash flow, high leverage, low-to-moderate growth, unproven management Unique business idea, high growth, niche market, proven management Unique business idea, strong cash flow, low-to-moderate growth, broad market

Unique business idea, high growth, niche market, proven management

Which of the following was NOT identified in the textbook as an attribute of an effective board member? Strong personal and professional networks Ability and willingness to mentor the CEO and the top managers of the firm Pattern recognition skills Unknown in their field Investment and/or operating experience

Unknown in their field

Susan Howard owns a seafood restaurant in Naples, Florida. She is currently owed $21,000 by a corporation that she catered a series of meetings for and $3,000 on an overdue account. Amanda has $24,000 in ________. accounts payable accounts receivable accounts collectable inventory accounts obtainable

accounts receivable

A(n) ________ is a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis. idea panel advisory board consultation board counseling panel suggestion panel

advisory board

Kelly Andersen founded a technology consulting firm several years ago. Her firm has grown rapidly and is financially successful. One thing that Kelly attributes her success to is that early on she assembled a panel of experts who provided her ongoing direction and advice about her business. What Kelly created is called a(n) ________. accountability panel suggestion panel advisory board consultation panel idea board

advisory board

A board of directors' three formal responsibilities are to ________. appoint the officers of the firm, declare dividends, and oversee the affairs of the corporation write the firm's strategic plan, declare dividends, and conduct the annual meeting periodically update the firm's business plan, declare dividends, and write the firm's marketing plan appoint the officers of the firm, conduct the annual meeting, and submit the firm's annual report to the Securities & Exchange Commission provide funding to the firm, write the firm's strategic plan, and submit the firm's annual report to the Securities & Exchange Commission

appoint the officers of the firm, declare dividends, and oversee the affairs of the corporation

The 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. statement of owners' equity statement of cash flows income statement expense statement balance sheet

balance sheet

For Essentium Materials, the company profiled in the opening feature in Chapter 8, an essential financial metric is to work to grow its monthly revenues faster than its monthly ________ rate. return profitability accounts receivable burn accounts payable

burn

The Partnering for Success feature in Chapter 10 focuses on Startup Weekend. Startup Weekend is a for-profit organization that ________. provides 54-hour weekend retreats for people to gather and learn as much as possible about the startup process facilitates weekend business plan competitions across the United States sponsors pitch events, usually over a weekend, that allow entrepreneurs to pitch their business ideas to angel investors creates a context in which small groups of people can start a business in 54 hours (usually over a weekend) sponsors "weekend" events that connect entrepreneurs with mentors, advisors and potential investors

creates a context in which small groups of people can start a business in 54 hours (usually over a weekend)

Cash plus items that are readily convertible to cash, such as accounts receivable, marketable securities, and inventories are classified as ________ assets on a firm's balance sheet. temporary intermediate term current other fixed

current

A firm's working capital is its ________. cash and cash equivalents minus its current liabilities current assets minus its current liabilities accounts receivable minus its total accounts payable total assets minus its total liabilities inventory and accounts receivable minus its current liabilities

current assets minus its current liabilities

A board of directors' three formal responsibilities are to appoint the officers of the firm, oversee the affairs of the corporation, and ________. write the firm's strategic plan submit the firm's annual report to the stockholders provide funding for the firm conduct the annual meeting declare dividends

declare dividends

Real estate, buildings, equipment and furniture are classified as ________ assets on a company's balance sheet. current permanent fixed other intermediate term

fixed

A(n) ________ is a person who is in business for themselves, works on their own time with their own tools and equipment, and performs services for a number of different clients. freelancer trainee virtual assistant intern employee

freelancer

Debt financing involves ________. selling corporate bonds or selling stock via an IPO raising venture capital or securing a private placement getting a grant or selling corporate bonds getting a loan or raising venture capital getting a loan or selling corporate bonds

getting a loan or selling corporate bonds

The What Went Wrong? feature for Chapter 8 focuses on Wise Acre Frozen Treats, a company that made organic popsicles from unrefined sweeteners. According to the feature, Wise Acre Frozen Treats failed largely because it ________. was not efficient in the way it utilized its assets grew too quickly, which overwhelmed its cash flow did not compare its financial ratios to industry peers was not careful enough in preparing its pro forma financial statements spent too much money on marketing

grew too quickly, which overwhelmed its cash flow

A firm's ________ reflects the results of its operations over a specified period and shows whether it is making a profit or is experiencing a loss. operating budget income statement forecast balance sheet statement of cash flows

income statement

The three most common forms of equity funding are ________. friends and family, venture capital, bank loans friends and family, business angels, bootstrapping SBIR grants, venture capital, initial public offerings initial public offerings, business angels, venture capitalists SBIR grants, SBA guaranteed loans, bank loans

initial public offerings, business angels, venture capitalists

A board of directors is typically made up of both ________ and ________ directors. paid; unpaid inside; outside junior; senior experienced; inexperienced novice; expert

inside; outside

A company's merchandise, raw materials, and products waiting to be sold are called its ________. reserve stock accumulation inventory set aside

inventory

In the context of a firm's statement of cash flows, ________ activities include the purchase, sale, or investment in fixed assets (e.g., real estate, equipment, and buildings). financing investing operating capital liquidity

investing

According to the textbook, many entrepreneurs go about the task of raising capital haphazardly because they ________. haven't completed a feasibility analysis or business plan are uncomfortable talking about money and they haven't written a business plan are focused on the nuts and bolts of starting their business lack experience in this area and because they don't know much about their choices are intimidated by the process and they are unsure of how much money they need

lack experience in this area and because they don't know much about their choices

