EBD questions
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 key concept in developing an expense budget is that of a. fixed costs. b. labor costs. c. taxes. d. rent.
A
Capital budgeting is designed to show a. how many projects, in total, should be selected. b. which project is most profitable. c. projects that will increase business goals. d. how to evaluate projects based on rates of return.
A
The pro forma balance sheet is used in the critical risk segment of the business plan. a. True b. False
False
The set of assumptions on which financial projections are based have little meaning. a. True b. False
False
Financial information pulls together all the information presented in the other segments of the business. a. True b. False
True
Misunderstanding industry attractiveness can be a fatal flaw in strategic planning. a. True b. False
True
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
One of the most common reasons for acquiring a business is developing more growth-phase products. a. True b. False
True
Replacement value of a business is based upon the value of each asset if it had to be replaced at a certain cost. a. True b. False
True
Tangible assets as well as intangible assets of a business need to be assessed for proper venture evaluation. a. True b. False
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. a. True b. False
True
The business plan is the entrepreneur's road map for a successful enterprise. a. True b. False
True
The cash-flow budget provides an overview of cash inflows and outflows for the budget period. a. True b. False
True
The entrepreneurial strategy matrix measures risk and innovation. a. True b. False
True
The principal objective of capital budgeting is to maximize the value of the firm. a. True b. False
True
Emotional bias is likely to have what effect on a seller's valuation of a business? a. increase the valuation b. decrease the valuation c. have no net effect on the valuation d. none of these
A
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
Contribution margin is the difference between a. selling price and fixed cost per unit. b. purchase price and variable cost per unit. c. selling price and variable cost per unit. d. purchase price and fixed cost per unit.
C
Lack of expertise has never been considered a reason for the lack of strategic planning in new ventures. a. True b. False
False
In the context of buying a business, a known commodity may command a higher price for what reason? a. historical projections have intrinsic value b. avoiding start-up costs has value c. property values are variable d. the value of a founder's stock decreases over time
B
In the strategy matrix model, innovation is defined as a. an invention. b. something new and different. c. copying and improving on competitor's products. d. using practical milestones.
B
The price/earnings ratio is determined by a. patents. b. dividing market price of common stock by earnings per share. c. goodwill. d. deferred financing costs.
B
The principle objective of capital budgeting is to a. minimize the risks of the firm. b. maximize the value of the firm. c. maximize the assets of the firm. d. optimize the number of project requests.
B
Closely held ventures usually suffer from which of the following shortcomings? a. a lack of management depth b. overcapitalization c. sufficient controls d. internal conflict
A
Comparing financial numbers in order to make decisions is referred to as: a. ratio analysis. b. debt reduction. c. comparable fractions. d. descriptive statistics.
A
Many research studies suggest that strategic planning influences a venture's survival. a. True b. False
True
Financial information is important to entrepreneurs because it pulls together all the information presented in other segments of the business and: a. it quantifies all the assumptions concerning business operations. b. it answers all questions about the business and the entrepreneur. c. it justifies long term commitment to the business. d. it predicts the competitive environment in which the business operates.
A
Return on investment a. is net profit divided by investment. b. provides a replacement value. c. establishes a value for the business. d. is equal to the current prime rate.
A
The cash flow budget describes a. cash inflows/cash outflows. b. cash outflows/accounts receivables. c. interest income/interest expense. d. profits/costs.
A
A budget that is a statement of estimated income and expenses over a specified period of time is referred to as an a. anticipated budget. b. operating budget. c. entrepreneurial budget. d. expected results budget.
B
Break-even analysis is a technique commonly used to assess the a. rate of return on investment. b. expected product profitability. c. net present value. d. total costs.
B
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
Emerging ventures that are rapidly expanding with constantly increasing personnel size and market operations will need a. less formal planning because of constant changes. b. to formalize planning because there is a great deal of complexity. c. to establish a pattern of subordinate participation. d. to evaluate company strengths and weaknesses.
B
Which of the following is the correct order of the traditional life-cycle stages of an enterprise? a. start-up activities, new-venture development, growth, stabilization, and innovation or decline b. new-venture development, start-up activities, growth, stabilization, and innovation or decline c. Innovation, new-venture development, start-up activities, growth, stabilization, and decline d. growth, new-venture development, start-up activities, stabilization, and innovation or decline
B
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
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
Which of the following is a form of the pro forma statement? a. costs of goods sold b. cash flow statement c. balance sheet d. budget
C
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
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
Analysis of a firm's external and internal environments provides the firm with the information to develop a. a degree of uncertainty. b. administrative experience. c. competitive strengths. d. strategic intent and strategic mission.
D
Which of the following fatal mistakes entrepreneurs continually fall prey to in their attempt to implement a strategy concerns pursuing a position of dominance in a fast-growing industry? a. pursuing an unattainable competitive position b. misunderstanding industry attractiveness c. compromising strategy for growth d. failure to explicitly communicate the venture's strategy to employees
A
Which of the following refers to the conducting of a thorough analysis of every facet of an existing business? a. Due diligence b. Industry capitalization c. Knowledge acquisition d. Risk assessment
A
Small business owners are often guarded about their businesses, which leads to a. distrust of others when formulating a strategic plan. b. a myopic viewpoint. c. misunderstanding of the economic environment. d. lack of attention to the competition.
A
A fixed cost a. changes in response to changes in activity for a given period of time. b. does not change in response to changes in activity for a given period of time. c. changes inversely to changes in activity for a given period of time. d. does none of these.
