Test Bank Answers Ch.16 Business Planning For Small Firms

Chapter 16- Business Planning for Small Firms

True/False

1. A business plan is useful only for startups

Response: See section 16.1

Level: Easy

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. At a basic level, a business plan records entrepreneur’s ideas and insights for the venture

Response: See section 16.1

Level: Easy

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. The means-driven business plan involves thinking about where you want to be and then considering the resources you will need to get there

Response: See section 16.1

Level: Easy

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. The means-driven planning is effect dependent

Response: See section 16.1

Level: Easy

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. The goals-driven planning is excellent at exploiting knowledge

Response: See section 16.1

Level: Easy

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. Writing the business plan helps to determine flexibility of a business idea

Response: See section 16.1.2

Level: Easy

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. A good business plan is a verbal plan communicated to investors

Response: See section 16.1.3

Level: Easy

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. A good business plan remains the same at every stage of the business

Response: See section 16.1.3

Level: Easy

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. The underlying philosophy of a traditional business plan is the build-assess-learn

Response: See section 16.1.3

Level: Medium

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. The lean start-up is a methodology that favors a minimum viable product concept

Response: See section 16.1.3

Level: Medium

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. The Build-Access-Learn is a core component of the lean start-up methodology and is based on a feedback approach

Response: See section 16.1.3

Level: Medium

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. The Lean-startup methodology was developed by Alexander Osterwalder and Yves Pigneur from the University of Lausanne in Switzerland

Response: See section 16.2

Level: Easy

Learning Objective: Recognize the importance of a (sound) business model

1. The Business model canvas focuses on how the venture creates value for customers and the owners

Response: See section 16.2

Level: Easy

Learning Objective: Recognize the importance of a (sound) business model

1. An executive summary in a business plan is typically one to two pages in length

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. Ideally, the executive summary is written before writing the other sections of the business plan

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. In the business plan, the educational background and the work experience of the founders should be given

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. The section on financial analysis provides information on the target market

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. For a business plan, if the business is yet to be started, income statements are based on estimate for what the revenues and expenses will be once the business starts

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. For a business plan, one must present annual income statement based on only the best-case scenario to attract investors

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. For a business plan, one generally presents annual income statement, possibly over three years

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. Owners of small businesses should not provide the risk factors of their business in their business plan

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. A business plan should always reflect strength and opportunities of a business

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. For a business plan, resumes of owners and key executives must be given in the management team section

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. The business brief is an eight-to-ten page document that focuses on the skills of the entrepreneur and the size of the market

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. The business plan is not required for the businesses with significant regulations

Response: See section 16.4

Level: Easy

Learning Objective: Discuss how to make the business plan fit well with your needs

Multiple Choice Questions

1. The purpose of a good business plan is to:
2. Provide direction for the business after it is up and running
3. Delve deeper into the feasibility of the business idea
4. Attract capital and other resources to the nascent business
5. All of the above

Response: See section 16.1

Level: Easy

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. According to the text, the two fundamentally different approaches to planning are:
2. Causation, effectuation
3. Business plan, Lean start-up
4. Monitor, control
5. Forward, equilibrium

Response: See section 16.1

Level: Easy

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. While _________approach to planning focuses on the predictable aspects of an uncertain future, the _________ approach focuses on the controllable aspects of an uncertain future
2. Backward, forward
3. Effectuation, causation
4. Causation, effectuation
5. Forward, equilibrium

Response: See section 16.1

Level: Medium

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. Where the ________focused on what it would take to start your dream business, the ______is geared towards how you can start a business with the resources you can currently obtain
2. Lean start-up, traditional business plan
3. Traditional business plan, lean start-up
4. Effectuation, causation
5. Control, Monitor

Response: See section 16.1.3

Level: Easy

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. In the build-assess-learn framework, the emphasis is on pursuing an idea with the resources one can get to bring the idea to market ______ and __________
2. Quickly, cost-effectively
3. Later, expensively
4. Quickly, reduce
5. Quickly, decrease

Response: See section 16.1.3

Level: Medium

Learning Objective: Explain what a business plan is and why it is helpful for a firm to have it