A(n) ________ is a written agreement in which the owner of a piece of property allows an individual or business to use the property for a specified period of time in exchange for payments. warranty lease loan assurance guarantee

lease

A firm's pro forma financial statements are similar to its historical financial statements except that they ________. do not include the statement of cash flows look forward rather than back are required by the SEC in all cases look back rather than forward do not include the income statement

look forward rather than back

A firm's profit margin, or return on sales, is computed by dividing ________. operating income by gross profit net income by cost of sales net income by net sales net income by gross profit gross profit by net sales

net income by net sales

In the context of computing the cost of sales, the common way to do this is to use the percent-of-sales method, which is a method for expressing each expense item as a percentage of ________. net sales cost of sales operating income gross profit net income

net sales

A ________ is the group of founders, key employees, and advisers that move a new venture from an idea to a fully functioning firm. new venture panel startup cadre new project team startup team new venture team

new venture team

Kathy Denver is preparing to launch a home security firm. The team of people that will launch Kathy's firm are as follows: Kathy (CEO), Trevor (VP-Finance), Shelia (VP-Sales), a four-person Board of Directors, a five-person Board of Advisors, and Kathy's primary investor, who will assume an advisory role. The group of people that will launch Kathy's firm is called its ________. new venture panel startup cadre new venture team startup troop startup squad

new venture team

Wild Friends Food, the company profiled in the opening feature of Chapter 9, is a food company. Which of the following statements is incorrect regarding Wild Friends Foods co-founders, its personnel policies or the company itself? The co-founders both are low drama type of people. The firm is located in Eugene, Oregon. The idea for Wild Friends Food was created at a Startup Weekend event in San Francisco. Wild Friends Food has two co-founders. The co-founders have complementary skills.

none- The co-founders both are low drama type of people.

Which of the following statements is incorrect regarding how balance sheets are prepared? The right-hand side of a balance sheet shows a firm's liabilities and its owners' equity. Intellectual property receives value in some cases and in some cases it does not. The assets on a balance sheet are shown in order of liquidity. The left-hand side of a balance sheet shows a firm's assets. Assets are recorded at fair market value rather than cost.

not- Intellectual property receives value in some cases and in some cases it does not.

Adam Miller is a general partner in a venture capital firm that just funded Gold Coast Software, a software firm in Santa Barbara, California. Gold Coast Software is incorporated, and Adam has taken a seat on the firm's board of directors. In board of directors terminology, Keith is a(n) ________ director. inside subordinate senior outside distant

outside

In the context of boards of directors, a(n) ________ director is someone who is not employed by the firm. external inside outside impartial peripheral

outside

According to the textbook, although a board of directors has formal governance responsibilities, its most useful role is to ________. provide funding to the firm represent the firm in public relations activities conduct the firm's annual meeting submit papers on behalf of the firm to the SEC provide guidance and support to the firm's managers

provide guidance and support to the firm's managers

According to the textbook, the most practical way to interpret or make sense of a firm's historical financial statements is through ________. regression analysis the preparation of pro forma financial statements percentage analysis ratio analysis profit analysis

ratio analysis

Liz Zackery just launched a firm in the sporting goods industry. On the day the company was launched, Liz issued a press release, indicating that the vice president of New Balance, a highly respected athletic shoe and sports apparel company, had agreed to serve on her board of directors. Liz knows that such a high quality appointment will send an important message to her potential clientele. This phenomenon is referred to as ________. championing indicating profiling signaling trumping

signaling

Melissa Jones just launched a firm in the wireless communications industry. Shortly after the company was launched, Melissa announced that a prominent Silicon Valley venture capitalist had agreed to serve on her board of directors. Melissa knows that such a high quality appointment will send an important message to her potential business partners and clientele. This phenomenon is referred to as ________. trumping championing profiling indicating signaling

signaling

The members of homogeneous teams are ________ in terms of their ________. diverse; abilities and experiences diverse; abilities, but very similar in terms of their experiences diverse; experiences, but very similar in terms of their abilities similar; abilities and experiences sometimes diverse; abilities and experiences and sometimes similar along the same dimensions

similar; abilities and experiences

A(n) ________ is a chart that depicts the most important skills that are needed in a new venture and where skills gaps exist. talent summary expertise report skills profile talent profile abilities summary

skills profile

Jason Andersen just finished writing a business plan for a new type of office supply store. One thing Jason included in the "Management Team & Company Structure" section of his business plan is a chart that depicts the most important skills that are needed for his business and where skills gaps exist. Jason included a(n)________ in his business plan. talent summary skills profile abilities profile expertise report talent report

skills profile

According to our textbook, the seed money that gets a company off the ground typically comes from ________. the founders of the firm angel investors governmental agencies commercial banks venture capitalists

the founders of the firm

On a firm's income statement, net sales consists of ________. cost of sales minus allowances for returned goods and discounts total sales minus allowances for returned goods and discounts operating expenses minus cost of sales cost of sales minus operating expenses total sales minus operating expenses

total sales minus allowances for returned goods and discount

When evaluating a balance sheet, the two primary questions are ________. whether a firm's cost of sales is going up and whether it is generating excess cash that could be used to pay down debt or pay dividends whether a firm is profitable and whether a firm is financially sound whether a firm is profitable and whether it is generating excess cash that could be used to pay down debt or pay dividends whether a firm has sufficient short-term assets to cover its short-term debts and whether it is profitable whether a firm has sufficient short-term assets to cover its short-term debts and whether it is financially sound

whether a firm has sufficient short-term assets to cover its short-term debts and whether it is financially sound