Ch5 Complete Test Bank Preparing The Investor Package

Chapter 5: Preparing the Investor Package

True/False

1. The main purpose of writing a business plan is to test the viability of the business idea and set a path for the entrepreneur to follow.
2. A business plan allows for bank loans and investors to gain insight into the business idea and determine the financial requirements.
3. A business plan is a 45 to 60 page written document that describes where a business is heading and how it hopes to achieve its goals and objectives.
4. The single most important reason for preparing a business plan is to secure capital.
5. The biggest problem most business plans have is that they don’t include a clear description of the market, competition, and customers.
6. Writing a business plan guarantees that problems do not come up.
7. Research finds that it will take at least three hundred hours of dedicated effort to produce a good plan.
8. The marketing and sales strategy section of the business plan describes how the business will implement the marketing plan to achieve expected sales performance.
9. To protect the human resource talent and competitive positioning, the management team’s talents and skills should not be detailed in the management team section of the business plan.
10. Fortunately, the financial plan is the most flexible part of a business plan in terms of format.
11. It is quite common for today’s startup founders to prepare what is called a “Reading” slide deck, which usually consists of 20-40 slides describing the business plan.
12. Creating an operations’ plan would be more important to a simple service business than to an e-commerce business.
13. The executive summary is typically found at the beginning of the business plan although it should be composed last.

Ans. True Pages: 136 and 134

Short Answer / Fill in the Blank

1. A(n) ________ serves as a blueprint for building a company.
2. An entrepreneur should use a(n) ________ business plan when he or she needs to describe the business in detail to attract potential investors, strategic partners, or buyers.
3. A(n) _________ is a two-to-five page document that contains the most important information about the business and its direction.
4. _______ pricing is when the business sells the products or services based on demand or whatever the market will bear.
5. ________ are individuals who buy products, often overseas, directly from the distributor and sell them to retailers or end users.
6. The term _______ is used to describe when products and services are sold through a web site or through Internet partner alliances.
7. ________ most often reflects at least quarterly performance for the first year.
8. The _______ should reflect the company’s financial position at its inception.
9. The funds required and uses section of the business plan should describe how much _______ is required to finance the business, where these funds will be spent, and when they will be needed.
10. A business plan may fail because the _______ is unclear, not concise, and not specifically targeted to the intended audience.

Multiple Choice

1. The main purpose of writing a business plan is to:
   1. develop new applications
   2. test the viability of the business idea and set a path for the entrepreneur to follow.
   3. avoid competition.
   4. provide a historical perspective of the venture.
2. Which of the following is not one of the ways that the business plan will determine if the business has a chance of becoming successful?
   1. Decrease the likelihood of the venture’s success.
   2. Test the feasibility of the business concept.
   3. Attract bank loans and investors.
   4. Improve your business planning process to become more manageable and effective.
3. A business plan is a _____to _____page written document.
   1. 45-50 pages
   2. 15-20 pages
   3. 60-80 pages
   4. 2-4 pages
4. Which of the following is not one of the three essential reasons to prepare a business plan?
   1. Entrepreneurs reap benefits from the planning activity itself.
   2. The plan provides a basis for measuring actual performance against expected performance.
   3. The plan acts as a vehicle for communicating to others what it is that the business is trying to accomplish.
   4. The plan is to attract competitors’ action.
5. Which of the following is the first step in the process to write the business plan?
   1. Draft the Outline
   2. Review the Outline
   3. Draft the Plan
   4. Identify the Objectives
6. Which of the following is the third step in the process to write the business plan?
   1. Draft the Outline
   2. Review the Outline
   3. Draft the Plan
   4. Identify the Objectives
7. Detailed support for any assumptions and assertions made in the business plan should be available in what stage of writing the business plan?
   1. Draft the Outline
   2. Review the Outline
   3. Draft the Plan
   4. Identify the Objectives
8. Which of the following is the fourth step in the process to write the business plan?
   1. Draft the Outline
   2. Review the Outline
   3. Draft the Plan
   4. Have the Plan Reviewed and Updated
9. Which of the following is not part of the executive summary?
   1. Business Concept
   2. Financial Features
   3. Success Factors
   4. Temporary Position
10. An entrepreneur should use a(n) _____ when he or she needs to describe the business in detail to attract potential investors, strategic partners, or buyers.
    1. executive summary plan
    2. full business plan
    3. action plan
    4. target plan
11. A document the management team uses to implement the plan is called the:
    1. Executive summary plan
    2. Full business plan
    3. Action plan
    4. Target plan
12. The section of the plan that describes how you will tell potential customers that you have a product or service that can satisfy their demand, to convince those customers to buy from you, and to successfully compete with similar businesses is the __________section.
    1. Financial
    2. Marketing
    3. Executive Summary
    4. Advertising, Public Relations and Promotion Strategies
13. Which of the following is NOT a question answered in writing the business plan?
    1. Target Customers
    2. Competition
    3. Risks and Market Constraints
    4. Government’s Role
14. The title page includes all the following except:
    1. Name
    2. Length of the Plan.
    3. Address
    4. Phone
15. How long should the executive summary be?
    1. One page
    2. Four to six pages
    3. Two to three pages
    4. 8-10 pages
16. Which type of pricing includes all costs, both fixed and variable, and a profit percentage is added on?
    1. Demand Pricing
    2. Competitive Pricing
    3. Markup Pricing
    4. Cost-Plus Pricing
17. Which type of pricing is where the company enters a market where there is an established price and where it is difficult to differentiate one product from another?
    1. Value Pricing
    2. Competitive Pricing
    3. Markup Pricing
    4. Cost-Plus Pricing
18. In the operations section of the business plan, all of the following are included except:
    1. Maintenance and Support
    2. Manufacturing
    3. Marketing
    4. Product/Service Development
19. Which section of the business plan should formulate a credible, comprehensive set of projections reflecting the business’s anticipated financial performance?
    1. Financial plan
    2. Operations section
    3. Marketing analysis section
    4. Marketing and sales strategy section
20. All of the following information should be presented in the financial plan except:
    1. Project income statements
    2. Projected cash flow statements
    3. Competitor’s balance sheet
    4. Set of assumptions
21. Which section of the business plan describes how much money is required to finance the business, where these funds will be spent, and when they will be needed?
    1. Operations section
    2. Marketing analysis section
    3. Funds required and uses
    4. Management plan
22. All of the following are typical exhibits except:
    1. Market potential
    2. Process flow
    3. Detailed financials
    4. Tax returns
23. “Describing the Product and Services portion of the business plan includes all of the following except:
    1. The physical description of the product.
    2. A statement regarding use and appeal of the product.
    3. The cost to produce and the pricing of the product.
    4. Testimonials by experts or prior users who are familiar with the product.

47. An operations’ plan for a manufacturing venture should address all of the following topics except:

a. Market potential – potential and likely customers defined by segments.

b. Product development – a summary of development activities that the company will undertake,

c. Manufacturing – the process by which a company will produce its products.

d. Maintenance and support – the level of support a company will provide after the customer has purchased the product.

48. The Executive Summary Document should cover key points on:

1. Your opportunity and target customer, market size and industry growth trends.
2. Your competitor analysis and strategy, and financial projections excluding foundational assumptions.
3. Both a and b should be included in the Executive Summary.
4. Neither a or b are appropriate topics for the Executive Summary.