Final

Question 1

3 important perspectives for the business plan

Answer 1

entrepreneur’s, marketing, investor’s

Question 2

what is the executive summary section of a business plan?

Answer 2

2-3 pages summarizing complete business plan, should stimulate investors’ interest and address issues the reader might have

Question 3

environmental analysis

Answer 3

assessment of external uncontrollable variables that may impact the business plan

Question 4

industry analysis

Answer 4

reviews industry trends and competitive strategies

Question 5

description of venture

Answer 5

provides complete overview of products, services, and operations of new venture

Question 6

production plan

Answer 6

details how the products will be manufactured

Question 7

operations plan

Answer 7

describes flow of goods and services from production to customer

Question 8

marketing plan

Answer 8

describes market conditions and strategy related to how the products and services will be distributed, priced, and promoted

Question 9

organizational plan

Answer 9

describes form of ownership and lines of authority and responsibility of members of new venture

Question 10

assessment of risk

Answer 10

identifies potential hazards and alternative strategies to meet business plan goals and objectives

Question 11

financial plan

Answer 11

projections of key financial data that determine economic feasibility and necessary financial investment commitment

Question 12

main reasons for business plan failure

Answer 12

goals are not reasonable or measurable
not enough commitment to venture
no experience
no customer need established for product or service

Question 13

business plan

Answer 13

written document prepared by entrepreneur that describes all relevant external and internal elements involved in starting a new venture

Question 14

3 basic legal forms of business formation

Answer 14

proprietorship, partnership, corporation

Question 14

proprietorship

Answer 14

single owner who has unlimited liability, ,controls all decisions, and receives all profits

Question 14

partnership

Answer 14

2 or more individuals having unlimited liability who have pooled resources to own a business

Question 15

C corporation

Answer 15

most common form of corporation, treated as a separate legal entity

Question 16

tax advantages for propietorship

Answer 16

no double tax on profits; no capital stock tax or penalty for retained earnings

Question 17

limited partners liability in general partnership

Answer 17

only liable for the amount of their investment

Question 18

corporation tax advantages

Answer 18

corporate tax rate may be lower than individual tax rate, also gets more deductions

Question 19

corporate tax disadvantage

Answer 19

double taxation

Question 20

S corporation

Answer 20

special type of corporation where profits are distributed to stockholders and taxed as income

Question 21

limited liability company

Answer 21

partnership-corporation hybrid that has members instead of stockholders

Question 22

management teams must be able to accomplish what 3 functions?

Answer 22

execute business plan
identify changes in the business as they occur
make adjustments to plan based on changes

Question 23

functions of the board of directors

Answer 23

``` reviewing budgets develop long term strategies for growth support day-to-day activities resolve conflicts ensure proper use of assets develop network of information sources for entrepreneur ```

Question 24

board of advisors

Answer 24

more loosely tied to organization and serve only in advisory capacity

Question 25

pro forma income

Answer 25

projected net profit calculated from projected revenue minus projected costs

Question 26

cash flow

Answer 26

difference between actual cash receipts and cash payments

Question 27

pro forma cash flow

Answer 27

projected cash available calculated from projected cash accumulations minus projected cash disbursements

Question 28

pro forma balance sheet

Answer 28

summarizes projected assets, liabilities, and net worth of venture

Question 29

when is the balance sheet prepared?

Answer 29

at periodic intervals (quarterly, annually)

Question 30

owner's equity

Answer 30

amount owners have invested and/or retained from the venture

Question 31

penetration strategy

Answer 31

encouraging existing customers to buy more of the firm's current products

Question 32

market development strategy

Answer 32

selling the firm's existing products to new groups of customers

Question 33

new groups of customers in market development strategies

Answer 33

geographical, demographic, product use

Question 34

product development strategy

Answer 34

developing and selling new products to people who are already purchasing the firm's existing products

Question 35

diversification strategy

Answer 35

selling a new product to a new market

Question 36

backward integration

Answer 36

step back (up) in value-added chain toward raw materials

Question 37

forward integration

Answer 37

step forward (down) on value-added chain toward customers

Question 38

horizontal integration

Answer 38

occurs at the same level of the value-added chain but involves a different, complementary, value-added chain

Question 39

major areas of pressure during growth

Answer 39

existing financial resources, human resources, management of employees, and entrepreneur's time

Question 40

managing cash flow drivers

Answer 40

accounts receivable, inventory, accounts payable

Question 41

participative style of management

Answer 41

manager involves others in decision-making process

Question 42

how to institute a more participative style of management

Answer 42

``` establish team spirit communicate with employees provide feedback delegate some responsibility to employees provide continuous training ```

Question 43

informal risk-capital market

Answer 43

consists mainly of individuals (angel investors)

Question 44

venture-capital market

Answer 44

consisting of formal firms of investors

Question 45

public equity market

Answer 45

consisting of publicly owned stocks of companies

Question 46

equity participation

Answer 46

taking an ownership position through stock, warrants, and/or convertible securities

Question 47

SBIC

Answer 47

small business investment company

Question 48

types of venture capital organizations

Answer 48

SBIC, private venture, corporate, state-sponsored, university-sponsored

Question 49

what 3 things does a venture capitalist expect before investing?

Answer 49

strong management team unique product or market opportunity significant capital appreciation

Question 50

factors in valuation

Answer 50

``` nature & history of the business outlook of economy overall financial condition future earning capacity future dividend-paying capacity assessment of goodwill/intangibles previous stock sales market value of similar companies' stock ```

Question 51

present value of future cash flow

Answer 51

valuing a company based on its future sales & profits

Question 52

earnings approach

Answer 52

determining the worth of a company by looking at its present & future earnings, using a price-earnings multiple; most widely used to compute ROI

Question 53

liquidation value

Answer 53

worth of a company if everything was sold today