Chapter 7 the Business Plan: Creating And

Chapter 7 The Business Plan: Plan: Creating and Starting Starting the Venture

True/False Questions

1. Planning Planning the new venture venture is is a process process that never never ends. ends. Answer: True Page: 199 Difficulty: Easy 2. The business business plan plan addresses addresses both both short term term and long long term decisio decision n making. making. Answer: True Page: 199 Difficulty: Easy 3. To maintain maintain objectivity objectivity,, the business business plan should should not be written written by the entrepreneu entrepreneur. r. Answer: False Page: 200 Difficulty: Medium 4. The business business plan plan is a private private document document and should should not be read read by employees employees and and customers. Answer: False Page: 201 Difficulty: Medium 5. In the business business plan plan the entreprene entrepreneur ur should should address address the needs needs of the entrepre entrepreneur neur and the needs of the market; the investor's perspective is not important. Answer: False Page: 201 Difficulty: Medium 6. The process process of writin writing g the business business plan provide providess a self-asses self-assessment sment for for the entrepreneur. Answer: True Page: 201 Difficulty: Easy 7. The best way way to address address the concerns concerns of of all potentia potentiall audiences audiences when writing writing the business plan is to rely exclusively on a computer software package. Answer: False Page: 202 Difficulty: Medium 8. The business business plan plan serves as an important important tool tool in helping helping to obtain obtain financing. financing. Answer: True Page: 202 Difficulty: Easy 9. The four Cs of credit credit are computers computers,, capital, capital, compromise compromise,, and collateral collateral.. Ans Answer: wer: Fals Falsee Page Page:: 202 202

52

Diff Diffic icul ulty ty:: Medi Medium um

Hisrich, Entrepreneurship, Seventh Edition


10. Venture Venture capitalist capitalistss demand high high rates of return return for their their investment investment in the the new venture. Answer: True Page: 203 Difficulty: Medium 11. In preparing preparing the busines businesss plan, entrepren entrepreneurs eurs can provide provide their their own perspect perspective ive and need not consider the needs of external sources. Answer: False Page: 203 Difficulty: Medium 12. A quick feasibi feasibility lity study study should should be conducted conducted before before preparing preparing the the business business plan to to uncover possible barriers to success. Answer: True Page: 204 Difficulty: Medium 13. In building building a marketing marketing plan, plan, the entrepre entrepreneur neur should should use a process process designed designed as a pyramid, starting with narrow data and working down to broader-based information. Answer: False Page: 205 Difficulty: Hard 14. Most entrepre entrepreneurs neurs have diffic difficulty ulty with with gathering gathering market inform information ation and do not often often know where to begin. Answer: True Page: 205 Difficulty: Medium 15. When gathering gathering financi financial al informati information, on, the entreprene entrepreneur ur should develop develop a budget budget that includes expected sales and expense figures for the first year. Answer: True Page: 208 Difficulty: Medium 16. To determine determine the figures figures in the budget, budget, the entreprene entrepreneur ur should identif identify y benchmarks benchmarks or norms in the industry. Answer: True Page: 208 Difficulty: Easy 17. Pro forma forma financial financial statements statements should should be prepared prepared monthly monthly for the first first year of of the venture. Answer: True Page: 208 Difficulty: Medium

53



18. The Internet Internet is a useful useful tool tool to access access informati information on but is generall generally y not a good vehicle vehicle for marketing goods and services. Answer: False Page: 208 Difficulty: Medium 19. Newsgroups Newsgroups are too closely closely control controlled led by competitors competitors to be useful useful for informa information tion gathering. Answer: False Page: 209 Difficulty: Medium 20. The executive executive summary summary section section of the business business plan plan should be written written first, first, before before other sections are developed. Answer: False Page: 211 Difficulty: Medium 21. An evaluation evaluation of cultura culturall changes is is irrelevant irrelevant to to the venture venture and should should not be included in the business plan. Answer: False Page: 212 Difficulty: Medium 22. The executive executive summary summary section section is only meant meant to highlight highlight key factors factors and and motivate motivate the person holding the plan to read it in its entirety. Answer: True Page: 212 Difficulty: Medium 23. The entreprene entrepreneur ur need not concentr concentrate ate on environmen environmental tal analysis analysis since since most most of the external factors are generally uncontrollable. Answer: False Page: 212 Difficulty: Easy 24. If a venture venture is not a manufac manufacturin turing g firm, an operati operations ons plan is not necessary. necessary. Answer: False Page: 213-214 Difficulty: Medium 25. The organizati organizational onal plan section section of the business business plan plan should describe describe the venture's venture's form form of ownership. Answer: True Page: 218 Difficulty: Medium 26. Letters Letters from customers customers,, distributor distributors, s, or subcontractor subcontractorss are examples of informat information ion that should be included in the executive summary of a business plan. Answer: False Page: 219 Difficulty: Medium


