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Finance
Q:
A typical business plan includes all of the following sections except:
a. executive summary
b. business description
c. marketing plan and strategy
d. disclosure of pending litigation
Q:
Firms that allow owners to pursue specific lifestyles while being paid for doing what they like to do are referred to as:
a. salary-replacement firms
b. lifestyle firms
c. entrepreneurial ventures
d. rapid-value-creation firms
Q:
Which of the following is not a standard component of a sound business model?
a. produce low-cost products
b. generate revenues
c. make profits
d. produce free cash flows
Q:
Some venture investors like to draw analogies between baseball terms and venture performance. The baseball term used to reflect a total loss of an investment is:
a. "home run"
b. "single"
c. "strikeout"
d. "double"
Q:
A VOS Indicator stands for:
a. "venture opportunity screening" indicator
b. "viable opportunity statement" indicator
c. "venture only success" indicator
d. "viable assessment screening" indicator
Q:
Free cash flow, which can be paid back to investors, occurs when cash generated from operations exceeds all of the following except:
a. borrowing costs
b. noncash depreciation
c. taxes
d. investment in assets
Q:
A written document that describes the proposed venture in terms of the product or service opportunity, current resources, and financial projections is called a(n):
a. financial plan
b. business plan
c. entrepreneurial plan
d. survival plan
Q:
Determine the return on assets (ROA) for a venture with the following financial information: revenues = $500,000; net profit = $70,000; and asset turnover = 2.0 times.
a. 10%
b. 14%
c. 28%
d. 34%
Q:
The evaluation of entry barriers occurs under which of the factor categories of the VOS Indicator?
a. industry/market considerations
b. pricing/profitability considerations
c. financial/harvest considerations
d. management team considerations
Q:
The factor categories in a VOS Indicator are:
a. industry/market considerations
b. industry/market and pricing/profitability considerations
c. industry/market, pricing/profitability, and financial/harvest considerations
d. industry/market, pricing/profitability, financial/harvest, and management team considerations
Q:
Which of the following is not one of the factor categories of the VOS Indicator?
a. industry/market considerations
b. pricing/profitability considerations
c. financial/harvest considerations
d. location/profitability considerations
Q:
A venture's value to its owners is determined by the:
a. size and timing of its future free cash flows (to equity)
b. level of its past revenues
c. prior losses and expenses
d. all of these choices
Q:
Revenues minus the cost of goods sold is called:
a. gross profit
b. gross profit margin
c. net profit
d. net profit margin
Q:
Determine the asset intensity of a venture with the following financial information: net profit = $22,000; revenues = $132,000; and return on assets 30%.
a. 0.1
b. 0.6
c. 1.8
d. 2.0
Q:
A venture opportunity screening guide, called the VOS Indicator, is used to screen venture opportunities for potential attractiveness.a. Trueb. False
Q:
A SWOT analysis is an examination of the strengths, weaknesses, opportunities, and threats to determine the business opportunity viability of an idea.
a. True
b. False
Q:
The nonfinancial options available to managers as the venture progresses through its life cycle are known as real options.
a. True
b. False
Q:
The VOS Indicator is useful in assessing the commercial potential of a venture, but should not be used as the sole tool to determine a venture's fate.
a. True
b. False
Q:
A venture opportunity screening is the same thing as preparing a business plan.
a. True
b. False
Q:
A venture with a low score on the VOS Indicator should always be abandoned.
a. True
b. False
Q:
Salary-replacement firms provide their owners with income levels comparable to what they could have earned working for much larger firms.
a. True
b. False
Q:
Asset intensity and asset turnover are calculated as revenues divided by total assets.
a. True
b. False
Q:
Only a small number of new business ideas become viable business opportunities with funded business plans.
a. True
b. False
Q:
A well-designed entrepreneurial venture begins with an idea that survives an analysis of its feasibility and results in a business plan.
a. True
b. False
Q:
Entrepreneurial ventures are firms that allow owners to pursue specific lifestyles while being paid for doing what they like to do.
a. True
b. False
Q:
Business changes resulting in higher net profit always increases ROA.
a. True
b. False
Q:
A SWOT analysis should consider as potential strengths or opportunities the extent of existing competition and the likelihood of substitute products or services.
a. True
b. False
Q:
A SWOT analysis should consider as potential strengths or weaknesses whether there are unfilled customer needs and the extent to which intellectual property rights exist.
