Question 1

A business plan is a picture or model of what management expects a business to become in the future expressed in words and numbers. The numbers are mainly financial projections.

Accepted Answer

A business plan includes both the description of the business's goals and strategies as well as financial projections, which are expressed in numbers.

Question 2

A good business plan conveys a comprehensive image of the firm's future including information about products, markets, employees, technology, facilities, capital, revenue, profitability, and anything else that might be relevant.

Accepted Answer

A business plan is a formal written document that describes the nature of a business, its goals and objectives, and how they will be achieved. It includes important information about the company's products, services, target market, competition, operations, finances, and management. A good business plan should be able to convince investors or lenders to provide funding or support for the business.

Question 3

Financial planning is the process of projecting a company's financial statements into the future, and is separate and distinct from the broader activity of business planning.

Accepted Answer

Financial planning is a part of the broader activity of business planning, involving the forecasting of a company's financial performance and the preparation of budgets to guide the company's operations, not a separate activity.

Question 4

The only goal of the planning process it to provide a roadmap for running the business.

Accepted Answer

The planning process serves multiple purposes such as setting objectives, identifying potential challenges, evaluating resources and capabilities, and making strategic decisions. The roadmap is just one of the outputs of the planning process.

Question 5

A good business plan shows enough supporting detail to indicate that it is the product of careful thinking.

Accepted Answer

A good business plan should be thorough and well-researched, showing that the author has carefully considered all aspects of the business idea and has a realistic plan for success. Supporting details should be included to show that the plan is grounded in solid research and analysis.

Question 6

Forecasts are projections of where the financial momentum of a business will carry it over a short period. They usually consist almost entirely of financial numbers without much supporting verbiage.

Accepted Answer

Forecasts primarily consist of financial numbers and are typically quantitatively focused without much supporting verbiage.

Question 7

A strategic plan is broad and conceptual rather than detailed and numerical. It does, however, contain precise financial projections supported by a great deal of detail.

Accepted Answer

A strategic plan is broad and conceptual but also contains detailed and numeric goals and objectives, along with specific action steps and timelines. It may also include financial projections, but they are not necessarily the main focus or primary component of the plan.

Question 8

Operational or operating plans contain great detail about who is going to do what, commonly over a one-year planning horizon.

Accepted Answer

Operational or operating plans are short-term plans that provide detailed information about the actions or strategies required to achieve a specific goal or objective within a one-year planning horizon. These plans are created to define specific tasks, responsibilities, timelines, budgets, and resources required to implement the strategies defined in the strategic plan.

Question 9

A budget is a longer term bridge between an annual operating plan and the five-year strategic plan.

Accepted Answer

A budget is typically a short-term financial plan, usually for a year, that helps in executing the annual operating plan, which aligns with the longer-term goals outlined in the five-year strategic plan.

Question 10

The business plan is a vehicle for communicating with potential investors.

Accepted Answer

The business plan is a document that outlines the company's goals and strategies, as well as its potential for success. It is often used as a tool for communicating with potential investors, as it provides them with a detailed look at the company's business model, management team, financial projections, and other key information that they would need to make an informed decision about whether or not to invest in the company.

Question 11

A financial plan can help in anticipating financing needs.

Accepted Answer

A financial plan includes forecasting future expenses and incomes, which can help identify potential financing needs and allow for preparation in advance.

Question 12

In large companies, business plans are developed at decentralized divisions and consolidated upward. Division plans are generally not reviewed and discussed by corporate management.

Accepted Answer

In large companies, division plans are often reviewed and discussed by corporate management to ensure alignment with overall corporate goals and strategies. Consolidation of plans happens after this review and discussion process.

Question 13

Executive bonuses are often tied to the achievement of goals spelled out within the firm's business plan.

Accepted Answer

Executive bonuses are commonly tied to achieving the targets laid out in the business plan or to other performance indicators.

Question 14

The financial plan is essentially a chapter or section of a business plan.

Accepted Answer

The financial plan is typically a section of a business plan that outlines the financial goals and strategies of the company. It includes financial projections and analysis, funding needs, and revenue and expense forecasts.

Question 15

The annual _____ plan projects the business in detail over a year; and is the most important planning exercise.

Accepted Answer

The answer of The annual _____ plan projects the business...

Question 16

The financial plan is essentially a part of a broader activity known as business planning.

Accepted Answer

The financial plan is a key component of the overall business plan, which includes sections such as market analysis, marketing and operations plans, and management structure. The financial plan outlines the financial goals, strategies, and projections for the business, and helps to ensure that the company is financially viable and sustainable.

Question 17

Budgets generally update annual plans every six months, especially in stable businesses.

Accepted Answer

Budgets in stable businesses typically update annual plans on a yearly basis, not every six months.

Question 18

Business plans and the information they contain are generally very private, and are not shared with investors or securities analysts.

Accepted Answer

Business plans and the information they contain may be shared with investors or securities analysts in order to obtain funding or evaluate the business. However, the company has discretion over what information is shared and with whom.

Question 19

The most common time horizon for strategic plans is ten years.

Accepted Answer

The most common time horizon for strategic plans is 3-5 years, although some organizations may have longer or shorter timeframes depending on their specific needs and circumstances.

Question 20

A firm's financial plan represents a stage in a larger planning process.

Accepted Answer

A firm's financial plan is just one aspect of the larger planning process, which includes strategic, operational, and marketing planning.

Quiz 4: Financial Planning