Complete Test Bank The Business Plan Ch4

Test Bank

Chapter 4: The Business Plan

Multiple Choice

1. In the building blocks for the business model canvas, value proposition includes ______.

a. which need we are solving

b. for whom this product creates value

c. what assets we need

d. how many revenue streams run into the model

KEY: Learning Objective: 4.2: Explain the purpose and process of developing a business model.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.2: Business Models and Feasibility Analysis

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

2. Although passion is needed to run a business, it must be tempered with logic and rationality to bring success. A business plan does this by ______.

a. removing the need for capital

b. providing perfect planning

c. proving feasibility

d. identifying demographics

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

3. A document that tests the feasibility of a business idea, describes ways to raise capital, and serves as a road map for future operations is called a ______.

a. code of ethics

b. mission statement

c. business plan

d. strategic plan

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

4. Which of the following questions will bankers first ask potential small business owners?

a. What will be used as collateral?

b. How long before a profit will be made?

c. Where is the business plan?

d. How much debt will be held by the business?

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

5. Many people just starting a new business focus on ______.

a. obtaining financing

b. the excitement and emotions involved in beginning a new business

c. hiring good employees

d. making a profit

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

6. Warren is in the process of developing a business plan, so he visits a nearby Small Business Development Center to get guidance. Which of the following is the best advice that could be given by the SBDC?

a. “try to write your business plan in the first person”

b. “try to write a plan that is longer than 45 pages”

c. “follow a business plan template”

d. “consider your audience”

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Reflective thinking

7. In general, how many pages should the business plan contain?

a. 10 pages or less

b. 30 pages or less

c. 40 pages or less

d. at least 45 pages

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

8. Free or inexpensive business planning assistance is available from ______.

a. a local accountant

b. small business development centers

c. local consultants

d. competitors

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

9. In terms of appearance, a business plan should be ______.

a. handwritten

b. professionally prepared by outside experts

c. printed and spiral bound

d. printed on gold-leaf-trimmed pages

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

10. Which of the following people is most qualified to write the business plan for a proposed new business?

a. the small business owner

b. a banker

c. a consultant

d. a college professor

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

11. A condensed abstract of a business plan used to spark reader interest and to highlight critical information is called a/an ______.

a. business plan

b. strategic plan

c. executive summary

d. code of ethics

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

12. A small business plan should be written by ______.

a. consultants

b. investors

c. proposed employees

d. proposed business owners

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

13. Daniel is preparing a business plan for the carwash that he plans to open. He is writing a one-page abstract of the plan to highlight crucial information and to spark readers’ interest. This abstract is part of which business plan component?

a. cover page

b. executive summary

c. table of contents

d. industry analysis

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Reflective thinking

14. In writing her business plan, Rita wants to include an honest portrayal of the setbacks that she had come up against along the way in forming the business. This would fit under which area of the business plan?

a. industry analysis

b. company information

c. executive summary

d. cover page

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Reflective thinking

15. ______ involves identifying trends and changes that are happening at the national and international levels that may influence the future of a small business.

a. Environmental analysis

b. Financial positioning

c. Internal positioning

d. Quality control

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

16. Descriptions of factors such as the background of the company, your competitive advantage, company objectives, and the legal business form would be found in which of the following sections?

a. executive summary

b. company information

c. products and services

d. marketing research and evaluation

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

17. A good executive summary provides the opportunity to develop an elevator pitch. What is an elevator pitch?

a. the approach you take when selling elevators

b. the short explanation of your business idea condensed to its essence

c. directions you provide to vendors to find your business

d. a list of your products

KEY: Learning Objective: 4.5: Create a pitch.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.5: The Pitch

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

18. Factors such as uses for the product, patents and trademarks, and how the product is different will be found in which of the following sections?

a. executive summary

b. company and industry

c. products and services

d. marketing research and evaluation

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

19. Which of the following areas is addressed in the marketing research section of the business plan when the target markets are identified by some common variable?