a. True
b. False
Q:
The VOS Indicator provides both qualitative and quantitative information about a venture's commercial potential.
a. True
b. False
Q:
Entrepreneurial ventures emphasize survival and providing an acceptable living for their owners, with growth being a secondary goal.
a. True
b. False
Q:
The first component of a sound business model is the need to generate revenues.
a. True
b. False
Q:
A SWOT analysis focuses on strengths (S), worries (W), opportunities (O), and threats (T).
a. True
b. False
Q:
One way to describe asset intensity is the dollar investment in assets needed to generate a dollar in sales.
a. True
b. False
Q:
A high asset intensity implies a large investment in fixed assets and/or net working capital is needed to support revenue growth.
a. True
b. False
Q:
A successful, sound business model does not have to ultimately produce free cash flows.
a. True
b. False
Q:
The compound rate of return that equates the present value of the cash inflows with the initial investment outlay is called the internal rate of return (IRR).
a. True
b. False
Q:
Financial bootstrapping refers to the process of minimizing resources such as the need for financial capital and finding unique sources for financing a new venture.
a. True
b. False
Q:
The process of moving from entrepreneurial opportunities to new businesses, products, or services begins with ideas, then moves to the preparation of a business plan, and finally ends with a feasibility study.
a. True
b. False
Q:
Ideas that are said to be ahead of their time are too late to become viable business opportunities for the inventor or innovator.
a. True
b. False
Q:
Free cash flow to equity is the cash flow from producing and selling a product or providing a service.
a. True
b. False
Q:
Asset intensity is the net after-tax profit divided by total assets.
a. True
b. False
Q:
A sound business model should provide a plan to generate revenues, make profits, and produce free cash flows.
a. True
b. False
Q:
Best practices of high-growth, high-performance firms applied in the marketing practices area include "developing new products or services that are considered to be the best."
a. True
b. False
Q:
An entrepreneur may start a number of different types of businesses, including salary-replacement firms, lifestyle firms, and entrepreneurial firms or ventures.
a. True
b. False
Q:
Business opportunities exist in real time, and most ideas have a relatively narrow window of opportunity to become successful business ventures.
a. True
b. False
Q:
Lifestyle firms are growth driven in terms of revenues, profits, and cash flows and also performance oriented as reflected in rapid value creation over time.
a. True
b. False
Q:
A viable venture opportunity creates or meets a customer need, provides an initial competitive advantage, is timely in terms of time-to-market, and offers the expectation of added value to investors.
a. True
b. False
Q:
Once conceptualized, a new idea should be examined for its business feasibility.
a. True
b. False
Q:
Venture opportunity screening involves assessment of an idea's commercial potential to produce revenue growth, financial performance, and value.
a. True
b. False
Q:
Best practices of high-growth, high-performance firms applied in the financial practices area include "preparing detailed monthly financial plans for the next year and annual financial plans for the next five years."
a. True
b. False
Q:
In a typical business plan, the section covering the management team does not need to disclose the management team's expertise and experience.
a. True
b. False
Q:
It has been estimated that venture capitalists invest in about 10 to 30 percent of business plans presented to them.
a. True
b. False
Q:
Mark Twain said, "Like I tell anybody, if you fail to plan, you're planning to fail."
a. True
b. False
Q:
Best practices of high-growth, high-performance firms applied in the management practices area include "assembling a management team that is balanced in both functional area coverage and industry/market knowledge."
a. True
b. False
Q:
A sound business model is a plan to generate investor interest, make profits, and grow asset investments.
a. True
b. False
Q:
Being first to market does not guarantee success.
a. True
b. False
Q:
Indicate whether the statement is true or false.For ventures that get to market first or create intellectual property rights, it is common to price new products or services at high markups or profit margins.a. Trueb. False
Q:
The goal of the entrepreneurial process is to:
a. develop opportunities
b. gather resources
c. manage and build operations
d. create value
Q:
Where individuals accept short-term job assignments instead of having full-time employment is called the:
a. sharing economy
b. gig economy
c. make-work economy
d. declining economy
Q:
The stage that precedes the survival stage in a successful venture's life cycle is called the:
a. rapid-growth stage
b. early-maturity stage
c. development stage
d. startup stage
Q:
Which of the following statements is correct?