54


27. Since bills bills have to be paid at different different times times of the year, year, cash flow flow projections projections should should be presented monthly. Answer: True Page: 220 Difficulty: Easy 28. Bankers Bankers agree that most most business business failures failures are are due to the entrepreneur entrepreneur's 's inability inability to plan plan effectively. Answer: True Page: 220 Difficulty: Medium 29. Typically Typically busines businesss plan projections projections are made in a 36-month 36-month schedul schedule. e. Answer: False Page: 220 Difficulty: Medium

Multiple Choice Questions

30. Which of the the following following statements statements is (are) (are) true? A) The business business plan plan describes describes both both internal internal and external external elements elements.. B) The prelimi preliminary nary busines businesss plan should should be be prepared prepared by a lawyer lawyer.. C) Most busines businesss plan resources resources on the the Internet Internet are too comple complex x and expensive expensive to be of use to the new venture. D) Once made, made, a business business plan plan should should not be changed. changed. Answer: A Page: 199 Difficulty: Medium 31. Which of the the following following interested interested parties parties should should not have not have access to the venture's business plan? A) Suppl upplie ierrs B) Lenders C) Investors D) Comp Compet etit itor orss Answer: D Page: 199 Difficulty: Easy 32. The depth depth and and detail detail of a busine business ss plan plan depend depend on: A) the the tar targe gett audi audien ence ce.. B) the expe experie rience nce of the entr entrepr epreneu eneur. r. C) the size size and and scope scope of of the the new vent venture ure.. D) the amount amount of capi capital tal needed. needed. Answer: C Page: 201 Difficulty: Medium

55



33. While While preparing preparing the first draft draft of the busines businesss plan, the entrepre entrepreneur neur should should not: A) prepare prepare it from his his or her personal personal viewpoint. viewpoint. B) take into into consideration consideration the constit constituencie uenciess that will ultima ultimately tely read read and evaluate evaluate the plan's feasibility. C) prepare prepare it with with an aim to identif identify y possible possible barriers barriers to to success. success. D) try to to define define the goals goals and object objectives ives of the the venture. venture. Answer: B Page: 202 Difficulty: Medium 34. When evaluatin evaluating g business business plans _________ _________ are are primarily primarily concerned concerned with with the four four Cs of credit. A) inves nvesttors ors B) lenders C) vendors D) empl employ oyee eess Answer: B Page: 202 Difficulty: Medium 35. The business business plan present presentation ation for potenti potential al investor investors: s: A) should should be prese presente nted d only in in writin writing. g. B) should should contai contain n no negative negative proje projecti ctions ons.. C) should should enable the the entrepreneur entrepreneur to to “sell” “sell” his or her busines businesss concept in in a designated period of time.. D) should should provide provide the entrepreneur entrepreneur’s ’s own perspectiv perspective. e. Answer: C Page: 203 Difficulty: Medium 36. Investors Investors often often place more more emphasis emphasis on the the entrepreneur’ entrepreneur’ss _________ _________ than lenders lenders do. A) expe experrience ence B) character C) fina financ ncia iall recor records ds D) pers person onal al view viewpoi point nt Answer: B Page: 203 Difficulty: Medium 37. Before Before beginning beginning the business business plan, the entrepre entrepreneur neur should should define the venture's venture's goals goals and objectives. These goals should be: A) gener general al and broa broad. d. B) feasible. C) guar guaran ante teed ed.. D) unique. Answer: B Page: 204 Difficulty: Medium