a. markets

b. market trends

c. competition

d. market share

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

20. Which of the following areas is addressed in the marketing research section of the business plan when the price leader, the quality leader, and the service leader are identified?

a. markets

b. market trends

c. competition

d. market share

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

21. Although Bob’s Outdoor Retailer competes directly with nearby supercenters, managers at Bob’s are confident that individuals within a ten-mile radius of the business will be loyal customers. These managers are establishing a target market based on ______.

a. demographics

b. psychographic variables

c. geographic location

d. market trends

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Reflective thinking

22. Stella, a tattoo artist, visits tattoo conventions in a nearby city every few months to attract potential customers who live on the outskirts of her business’s geographic market. This is an example of using ______.

a. pricing as part of the marketing plan

b. promotion as part of the marketing plan

c. place as part of the marketing plan

d. service policies as part of the marketing plan

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Reflective thinking

23. Which of the following areas is addressed in the marketing research section of the business plan when sales in relation to total industry sales are expressed as a percentage?

a. markets

b. market trends

c. competition

d. market share

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

24. Which of the following areas is addressed in the marketing plan section of the business plan when gross margin and the ability to make a profit after all expenses are paid are discussed?

a. pricing

b. promotion

c. place

d. service policies

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

25. Which of the following areas in the marketing plan section of the business plan is described when advertising media, trade shows, and direct mail are discussed?

a. pricing

b. promotion

c. place

d. service policies

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

26. Which of the following areas in the marketing plan section of the business plan is described when sales representatives and channels of distribution are discussed?

a. pricing

b. promotion

c. place

d. service policies

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

27. The section of the business plan where such items as facilities, location, capital equipment, labor force, inventory control, and purchasing are discussed is ______.

a. product/services section

b. company and industry

c. marketing

d. manufacturing and operations

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

28. Which of the following areas in the marketing plan section of the business plan is described when warranties, customer problems and complaints, and subcontracts are discussed?

a. pricing

b. promotion

c. place

d. service policies

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

29. The ______ section of the manufacturing and operations segment of the business plan discusses the proximity to customers or the proximity to transportation.

a. geographic location

b. facilities

c. make or buy policy

d. control systems

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

30. The ______ section of the manufacturing and operations segment of the business plan discusses the adequacy and quantity of skilled workers that are available to help in the production of the product/service.

a. labor force

b. facilities

c. make or buy policy

d. control systems

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

31. Which of the following sections of the manufacturing and operations section of the business plan discusses what will be produced in the plant and what components will be purchased to be assembled into the finished product?

a. labor force

b. facilities

c. make-or-buy policy

d. control systems

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

32. Developing adequate parking for a business establishment involves which area of the manufacturing and operations plan?

a. facilities

b. geographic location

c. labor force

d. control system

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

33. Ensuring product quality is part of which portion of a manufacturing and operations plan?

a. facilities

b. geographic location

c. labor force

d. control system

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

34. Which of the following is a possible contingency that should be anticipated in the critical risks and assumptions section of the business plan?

a. competition through underpricing by competitors

b. unrealistic timelines

c. inadequate management

d. lack of sufficient capital

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

35. Contingencies related to ______ in the critical risks and assumptions segment of the business plan discusses either sales that are too low or sales that are too high.

a. unreliable sales forecasts

b. competition

c. unfavorable industry-wide trends

d. insufficient numbers of trained employees

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

36. Which of the following is the contingency in the critical risks and assumptions segment of the business plan that discusses events occurring within the economy and society that could negatively affect the product/service being offered?

a. unreliable sales forecasts

b. competition

c. unfavorable industry-wide trends

d. insufficient numbers of trained employees

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

37. Which section of the benefits to community segment is concerned with the multiplier effect--the number of hands in the community affected by new dollars?