a. the development stage occurs between the startup and survival stages of a venture's life cycle
b. the early-maturity stage is the final stage of a new venture's life cycle
c. firms typically begin to cover all expenses with internally generated funds during the survival stage
d. during the startup stage, revenues grow much more rapidly than cash expenditures
Q:
Successful entrepreneurs do not exhibit which of the following traits?
a. recognize and seize commercial opportunities
b. tend to be doggedly optimistic
c. express conditional optimism
d. are pessimistic about the future
Q:
About what percent of all new employers in the United States survive for at least two years?
a. one-fifth
b. one-third
c. one-half
d. two-thirds
Q:
During a venture's rapid-growth stage, funds for plant expansion, marketing expenditures, working capital, and product or service improvements is obtained through:
a. seed financing
b. second-round financing
c. mezzanine financing
d. liquidity-stage financing
Q:
Founder and venture investor shares that are sold to the public after the initial public offering to the public is called a:
a. secondary market transaction
b. secondary stock offering
c. venture offering
d. bridge loan
Q:
Obtaining bank loans, issuing bonds, and issuing stock is characteristic of which type of financing during a venture's life cycle?
a. seed financing
b. second-round financing
c. mezzanine financing
d. seasoned financing
Q:
Which of the following are sources of entrepreneurial opportunities?
a. societal, demographic, and technological trends
b. crises and "bubbles"
c. emerging economies and global changes
d. societal, demographic, and technological trends; crises and "bubbles"; and emerging
e. economies and global changes
Q:
About one-half of all new employers in the United States survive for at least how many years after being started?
a. two years
b. three years
c. five years
d. eight years
Q:
During the early-maturity stage of a venture's life cycle, the primary source of funds is in the form of:
a. mezzanine financing
b. seasoned financing
c. seed financing
d. first-round financing
Q:
The type of financing that occurs during the survival stage of a venture's life cycle is typically referred to as:
a. seed financing
b. startup financing
c. first-round financing
d. mezzanine financing
Q:
Supplementary Questions (may require basic knowledge of probability and/or prior introductory accounting and business concepts)Lindsey and Tobias have the opportunity to invest in a project that requires an investment of $3,000. In one year, there is a 35% chance of a $2,900 return; a 40% chance of a $3,400 return; and a 25% chance of a $4,500 return. Lindsey requires a 15% return on the project after the first year, but Tobias requires a return of only 12%. Using the expected rate of return:a. Lindsey and Tobias should both invest in the projectb. Only Tobias should invest in the projectc. Only Lindsey should invest in the projectd. Lindsey and Tobias should both reject the project
Q:
Which of the following would not be considered a type of venture financing?a. seed financingb. startup financingc. mezzanine financingd. seasoned financing
Q:
Which of the following is not a life cycle stage of a successful venture?
a. development stage
b. startup stage
c. survival stage
d. declining stage
Q:
An innovation that creates a new market or network that displaces an existing market or network is called a:
a. crisis or "bubble"
b. disruptive innovation
c. fad
d. negative innovation
Q:
Which of the following does not describe activity during the startup stage of a venture's life cycle?
a. the venture's organization
b. the venture's development
c. operating cash flows are generated
d. initial revenue model is put in place
Q:
The sharing economy is a(n):
a. developing societal megatrend
b. fad
c. exchange of food at local restaurants
d. demographic bubble
Q:
Financial markets where customized contracts or securities are negotiated, created, and held with restrictions on how they can be transferred are called:
a. private financial markets
b. public financial markets
c. domestic financial markets
d. international financial markets
Q:
The entrepreneurial process involves:
a. developing opportunities
b. gathering resources
c. managing and building operations
d. developing opportunities, gathering resources, and managing and building operations
Q:
Maximizing the value of the venture for its owners is the common financial goal of which of the following?
a. the entrepreneur
b. the debtholders
c. the venture equity investors
d. the entrepreneur and the venture equity investors
Q:
You are considering investing in two independent projects: A and B. Project A requires an initial investment of $12,000. In one year, there is a 30% chance of a $10,500 return; a 50% chance of a $12,500 return; and a 20% chance of a $14,500 return. Project B requires an initial investment of $1,000. In one year, there is a 25% chance of a $950 return; a 25% chance of a $1,000 return; and a 50% chance of a $1,200 return. If you require a 7% return on your investment after one year, you should:
a. accept Project A and reject Project B
b. accept Project B and reject Project A
c. accept both projects
d. reject both projects