Deck 7: The Business Models Financial Abcs

Question 1

The two bottom blocks in the Business Model Canvas are related to financial aspects. What are they called?

A) Income budget
B) Revenue streams
C) Costs budget
D) Cost structure
E) Liquidity planning
F) Budget of results

Answer 1

Revenue streams
Cost structure

Question 2

The financial aspect of the business model covers what it will cost to create and deliver the value proposition, including all activities, resources and partnerships proposed in the upper sectors of the BMC model.

Answer 2

True

Question 3

How much do we need to invest to get started? In other words how much ……… will be required?

Answer 3

initial capital

Question 4

What will it cost to produce the product/service and make it ready for sale. In other words, how big are the .………?

Question 5

Which costs cannot be avoided regardless of the level of sales? In other words, what ……… will be required to create and deliver the product?

Question 6

How much money will be tied up in the inventory and receivables. In other words, how much ……… will be required?

Question 7

The aggregate anticipated revenue from a variety of sources that the proposition could pull in is referred to in the BMC as ………?

Question 8

Another term from the BMC which expresses that revenue can come from a variety of sources is:

A) payments
B) revenue sources
C) income flow
D) revenue streams

Question 9

The book differentiates between customer value and economic value as business models and the propositions they deliver. The point with differentiating between the two is to show that:

A) economic value precedes the customer value, not the other way around
B) economic value is a monetary value extracted from the customer value
C) a business model can create customer value without creating economic value
D) customer value is the economic value of the customer to the company
E) customer value is the company's aggregate revenue from a customer

Question 10

The book argues in the Financial ABC's that the purpose of the business model is to prevent "silo thinking" between the various parts. This implies that:

A) one understands and stresses the mutual dependence between the various parts of the model, as well as the financial implications of all aspects
B) one has control over the costs and revenue aspects but separates those from the rest
C) one avoids addressing the problems that may arise between customer and company expectations
D) one avoids addressing how costs may affect revenue

Question 11

To keep liquidity firmly in mind implies that one:

A) controls income and costs
B) ensures that margins are converted into money in
C) ensures there is enough money to run the business at various stages
D) ensures there are profits and that they are used in the right way

Question 12

Liquidity planning forces a company to:

A) think about offering customers a longer credit period
B) think about the timing between when the money comes in and when it needs to be paid out to various parties
C) try to pay suppliers in advance
D) try to increase margins and profits

Question 13

The book argues that the financial side of a company is separate from the rest and is managed by the financial department.

Question 14

The book addresses a number of fundamental questions around liquidity and profitability. One difference is the way in which they approach various aspects of time - short-term vs. long-term. Which of these prioritizes the short-term?

A) Liquidity
B) Profitability

Question 15

The book addresses a number of fundamental questions around liquidity and profitability. The term connected to the question "Do we have enough money?" is:

A) Liquidity
B) Profitability

Question 16

In terms of finances, the book states that a company's eternal dilemma is:

A) that "cash is king"
B) that the break-even point increases over time
C) that costs quickly surpass income
D) that expenditures usually come before payments received

Question 17

The fundamental equation for liquidation planning is:

A) Opening liquid assets + pay-ins - pay-outs = cash flow
B) Opening liquid assets + pay-ins - pay-outs = closing liquid assets
C) Opening liquid assets + income - costs = closing liquid assets
D) Opening liquid assets +/- gains/losses = closing liquid assets

Question 18

If the following equation ends in a minus (-), you have a liquidation problem.
Opening liquid assets + pay-ins - pay-outs = closing liquid assets

Question 19

Decisions in the upper part of the BMC about quality, prices, service, terms of delivery, inventory, terms of payment, returns policy, discounts, marketing, etc. are translated into money in and money out in liquidity planning.

Question 20

Decisions in the upper part of the BMC about quality, prices, service, terms of delivery, inventory, terms of payment, returns policy, discounts, marketing, etc. are translated into gains or losses in liquidity planning.