a. economic development

b. community development

c. human development

d. monetary development

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

38. A document that graphically shows how job positions fit within an organization is sometimes included in the appendix of a plan. This document is referred to as a/an ______.

a. mission statement

b. network diagram

c. organization chart

d. control chart

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

39. As a new small business owner, Sandra enjoys the fact that her business provides needed goods and services to her community. This involves which type of community benefit?

a. economic development

b. community development

c. human development

d. sociocultural development

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Reflective thinking

40. While finalizing the business plan for the pizza shop that he hopes to soon open, Alfred sits down with his teenage children to discuss the possibilities of them taking over ownership many years down the road. This demonstrates which business plan component?

a. developing a financial plan

b. developing an exit strategy

c. identifying benefits to the community

d. building a management team

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Reflective thinking

41. The financial document that is used by startup businesses to show where capital comes from and for what it will be used is called a ______.

a. cash-flow statement

b. projected earnings statement

c. sources and uses of funds

d. income statement

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

42. The financial document that shows the amount of money a business has on hand at the beginning of a time period, receipts, and money paid out is called a/an ______.

a. cash-flow statement

b. projected earnings statement

c. sources and uses of funds

d. income statement

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

43. For the first year of business, cash-flow projections should be made ______.

a. daily

b. monthly

c. quarterly

d. yearly

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

44. Adequate cash flow can be especially critical if the business is a ______.

a. manufacturing business

b. service business

c. seasonal/cyclical business

d. health care business

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

45. Which of the following financial documents shows the assets, liabilities, and owner’s equity for a business?

a. cash-flow statement

b. income statement

c. balance sheet

d. statement of retained earnings

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

46. Which financial document shows what is owned and what is owed?

a. cash-flow statement

b. income statement

c. balance sheet

d. statement of retained earnings

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

47. A financial document that shows sales revenues, expenses, and net profit or loss is called a ______.

a. cash-flow statement

b. statement of retained earnings

c. balance sheet

d. profit-and-loss statement

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

48. Which of the following financial documents projects the best and the worst that could happen in order to calculate profits or losses?

a. cash-flow statement

b. statement of retained earnings

c. balance sheet

d. profit-and-loss statement

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

49. The point at which sales and costs are equal and a business is neither making nor losing money is called ______.

a. profit

b. gross margin

c. breakeven point

d. net income

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

50. Break-even analysis occurs in which area of the business plan?

a. financial plan

b. risks and assumptions

c. marketing plan

d. HR plan

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

51. After the financial projections have been made for the break-even analysis, it may be helpful to compare the projections to ______.

a. the banker’s projections

b. industry averages

c. the accountant’s projections

d. wholesale averages

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

52. In which section of a business plan would resumes, advertising samples, brochures, organization charts, and the floor plans of the business be found?

a. manufacturing and operations

b. product or services

c. marketing research and evaluations

d. appendix

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

53. The last step in the preparation of a business plan should be which of the following?

a. professional binding in leather

b. review and evaluation

c. inclusion of appendices

d. summary of the business plan into one page or less

KEY: Learning Objective: 4.4: Discuss the importance of reviewing your business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.4: Review Process

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

54. Preparing a pro-forma profit-and-loss statement for the first three years of operation takes place before ______.

a. estimating the initial capital requirements for the business

b. listing possible sources of start-up capital

c. computing financial ratios

d. identifying the product or service

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

55. In her business plan, Jane indicates that her new company will rely on word-of-mouth advertising for the first few years. This is an example of which common error in writing business plans?

a. depending on outdated industry comparisons

b. making unsubstantiated assumptions

c. misunderstanding financial information

d. lacking marketing strategies

KEY: Learning Objective: 4.4: Discuss the importance of reviewing your business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.4: Review Process

Difficulty Level: Easy

TOP: AACSB Standard: Reflective thinking

56. Which of the following is a mistake that a writer of a good business plan should avoid?

a. being overly optimistic

b. understating profits

c. understating expenses

d. using the most current information available

KEY: Learning Objective: 4.4: Discuss the importance of reviewing your business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.4: Review Process