B
A reason new venture managers lack knowledge in the strategic planning process is because a. they refuse to learn new things. b. they have minimal exposure to the planning process. c. they attempt to implement actions too quickly. d. they are overconfident.
B
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
A reason for lack of strategic planning has been found to be a. lack of preference. b. time sharing. c. lack of expertise. d. lack of dominance.
C
A variable cost a. changes in the same direction and in inverse proportion to changes in operating activity. b. changes in the opposite direction and in direct proportion to changes in operating activity. c. changes in the same direction and in direct proportion to changes in operation activity. d. is synonymous with labor costs.
C
Formation of long-range plans for effective management in light of a venture's strengths and weaknesses is referred to as a. dimensional planning. b. tactical planning. c. strategic planning. d. operational planning.
C
The concept of the net present value method works on the premise that a. a dollar today is worth less than a dollar in the future. b. a dollar today is worth the same in the future. c. a dollar today is worth more than a dollar in the future. d. a dollar today cannot be measured in future dollars.
C
Traditional valuation methods includes all of the following except: a. adjusted tangible book value b. price/earnings ratio c. high equity/low debt d. discounted earnings
C
What hidden costs are involved when establishing the value of a firm? a. insufficient controls and costs b. divergent expenses c. personal expenses d. travel expenses
C
What is the one-person-band syndrome? a. an invention b. following a competitor's lead c. failure to delegate d. effective time management
C
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
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 a. assets minus liabilities. b. assets minus owner's equity. c. assets minus (liabilities plus owner's equity). d. zero.
D
A "SWOT" analysis refers to a. strength, weaknesses, opportunities, threats. b. small, weak, ordinary, tact. c. sound warnings of takeovers. d. none of these.
A
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.
A
"Why is the business being sold?" is not an important question to ask when analyzing the viability of buying a business. a. True b. False
False
A business plan must illustrate the current status of the venture but not the projected results. a. True b. False
False
Adjusted tangible book value is a popular method of valuation. a. True b. False
False
After delivering a pitch, it is not acceptable to question venture capitalists who turn down a funding opportunity. a. True b. False
False
A "SWOT" analysis refers to analyzing strengths, weaknesses, opportunities, and threats. a. True b. False
True
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
A budget is one of the most powerful tools that an entrepreneur can use in planning business operations. a. True b. False
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. a. True b. False
True
Sales and earnings of a venture are projected from a. historical projections. b. historical financials. c. data on start-ups. d. property values.
B
Break-even analysis is used to tell how many units must be sold in order to break even at a particular selling price. a. True b. False
True
Business valuation is essential when attempting to buy out a partner. a. True b. False
True
Buyers and sellers assign different values to a business. a. True b. False
True
During the growth stage of a venture, entrepreneurs shift into a managerial style. 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
In administrative cultures, there is a need for clearly defined authority and responsibility. a. True b. False
True
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
If cash flow is deemed the most important consideration in buying a business, which valuation method is likely to be used? a. adjusted tangible book value b. price/earnings ratio c. high equity/low debt d. discounted earnings
D
In which of the following situations is it essential to have a business evaluation? a. attempting to buy out a partner b. going public with the company c. establishing an employee stock option plan (ESOP) d. all of these are correct
D
Specific factors of a venture being offered for sale that should be examined include a. the industry growth rate. b. strength of competitive forces. c. weaknesses, opportunities, and threats. d. all of the above.
D
The entrepreneurial strategy matrix measures: a. risk and security. b. commitment and time. c. risk and innovation. d. opportunity and time.
D
Unique managerial concerns of growing ventures encompass all of the following except: a. the one-man-band syndrome b. community pressures c. time-management issues d. agency problems
D
Which of the following would be considered fatal mistakes in strategic planning, according to researcher Michael E. Porter? a. pursuing a solid competitive position b. compromising strategy for profits c. venture's strategy is too rigid d. no real competitive advantage
D
Contribution margin is the difference between the selling price and the fixed cost per unit. a. True b. False
False
Emotional bias is not an underlying issue in valuing a business. a. True b. False
False
Knowing a venture's pre-money valuation is not possible. a. True b. False
False
The traditional accounting equation is: assets + liabilities = owner's equity. a. True b. False
False
Participation by subordinates in a strategic plan is never appropriate. a. True b. False
False
Pro forma statements show the firm's present financial position. a. True b. False
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
False
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 price/earnings ratio (multiple of earnings) method is determined by dividing the market price of common stock by retained earnings. a. True b. False
False
New-venture development is a result of both market conditions and the entrepreneur's efforts. a. True b. False
False
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
Which of the following would not be considered a key step in the strategic planning activities of a growing firm? a. examining the strengths, weaknesses, opportunities and threats b. Implementation of the plan using programs, budgets and procedures c. evaluation of the performance d. changing the short-term goals according to the political climate
D
The first step in the preparation of the cash flow budget is the identification and timing of cash outflows. a. True b. False
False
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
The discounted earnings method of valuation establishes a. potential earning power. b. an appropriate rate for replacement. c. expectancy of the business expenses. d. future profits.
A
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 traditional accounting equation that verifies the accuracy of the entrepreneur's balance sheet is a. assets = liabilities + owner's equity. b. assets + liabilities = owner's equity. c. assets + owner's equity = liabilities. d. assets = liabilities - owner's equity.
A
When considering management, the entrepreneur should be concerned about a. ownership positions. b. pension and profit sharing. c. total number of employees. d. employee benefits.
A
When considering physical facilities, the entrepreneur should be concerned about a. which facilities are owned versus leased. b. which facilities are used for production. c. whether adequate capital is maintained. d. facility upkeep.
A
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