Question 21

The expression "cash is king" means:

A) the most money wins
B) money grants status
C) having money on hand equals independence
D) having no money on hand renders one vulnerable
E) those in power also make money
F) having no money on hand can easily make one dependent on others to solve one's liquidity crisis

Question 22

Persuading one's customers to pay in cash is good, but persuading them to pay in advance is even better.

Question 23

Post-purchase, cash and advanced are three payment alternatives which impact liquidity. Put them in order, starting with the one which has the most positive impact:

A) Post-purchase, cash, advanced
B) Advanced, post-purchase, cash
C) Advanced, cash, post-purchase
D) Cash, post-purchase, advanced

Question 24

Post-purchase, cash and advanced are three payment alternatives with decidedly different consequences as to the amount of working capital that will be needed, and will have to be managed and financed.

Question 25

Post-purchase, cash and advanced are three payment alternatives with decidedly different consequences as to the amount of investments that will be needed, and will have to be managed and financed.

Question 26

The following formula is used to calculate the anticipated result:

A) = anticipated fixed costs - anticipated variable costs
B) = anticipated pay-ins - anticipated pay-outs
C) = anticipated income - anticipated expenses
D) = anticipated income - anticipated costs

Question 27

Profits are mainly needed to compensate the owners for the work they have invested.

Question 28

Profits are crucial to survival in the longer term since they are needed to cover the costs of developing the business and to render a return to investors/owners in return for the risk they have taken.

Question 29

The break-even point is when:

A) aggregate pay-ins and aggregate pay-outs are balanced
B)aggregate income and aggregate cost are balanced
C) customers break through the point where they become profitable
D) the critical success factors have been solved and are in place

Question 30

A sensitivity test in this context is to test (simulate) the impact various factors have on, e.g. the result. One poses the question "What if …?"

Question 31

The break-even point is calculated by identifying the volume or turnover at which: Note from Sarah: please verify that these acronyms are correct. I wasn't sure if RC and FC were correct in English) TR = total revenue; TC = total costs; FC = ? RC = ?

A) FC = RC
B) TR ‹ TC
C)TR = TC
D) TC = FC + RC

Question 32

The difference between the price and variable costs, when expressed in percentage terms, is called the ……….

Question 33

The main purpose of the gross margin is to cover fixed costs, and when it does, you have your break-even point.

Question 34

One can increase the gross margin by:

A) pressing the prices paid to suppliers
B) raising fixed costs
C) raising the prices paid to suppliers
D) raising prices
E) lowering prices
F) selling more
G) lowering fixed costs
H)lowering operating costs

Question 35

If one increases the gross margin:

A) the break-even point lowers
B) the break-even point increases

Question 36

If one lowers the gross margin:

A)the break-even point increases
B) the break-even point lowers

Question 37

As a rule of thumb, gross margins of 40 percent and up are deemed viable. Margins under 20 percent are termed "razor thin."

Question 38

Growth requires capital, and capital requires compensation. Compensation, in turn, requires money on one's account, the source of which is profits, in order that control of the company doesn't pass from its founders to the financiers.

Question 39

Profits are needed for more than compensating the owners; for any young company that needs to grow they are an essential source of financing! Without profits, the company's ……….. will grow, which will decrease the company's chances of survival.

Question 40

Enough profits mean one is able to ensure that the share of ……… does not shrink, which strengthens, or even improves, the company's resilience in the face of setbacks.

Question 41

This consolidation of the company is described as increasing the company's ……….. and is taken by others as a measure of a company's ability to withstand and survive the trials.

Question 42

One needs to calculate how much money will be needed to start the business in the first place - otherwise known as …….. .

Question 43

Startup costs are usually considered in the categories ……….. and other initial costs.

Question 44

The money needed to get a business up and running and to survive the early stage is called ………. .

Question 45

Later on, a need for ………. will arise due to heavy product development costs, market expansion, etc.

Question 46

There are various sources of financing one can speak about at various stages.
Sort the following sources of financing, beginning with the early-stage, smaller types of financing, and continue on with the later stage and larger sources.
Crowdfunding
Bank loan
Family and friends
Owner's equity
Investment angels
Self-financing
Stock exchange listing
Strategic partnerships
Government risk financing
Venture capital