1. The __________is a template for articulating novel or existing business models
2. Lean Canvas
3. Lean focus
4. Business model canvas
5. Lean start-up

Response: See section 16.2

Level: Easy

Learning Objective: Recognize the importance of a (sound) business model

1. Which of the following is NOT part of the business model canvas?
2. Promoters
3. Customer segments
4. Customer relations
5. Mission statement

Response: See section 16.2.1

Level: Medium

Learning Objective: Recognize the importance of a (sound) business model

1. In a business plan, a cover page must include:
2. Products and services
3. Management team
4. Name and address of business
5. Industry analysis

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. In a business plan, a venture information should be on the:
2. Company description
3. Cover page
4. Executive summary
5. Industry analysis

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. In a business plan, the cover page should not include:
2. Name, address, and contact details of the business
3. Name, address of the promoters
4. A statement of the confidentiality of the business plan
5. Name and address of competitors

Response: See section 16.3

Level: Medium

Learning Objective: Outline the different parts of a business plan

1. An executive summary in a business plan must include:
2. What products or services will be offered
3. Growth rate of the target market
4. Investments that will be needed
5. All of the above

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. A _______is a popular framework for organizing key factors in broader society and isolating how they influence firms
2. Lean start up
3. Business canvas model
4. PESTEL analysis
5. SWOT analysis

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. _______captures the aggregation of prospective buyers into groups on the basis of shared characteristics such as common needs or taste
2. Culture segmentation
3. Market segmentation
4. Race segmentation
5. None of the above

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. Which of the following section in a business plan includes the ratio analysis
2. Company description
3. Cover page
4. Executive summary
5. Financial analysis

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. The ________summarizes the various assets owned by the company and the liabilities owed by the company
2. Capital structure
3. Balance sheet
4. Break-even analysis
5. None of the above

Response: See section 16.3

Level: Medium

Learning Objective: Outline the different parts of a business plan

1. The __________pricing approach entails looking at competitors’ pricing and using that information to decide one’s selling price
2. Cost-plus
3. Nominal
4. Comparison-to-competitors
5. Cost-plus profit

Response: See section 16.3

Level: Medium

Learning Objective: Outline the different parts of a business plan

1. A ___________statement summarizes income and expense activity over a specific period
2. Capital structure
3. Balance sheet
4. Ratio analysis
5. Profit-and-loss (P&L)

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. The owners’ equity in the business is the _________assets and liabilities
2. Sum of
3. Difference between
4. Division of
5. Product of

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. Which of the following is the most important section of a business plan?
2. Table of contents
3. Cover page
4. Executive summary
5. Financial analysis

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. If the fixed cost of a product is $500 and the gross profit per unit is $100, then a firm’s break-even point is:
2. 400
3. 5
4. 4
5. 1:5

Response: See section 16.3

Level: Medium

Learning Objective: Outline the different parts of a business plan

1. For a business plan, any supplemental information and documents that are not crucial but may still be of interest to the reader is given in the:
2. Appendix
3. Executive summary
4. Market analysis
5. Cover page

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. The _________is a presentation of the essential elements of a business plan in a way that seeks to excite your audience about the potential of the business
2. Business brief
3. Flexibility study
4. Pitch deck
5. Elevator pitch

Response: See section 16.3

Level: Easy

Learning Objective: Outline the different parts of a business plan

1. Which of the following can be a source of help for small business owners to review the business plan before submitting to investors?
2. Family and friends
3. SCORE
4. Small Business development center
5. All of the above

Response: See section 16.4

Level: Easy

Learning Objective: Discuss how to make the business plan fit well with your needs

1. If the product or service already exists, but the company is a first of its kind in its specific market, it is a________ business
2. New entrant
3. Regulated
4. Pioneering
5. Small

Response: See section 16.4

Level: Easy

Learning Objective: Discuss how to make the business plan fit well with your needs

1. Which of the following should be included in a good business plan?
2. Overstated numbers
3. Outdated information
4. Resume of employees
5. Strength and opportunities of a business

Response: See section 16.4

Level: Easy

Learning Objective: Discuss how to make the business plan fit well with your needs