BA109 Chapter 4 - Practice Exam 2023 with complete solution

BA109 Chapter 4 - Practice Exam 2023 with complete solution @ STUVATE-STUVIA USA T/F The executive summary of a business plan should summarize all of the relevant points of the proposed venture and should be concise-no more than two pages. - True T/F The executive summary serves as the thesis statement for the entire business plan. - False T/F The higher a small business scores on the 5 C's of credit, the greater its chances will be of receiving a loan. - True T/F To get external financing, an entrepreneur's business plan must pass the reality test, the competitive test, and the value test with potential lenders and investors. - True T/F An entrepreneur should prepare a single set of "most likely" financial forecasts for one year into the future as part of the business plan. - False T/F The plan of operation section of the business plan should address how the business plans to retain key managers and employees. - True T/F After presenting the business plan to a group of potential lenders and investors, an entrepreneur should sit back and wait to hear from those who might be interested in the venture. - False T/F The most common reasons banks give for rejecting small business loan applications are undercapitalization and too much debt. - True T/F The "two-thirds rule" says that only two-thirds of the entrepreneurs with a sound new business venture will get financing, that they will get only two-thirds of what they need, and that it will take them two-thirds longer to get it than they anticipated. - True T/F Capital requirements, estimate earnings, and return on investment are three aspects of the financial feasibility analysis. - True T/F Because the entrepreneur is the driving force behind a business idea, he or she should also be the driving force behind the business plan. - True T/F The loan proposal portion of the business plan should include a realistic timetable for repayment or for investors to exit. - True ________ are broad, long-range statements of what a company plans to achieve in the future that guide its overall direction and addresses the question, "Why am I in business?" - Goals T/F Before presenting a business plan to potential lenders and investors, an entrepreneur must be well informed and well prepared. - True T/F The competitive test that a business plan must pass in order to attract financing for lenders and investors involves proving to them that the venture offers a high probability of repayment or an attractive rate of return. - False T/F The "C" of the 5 C's of Credit that is synonymous with cash flow is capital. - False The ________ serves as the "thesis statement" for the entire business plan and is the broadest expression of a company's purpose and defines the direction in which it will move. - mission statement T/F In a business plan, both company goals and objectives should relate to the company's mission. - True Proving that a profitable market exists involves: - proving that customers in the marketplace need or want the good or service and are willing to pay for it and documenting claims about market size and growth rates with as much factual information as possible only Which of the following is true about the preparation of a business plan? - The elements of the plan may be standard, but the content should reflect the unique aspects of the business and the excitement of the entrepreneur. A synonym for capacity is: - cash flow. The higher a small business scores on the 5 C's of credit, the greater its chances will be of receiving a loan. - True A business plan that fails to assess a company's competitors realistically makes the entrepreneur appear to be poorly prepared. - True The business and industry profile section of the business plan should cover existing and anticipated profitability of firms in the targeted market segment and any significant entry or exit of firms. - True The second essential purpose for creating a business plan is: - to attract lenders and investors. In the business and industry profile section of the business plan, the entrepreneur should provide information on the size of the market, growth trends, and the relative economic and competitive strength of the industry's major players. - True The wise entrepreneur will indicate that there is no real competition for his new business venture, thereby increasing the likelihood that he will gain more interested investors. - False The primary purpose of a business plan is to: - guide a company by charting its future course and devising a strategy for success. An explanation of how the product will be distributed is contained within the ________ section of the business plan. - marketing strategy Potential lenders and investors expect entrepreneurs to exaggerate the truth in their business plans, so telling the truth in the plan is really not important. - False An entrepreneur may find that the business plan indicates that the business concept is not viable. This is another potential benefit of writing a business plan; this revelation occurred before the owner committed significant resources -time and money - to the venture. - True The section that describes "how to get there" and describes a competitive edge that sets the business apart is referred to as the: - business strategy. One form of primary research is: - a focus group. The criteria lenders and investors use to evaluate the credit worthiness of entrepreneurs that are seeking financing-including capital, capacity, collateral, character, and conditions-are referred to as: - the five