56


38. When collecti collecting ng marketing marketing inform information ation the the entrepreneu entrepreneurr should: should: A) not include include general general environmen environmental tal inform information. ation. B) start with narrownarrow-based based data data and work work down down to a more more broader broader scope of of information. C) iden identi tify fy compe competi tito tors rs.. D) not aim aim to defi define ne a specif specific ic marke market. t. Answer: C Page: 205 Difficulty: Medium 39. To assess assess the potential potential profitabil profitability ity of a venture, venture, the entrepreneu entrepreneurr needs to ascertain ascertain expected sales and expense expen se figures for the first: A) month. B) year. C) quarter. D) three hree yea years rs.. Answer: B Page: 208 Difficulty: Medium 40. Groups of Interne Internett visitors visitors who share share opinions opinions and have similar similar interest interestss are called: called: A) page page gr groups oups.. B) news newsgr grou oups ps.. C) libr librar ary y sour source ces. s. D) news news home homess. Answer: B Page: 209 Difficulty: Medium 41. The usefulne usefulness ss of the title title or introduct introductory ory page page is: A) that it it provides provides inform information ation about the the company. company. B) such such that it it requir requires es sever several al pages pages.. C) questio questionabl nable, e, especia especiall lly y to investor investors. s. D) that that it contai contains ns backu backup p data. data. Answer: A Page: 209-210 Difficulty: Medium 42. The execut executive ive summ summary ary sect section ion shoul should: d: A) be prepared prepared before before the total total plan plan is written. written. B) highlight highlight key financial financial milesto milestones nes that that have been been achieved. achieved. C) be about about two two to to three three pages pages in in length length.. D) try to summar summarize ize every every section section of the plan. plan. Answer: C Page: 212 Difficulty: Easy

57



43. The section section of the busines businesss plan in which which the entrepre entrepreneur neur identifi identifies es changes occurring on the national and international level is the: A) merc merchan handi disi sing ng plan plan.. B) descri descripti ption on of the venture venture.. C) environ environmen mental tal and and industry industry anal analysi ysis. s. D) execu executi tive ve sum summa mary ry.. Answer: C Page: 212 Difficulty: Medium 44. The part of the plan that that describes describes the the location location and size size of the business business,, the personnel personnel and office equipment that will be needed, and the history h istory of the venture is called the: A) orga organi niza zati tiona onall plan. plan. B) descri descripti ption on of the venture venture.. C) prod produc ucti tion on pla plan. n. D) execu executi tive ve sum summa mary ry.. Answer: B Page: 213-214 Difficulty: Hard 45. If the new venture venture is is a manufacturi manufacturing ng operation operation a(n) _________ __________ _ in the business business plan plan is necessary. A) owne owners rshi hip p plan plan B) quali quality ty cont contro roll pla plan n C) prod produc ucti tion on plan plan D) part partne ners rshi hip p agre agreem emen entt Answer: C Page: 215 Difficulty: Easy 46. If the new venture venture is is not a manufactu manufacturing ring operation operation,, but a retail retail store or or service, service, a new section of the business plan is required which is called the: A) orga organi niza zati tiona onall plan. plan. B) prod produc ucti tion on pla plan. n. C) oper operat atio iona nall plan. plan. D) execu executi tive ve sum summa mary ry.. Answer: C Page: 216 Difficulty: Medium


58


47. Distributi Distribution, on, pricing, pricing, and promotion promotion of the product product are discussed discussed in which which section section of the plan? A) Mark Market etiing B) Produ roduct ctiion C) Merc Mercha hand ndis isin ing g D) Orga Organi niza zati tion on Answer: A Page: 217 Difficulty: Medium 48. The organizati organization on plan plan describes describes the business': business': A) physic physical al plant plant and machin machinery ery layou layout. t. B) locati location on as well well as its its plant plant(s) (s).. C) syste system m of distr distribu ibutio tion. n. D) form form of owne owners rshi hip. p. Answer: D Page: 218 Difficulty: Medium 49. Which Which of the the follo followin wing g docume documents nts is is not usually not usually included in the Financial Plan? A) Statem Statement ent of cash cash flow flowss B) Inco Income me sta state teme ment nt C) Price Price lists lists from from suppli suppliers ers D) Proj Project ected ed balan balance ce sheet sheet Answer: C Page: 219 Difficulty: Easy 50. The business business plan is is designed designed to to guide the entrepre entrepreneur: neur: A) through through the the first first year year of operat operation ions. s. B) through through the the distr distribu ibutio tion n process process.. C) in the the fina financi ncing ng proc proces ess. s. D) in case case of a change change in in owners ownership hip.. Answer: A Page: 219 Difficulty: Medium 51. The tende tendency ncy among among many many entrep entrepren reneur eurss is to: A) avoi avoid d plan planni ning ng.. B) not take take ini initi tiat ativ ive. e. C) not mark market et their their prod product uct or or servic services. es. D) lose lose focus focus on the the busin business ess plan plan.. Answer: A Page: 220 Difficulty: Medium

59



52. By controlli controlling ng ___________, ___________, the firm firm can ensure ensure maximum maximum service service to the the customer. customer. A) prod produc ucti tion on B) sales C) inve nventory ory D) costs Answer: C Page: 221 Difficulty: Medium


60

Chapter 7 the Business Plan: Creating And

Recommend Documents