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

57. Which of the following is a mistake that a writer of a good business plan should avoid?

a. ignoring the macro-environment

b. concentrating on the macro-environment

c. investing heavily in the company

d. submitting a professional-looking copy of the business plan

KEY: Learning Objective: 4.4: Discuss the importance of reviewing your business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.4: Review Process

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

NARRBEGIN: 4-1

Scenario 4-1. Jean is contemplating opening her new small business called Jean’s Gems. She realizes that the first step in beginning her new business is writing a business plan. Since she has never started her own business before, she has many questions. She has attempted to follow an outline she found in an old newspaper article. Her first rough draft contained over 75 pages and now she is discouraged with the process. In fact, she is not even sure if she needs to continue. As in the case of many small business entrepreneurs, funds are limited. If you were Jean, what would you do?

NARREND

58. In Scenario 4-1, which of the following is a place Jean could go to receive free and/or inexpensive help in writing her business plan?

a. small business development center

b. small business consultant

c. an accountant

d. a lawyer

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Comprehension

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Reflective thinking

NAR: 4-1

59. In Scenario 4-1, the optimum length for Jean’s business plan would be how many pages?

a. 10 pages

b. 25 pages

c. 40 pages

d. 100 pages

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Comprehension

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Reflective thinking

NAR: 4-1

60. In Scenario 4-1, in which order should the following components of the business plan be written?

a. Determine market feasibility, list possible sources of capital, and identify product/service.

b. Prepare executive summary, develop marketing strategy, and identify product/service.

c. Prepare executive summary, identify product/service, and choose target market.

d. Identify product/service, identify marketing mix, and prepare executive summary.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Comprehension

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Reflective thinking

NAR: 4-1

61. In Scenario 4-1, which of the following sections will be the most important segment of Jean’s business plan?

a. executive summary

b. marketing plan

c. identification of the target market

d. manufacturing and operations plan

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Comprehension

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Reflective thinking

NAR: 4-1

NARRBEGIN: 4-2

Scenario 4-2. Petro is considering opening a new small business called Petro’s Playground. It will be an inside playground with climbing equipment, jungle gym, pit of balls, slides, and swings. Petro’s closest competition has been in business for four years and provides quality service along with the fun of the playground. The competition is located four miles away in a large city and Petro is hoping to acquire some of his competition’s market share by providing lower prices and more diversity in playground equipment.

NARREND

62. In Scenario 4-2, the target market for Petro’s Playground would be ______.

a. senior citizens

b. all children between the ages of 0 and 4

c. middle-aged adults

d. children between the ages of 2 and 12

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Comprehension

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Reflective thinking

NAR: 4-2

63. In Scenario 4-2, the market share that Petro hopes to capture refers to

a. Petro’s sales in relation to the sales of his competitors

b. Petro’s sales this year compared to next year

c. Petro’s sales this year compared to the next five years

d. Petro’s competitors’ sales compared to industry sales

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Comprehension

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Reflective thinking

NAR: 4-2

64. In Scenario 4-2, which advantages may Petro have initially in obtaining new customers?

a. lower prices and new and different equipment

b. good service

c. new building

d. location

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Comprehension

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Reflective thinking

NAR: 4-2

65. In Scenario 4-2, Petro plans on keeping his prices ______.

a. always lower than the competition

b. the same as the competition

c. at a rate where gross margin will allow a profit

d. always higher than the competition

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Comprehension

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Reflective thinking

NAR: 4-2

True/False

1. Planning is essential if a business is to succeed.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

2. A business plan can be the difference between running a business proactively and running a business reactively.

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

3. A business plan should provide a road map for future operations.

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

4. Business plans do not necessarily need to be written on paper; having the plan in mind is sufficient.

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

5. The overall appearance of a business plan is not important; content is what counts.

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

6. Writing a business plan is pure science, not an art.

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

7. The most important section of a business plan is the executive summary.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

