Question 1

What are the most important features that should be emphasized in the Executive Summary (of the Business Plan)?

Accepted Answer

The Executive Summary should highlight the mission statement, products and services provided, overall financial situation, and future plans to give a comprehensive overview of the business's current status and future direction.

Question 2

You run a software development business in Toronto. You are offered a chance to bid on a government contract that you estimate will require 600 000 lines of code, deliverable in one year. You have developed a model: Effort = 3.0(KLOC)1.2 to predict the effort, in programmer-months, required to complete a job, where `KLOC' stands for `thousands of lines of code'. On the basis of this model, how many programmers should you assign to work on the project?

Accepted Answer

First, convert the total lines of code to KLOC: 600,000 lines = 600 KLOC. Then, apply the model: Effort = 3.0 * (600)^1.2. This gives an effort of approximately 6474 programmer-months. To complete this in one year (12 months), divide the total effort by 12: 6474 / 12 ≈ 540. Therefore, you should assign approximately 540 programmers to the project.

Question 3

Suppose that a business has $100 million in long-term assets and $50 million in current assets. The business's liabilities are: current liabilities = $30 million and long-term liabilities = $80 million. Calculate the equity ratio and comment on the business's performance on the basis of this ratio.

Accepted Answer

The answer of Suppose that a business has $100 million...

Question 4

What is the cost principle of accounting?

Accepted Answer

The answer of What is the cost principle of accounting?...

Question 5

The strategies to penetrate the target market and gain market share are included in what section of the Business Plan?

Accepted Answer

The Sales and Marketing section of a Business Plan typically outlines strategies for penetrating the target market and gaining market share, including details on how a company plans to reach its potential customers and its approach to selling its products or services.

Question 6

Your company recently constructed a steel mill producing 600 000 tons of steel per year, for a construction cost of $12 000 000. You know that a rival company has constructed a similar mill, producing twice as much steel, at a cost of $20 900 000. Based on these figures, what is your estimate of the capacity factor for the steel industry?

Accepted Answer

The answer of Your company recently constructed a steel mill...

Question 7

What section of the business plan includes the company's human resource capabilities and the competitive advantages of the company?

Accepted Answer

The answer of What section of the business plan includes...

Question 8

What is the difference between financial accounting and managerial accounting?

Accepted Answer

The answer of What is the difference between financial accounting...

Question 9

Explain how owners' equity is defined.

Accepted Answer

The answer of Explain how owners' equity is defined....

Question 10

What is the main purpose of a Business Plan?

Accepted Answer

A business plan primarily serves as a 3-5 year road map outlining the company's operating, marketing, financial, and HR intentions.

Question 11

You are trying to estimate the annual cost of setting up a branch of a manufacturing business in Vancouver, based on your experience of running a similar business in Halifax. The original business produces 800 units per year, whereas the Vancouver branch will produce 1 700. If the cost of setting up the Halifax operation was $9 000 000 and the capacity factor is 0.6, give an order of magnitude estimate for the cost of setting up the Vancouver operation.

Accepted Answer

The cost estimation can be calculated using the formula: Cost_Vancouver = Cost_Halifax * (Capacity_Vancouver / Capacity_Halifax)^Capacity_Factor. Plugging in the values: $9,000,000 * (1700/800)^0.6 ≈ $14,147,000.

Question 12

According to a firm's balance sheet, total assets account for $10 million while total liabilities account for $8 million. Calculate the equity ratio.

Accepted Answer

The answer of According to a firm's balance sheet, total...

Question 13

What is the fundamental difference between a Balance Sheet and an Income Statement?

Accepted Answer

The answer of What is the fundamental difference between a...

Question 14

How are assets defined in a Balance Sheet? What types of assets are usually included in this financial document?

Accepted Answer

The answer of How are assets defined in a Balance...

Question 15

What section of the Business Plan describes the company's industry and analyzes the growth plans of the company?

Accepted Answer

The "Market Analysis and Future Outlook" section of a Business Plan is specifically designed to describe the company's industry, market environment, and outline the company's growth plans, including potential future trends and directions.

Question 16

You are trying to estimate the annual cost of setting up a branch of an engineering consulting business in Vancouver, based on your experience of running the original business in Halifax. The original business employs 80 engineers, whereas the Vancouver branch will initially employ 15. On the other hand, Vancouver salaries are typically 50% higher than those paid in Halifax. If the annual salary bill for the Halifax office is $9 000 000, give an order of magnitude estimate for the salary bill of the Vancouver office.

Accepted Answer

The salary bill for the Vancouver office can be estimated by first determining the salary per engineer in Halifax, then adjusting for the number of engineers and the salary difference in Vancouver. In Halifax, the total salary bill is $9,000,000 for 80 engineers, which is $112,500 per engineer. In Vancouver, with a 50% higher salary, this becomes $112,500 * 1.5 = $168,750 per engineer. For 15 engineers, the total is $168,750 * 15 = $2,531,250, which rounds to the order of magnitude estimate of $2,530,000.

Question 17

In this section of the Business Plan, information about key company employees are provided, including experience, education and qualifications for each individual.

Accepted Answer

The "Management and Organization" section of a Business Plan typically includes detailed information about the key company employees, their experience, education, and qualifications, outlining how their background will contribute to the success of the business.

Question 18

The Funding Requirements section of the Business Plan should not only consider how much money will be borrowed from a bank (and interest rate), and how much funding comes from owners or investors, but also:

Accepted Answer

The Funding Requirements section should detail strategies for attracting investors for new projects or company start-up, as it directly relates to securing the necessary capital for the business.

Question 19

Consider the following balance sheet:
  Define and calculate the acid-test ratio.

Accepted Answer

The answer of Consider the following balance sheet:
  Define...

Question 20

When describing your company's market share in the Market Analysis and Future Outlook section, what are some of the items that you could analyze?

Accepted Answer

A) This choice comprehensively covers various aspects relevant to market share analysis, including internal factors (strengths/weaknesses, experience, and human factors), external factors (technological advances, geographic location), and financial outlook, making it the most suitable answer.

Quiz 6: Financial Accounting and Business Plans

What are the most important features that should be emphasized in the Executive Summary (of the Business Plan) ?