C's of credit. A product or service feasibility analysis determines the degree to which a product or service idea appeals to potential customers and identifies the necessary resources. - True Generally, an industry is more attractive when quality substitute products are not readily available, the prices of substitute products are higher, and buyers' costs of switching products is high. - True Ideally, a business plan should range from ________ pages in length. - 20 to 40 A ________ is a descriptive fact about a product or service; a ________ is what the customer gains from that characteristic. - feature; benefit Because the entrepreneur is the driving force behind a business idea, he or she should also be the driving force behind the business plan. - True Which of the following is true regarding the process of building a business plan? - All of these An entrepreneur should prepare a single set of "most likely" financial forecasts for one year into the future as part of the business plan. - False In a business plan, both company goals and objectives should relate to the company's mission. - True The strongest of the five forces in most industries is: - rivalry among companies competing in the industry. The ________ highlights significant financial and operational events in the company's life and should concentrate on the company's accomplishments. - company history When describing their products and services in their business plans, entrepreneurs must remember that customers buy the benefits from products and services, not the features. - True Proving that a profitable market exists involves: - proving that customers in the marketplace need or want the good or service and are willing to pay for it and documenting claims about market size and growth rates with as much factual information as possible only The loan proposal section of a business plan should include all but which of the following? - A general request for funds without stating a specific dollar amount Switching costs, the number of buyers, and if the items represent a relatively small portion of the cost of finished products are key considerations regarding the: - bargaining power of buyers. Issues such as market size, growth trends, ease of market entry and exit, the presence of cyclical or seasonal sales trends, and the competitive dynamics of an industry appear in the ________ section of the business plan. - business and industry profile ________ are broad, long-range statements of what a company plans to achieve in the future that guide its overall direction and addresses the question, "Why am I in business?" - Goals Primary research is information that has already been complied and is available for use, often at very reasonable costs or sometimes at no cost to the entrepreneur. - False Essential pieces of information for potential lenders and investors include the assumptions the entrepreneur uses to derive the financial forecasts and projections in the business plan. - True A business plan is a written summary of an entrepreneur's proposed venture, its operational and financial details, its marketing opportunities and strategy, and its managers' skills and abilities. - True To be meaningful, an objective must include a time frame for achievement. - True The company history section of the business plan typically includes: - All of these When formulating a marketing strategy, small companies usually are most successful when they: - focus on a particular market niche where they can excel at meeting customers' needs and wants. The focus of the competitor analysis section of the business plan is on: - demonstrating your company's advantage over competitors. A table of contents that allows lenders to navigate a business plan easily is an important element of any business plan. - True Porter's five forces model assesses industry attractiveness by surveying these five factors: - potential entrants, suppliers, buyers, substitutes, and rivalry among existing firms. The business strategy section of the business plan addresses the question of how the entrepreneur plans to achieve the mission, goals, and objectives he has established for his business venture. - True After presenting her business plan to a group of potential lenders and investors, an entrepreneur should: - take a proactive approach by following up with every potential lender and investor to whom she makes a presentation. A feasibility analysis is the process of determining whether an entrepreneur's idea is a viable foundation for creating a successful business. - True The competitive test that a business plan must pass in order to attract financing for lenders and investors involves proving to them that the venture offers a high probability of repayment or an attractive rate of return. - False The financial feasibility analysis takes these aspects into consideration: - capital requirements, estimated earnings, and return on investment. ________ are short-term, specific targets which are attainable, measurable, and controllable. - Objectives To make a business plan more attractive, an entrepreneur should include a potential exit strategy as a way to "cash out" for investors. - True Products or services that may be sought as alternative solutions-such as purchasing tax planning software rather than paying a CPA to assist with preparing your taxes-are referred to as: - substitute products. To get external financing, an entrepreneur's business plan must pass the reality test, the competitive test, and the value test with potential lenders and investors. - True Before presenting a b