Deck 4: The Business Plan

Question 1

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

Answer 1

C

Question 2

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

Answer 2

B

Question 3

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

Answer 3

C

Question 4

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"

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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?

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

______ 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

Question 15

A small business plan should be written by ______.

A) consultants
B) investors
C) proposed employees
D) proposed business owners

Question 16

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

Question 17

Free or inexpensive business planning assistance is available from ______.

A) a local accountant
B) small business development centers
C) local consultants
D) competitors

Question 18

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

Question 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

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

Question 28

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

Question 29

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

Question 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

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

Question 41

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

Question 42

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

Question 43

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

Question 44

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

Question 45

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

Question 46

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

A) daily
B) monthly
C) quarterly
D) yearly

Question 47

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

Question 48

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

Question 49

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

A) financial plan
B) risks and assumptions
C) marketing plan
D) HR plan

Question 50

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

Question 51

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

Question 52

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

Question 53

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?

-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

Question 54

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

Question 55

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?

-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.

Question 56

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

Question 57

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?

-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

Question 58

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

Question 59

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

Question 60

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

Question 61

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.

-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

Question 62

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.

-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

Question 63

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

Question 64

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?

-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

Question 65

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

Question 66

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

Question 67

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

Question 68

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

Question 69

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

Question 70

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

Question 71

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.

Question 72

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

Question 73

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

Question 74

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

Question 75

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.

-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

Question 76

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

Question 77

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.

-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

Question 78

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

Question 79

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

Question 80

Planning is essential if a business is to succeed.