Entrepreneurship

Emerging ventures that are rapidly expanding with constantly increasing personnel size and market operations will need

to formalize planning bc there is a great deal of complexity

An important guideline in putting the plan together is

to identify the target market

When considering physical facilities, the entrepreneur should be concerned about

which facilities are owned vs leased

When using the internal rate of return method, the future cash flows are discounted at a rate that makes the net present value equal to

zero

Which of the following describes advantages of the business plan for financial sources?

The plan identifies critical risks

A "niche" is a homogeneous group w common characteristics

True

Many research studies suggest that strategic planning influences a venture's survival

True

Misunderstanding industry attractiveness can be a fatal flaw in strategic planning

True

One of the most common reasons for acquiring a business is developing more growth-phase products

True

Tangible assets as well as intangible assets of a business need to be assessed for proper venture evaluation

True

The entrepreneurial strategy matrix measures risk and innovation

True

The principal objective of capital budgeting is to maximize the value of the firm

True

An indicator of the planning pitfall of "failure to anticipate roadblocks" is

making no admission of possible flaws in the plan

Competitive analysis, advertising plan, and pricing policy are all part of the

marketing segment

The principle objective of capital budgeting is to

maximize the value of the firm

Which of the following would be considered fatal mistakes in strategic planning, according to researcher Michael E. Porter

no real competitive advantage

In the strategy matrix model, innovation is defined as

something new & different

Formation of long-range plans for effective management in light of a venture's strengths and weaknesses is referred to as

strategic planning

A "SWOT" analysis refers to

strengths, weaknesses, opportunities, threats

The financial segment includes

the pro forma balance sheet

Which one of the following is not a benefit of a business plan to the entrepreneur?

Provides a comprehensive product-launch timetable

A budget is one of the most powerful tools that an entrepreneur can use in planning business operations

True

Adjusted tangible book value is a popular method of valuation

True

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

True

The "best" strategic plan will be influenced by the abilities of the entrepreneur, the complexity of the venture, and the nature of the industry

True

A business plan must illustrate the current status of the venture but not the projected results

False

The business plan is the entrepreneur's road map for a successful enterprise

True

The cash-flow budget provides an overview of cash inflows and outflows for the budget period

True

When considering management, the entrepreneur should be concerned about

ownership positions

Factors that must be addressed when planning a new venture include setting realistic goals, determining milestones, making a commitment, and having

True

Replacement value of a business is based upon the value of ea. asset if it had to be replaced at a certain cost

True

A budget that is a statement of estimated income and expenses over a specified period of time

operating budget

Which of the following statements would not be an appropriate guideline for successful business plan development

orient the plan to the present

What hidden costs are involved when establishing the value of a firm

personal expenses

The discounted earnings method of valuation establishes

potential earning power

During the growth stage of a venture, entrepreneurs shift into a managerial style

True

There are only two viewpoints from which a business plan should be written, the entrepreneur's and the financial source

True

The concept of the net present value method works on the premise that

a $ today is worth more than a $ in the future

Closely held ventures usually suffer from which of the following shortcomings

a lack of management depth

A reason for lack of strategic planning has been found to be

a lack of preference

A business plan is

a written document that details the proposed venture

Break-even analysis is a technique commonly used to assess the

expected product profitability

What is the one-person-band syndrome

failure to delegate

Unique managerial concerns of growing ventures encompass all of the following except

agency problems

The traditional accounting equation that verifies the accuracy of the entrepreneur's balance sheet

assets = liabilities + owner's equity

In the context of buying a business, a known commodity may command a higher price for what reason

avoiding start-up costs has value

Which of the following is a form of the pro forma statement

balance sheet

The cash flow budget desccribes

cash inflows/cash outflows

A variable cost

changes in the same direction and in direct proportion to changes in operation activity

If cash flow is deemed the most important consideration in buying a business, which valuation method is likely to be used

discounted earnings

Small business owners are often guarded abt their businesses, which leads to

distrust of others when formulating a strategic plan

The price/earnings ratio is determined by

dividing market price of common stock by earnings per share

A fixed cost

does not change in response to changes in activity for a given period of time

The price/earnings ratio (multiple of earnings) method is determined by dividing the market price of common stock by retained earnings

False

Which of the following statement is not part of the 5-minute reading by venture capitalists

Determine the strengths and weaknesses of the entrepreneur

Bernie's leather tanning company generates a significant amount of hazardous waste in the form of chemicals used to tan the hides of animals into leather. In order to properly dispose of this chemical waste, Bernie must transport the waste to a hazardous waste dump in the next county. In order to comply with RCRA, he must:

properly label and package material before transport to ensure proper care is taken by all parties along the way

Comparing financial numbers in order to make decisions is referred to as

ratio analysis

The comprehensive business plan should be the result of

reflections on the direction of the venture

The entrepreneurial strategy matrix measures

risk and innovation

Contribution margin is the difference between

selling price and variable cost per unit

Analysis of a firm's external and internal environments provides the firm w the information to develop

strategic intent and strategic mission

Which of the following statements may be the most important in new venture creation

the cash flow statement

A reason new venture managers lack knowledge in the strategic planning process is bc

they have minimal exposure to the planning process

Which of the following refers to the conducting of a thorough analysis of every facet of an existing business

Due diligence

"Why is the business being sold?" is not an important question to ask when analyzing the viability of buying a business

False

A key concept in developing an expense budget is that of

fixed costs

Traditional valuation methods include all of the following except

high equity/low debt

Sales and earnings of a venture are projected from

historical financials

Capital budgeting is designed to show

how many projects in total should be selected

Emotional bias is likely to have what effect on a seller's valuation of the business

increase the valuation

Return on investment

is net profit divided by investment

What is the significance of a harvest strategy segment in a business plan

it is important for the entrepreneur to plan for a liquidity event as an exit strategy

Financial information is important to entrepreneurs bc it pulls together all the info. presented in other segments of the business and

it quantifies all the assumptions concerning business operations

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

False

Contribution margin is the difference between the selling price and the fixed cost per unit

False

Emotional bias is not an underlying issues in valuing a business

False

Knowing a venture's pre-money valuation is not possible

False

Lack of expertise has never been considered a reason for lack of strategic planning in new ventures

False

Participation by subordinates in a strategic plan is never appropriate

False

The pro forma balance sheet is used in the critical risk segment of the business plan

False

The set of assumptions on which financial projections are based have little meaning

False

The traditional accounting equation is assets + liabilities = owner's equity

False

Pro forma statements show the firm's present financial position

False

The easiest way to avoid the pitfall of no commitment or dedication is to designate that the venture is a hobby or whim

False

The entrepreneur should expect to encounter a friendly and supportive audience when presenting the business plan to potential financial sources

False

The first step in the preparation of the cash flow budget is the identification and timing of cash flows

False

Break-even analysis is used to tell how many units must be sold in order to break even at a particular selling price

True

Business valuation is essential when attempting to buy out a partner

True

Buyers and sellers assign different values to a business

True

Financial information pulls together all the information presented in the other segments of the business

True

In administrative cultures, there is a need for clearly defined authority and responsibility

True

Which of the following is a critical factor to be considered in the management segment

organizational structure