8. The executive summary is located at the beginning of the business plan and should be written first.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

9. When writing the company and industry section of the business plan, any setbacks or wrong turns should not be included.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

10. The goal of the marketing research section of the business plan is to convince readers that a market exists for the product/service and that the projected sales forecasts can be achieved.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

11. Marketing objectives and strategies used to accomplish those objectives are included in the products/services section of the business plan.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

12. The marketing plan section of the business plan stresses the manufacturing and operations plan that will be needed to produce the product.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

13. A successful management team combines people with complementary business knowledge, technical skills, and life experiences.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

14. A timeline does not need to be attainable; it need only show a general outline of when projects may be completed.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

15. The marketing plan section of the business plan is where alternative plans are established in case the unexpected should occur.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

16. The most important financial statement for a small business is the cash-flow statement.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

17. If a new small business runs out of cash, thus having inadequate cash flow, it is out of business.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

18. A projected profit-and-loss statement should be 100 percent accurate in the future dollar amounts it states.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

19. Information and documents critical to the business plan would be found in the appendix section of the business plan.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

20. Writing a business plan involves a long series of interrelated steps.

KEY: Learning Objective: 4.4: Discuss the importance of reviewing your business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.4: Review Process

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

21. A common mistake made in writing business plans is for the small business owner to propose investing none of their own money in the business.

KEY: Learning Objective: 4.4: Discuss the importance of reviewing your business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.4: Review Process

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

22. Potential pitfalls and problems should be addressed in a well-written business plan.

KEY: Learning Objective: 4.4: Discuss the importance of reviewing your business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.4: Review Process

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

23. A business plan says nothing about the level of financial and professional knowledge a potential small business owner has acquired.

KEY: Learning Objective: 4.4: Discuss the importance of reviewing your business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.4: Review Process

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

24. Customer segments refer to those for whom a product creates value.

KEY: Learning Objective: 4.2: Explain the purpose and process of developing a business model.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.2: Business Models and Feasibility Analysis

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

25. Identifying a business’s breakeven point is used to provide direction for that business.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

26. Two good sources for guidance on writing business plans include a local SCORE chapter and a nearby college or university.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

27. Financial data should never be included in a business plan’s executive summary.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

28. An environmental analysis should be completed after the industry analysis is complete.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

29. The 18- to 25-year-old female market is an example of a consumer demographic.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Reflective thinking

30. Deciding whether to use a sales force or distributors involves using service policies as part of the marketing plan.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

31. The make-or-buy decision involves deciding what will be produced and what will be purchased in a manufacturing business.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

32. Providing new technical skills and creating opportunities for career advancement provide human development benefits to a community.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

33. To reinforce financial projections and establish benchmarks, it is important to compare projected financial ratios with GDP averages.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Knowledge

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

Short Answer

1. Explain the three primary reasons that business plans are important.

KEY: Learning Objective: 4.1: Explain the purpose and importance of the business plan.

REF: Cognitive Domain: Comprehension

Answer Location: Concept Module 4.1: Every Business Needs a Plan

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

2. Describe why the executive summary is the most important section of the business plan.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Comprehension

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

3. Describe and explain three major components of the business plan.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Comprehension

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking

4. List four differing areas where a small business owner could receive help in writing a business plan.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Comprehension

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

5. List and describe at least five marketing research and evaluation components to be included in a business plan.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Comprehension

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Medium

TOP: AACSB Standard: Analytical thinking

6. Describe at least three items that may be included in a financial plan within a business plan.

KEY: Learning Objective: 4.3: Describe the components of a business plan.

REF: Cognitive Domain: Comprehension

Answer Location: Concept Module 4.3: Business Plan Contents

Difficulty Level: Easy

TOP: AACSB Standard: Analytical thinking