Question 1

The strongest of the five forces in most industries is the rivalry that exists among the businesses competing in a particular market.

Accepted Answer

This is because intense rivalry can lead to price wars, advertising battles, and attempts to steal market share from competitors. It can also drive innovation and improvement, as companies strive to differentiate themselves from their rivals.

Question 2

Generally, an industry is more attractive when quality substitute products are not readily available, the prices of substitute products are higher, and buyers' costs of switching products is high.

Accepted Answer

If quality substitute products are not readily available, it means that consumers will be more likely to stick with the existing product, even if its price increases. Additionally, if the prices of substitute products are higher, consumers will be less likely to switch. In these circumstances, the industry is more attractive because it has a stronger hold on the market.

Question 3

The criteria lenders and investors use to evaluate the credit worthiness of entrepreneurs that are seeking financing-including capital, capacity, collateral, character, and conditions-are referred to as:

Accepted Answer

The criteria lenders and investors use to evaluate the credit worthiness of entrepreneurs that are seeking financing are known as the five C's of credit, which include capital, capacity, collateral, character, and conditions. These factors are used to assess the risk associated with lending or investing money and to determine the terms and conditions of the financing.

Question 4

Carly will be presenting her business plan to potential lenders and investors soon. Which of the following is not one of the suggested helpful tips for presenting the business plan?

Accepted Answer

Using a great deal of technological jargon may alienate potential lenders and investors who may not be familiar with the terminology. It is important to communicate clearly and effectively to ensure that all parties understand the business plan and its potential for success.

Question 5

The reality test that a business plan must pass in order to attract financing from lenders and investors involves proving that a market for the company's product or service actually does exist, and that the company actually can build it for the cost estimates in the plan.

Accepted Answer

This statement is true. Lenders and investors want to see evidence that there is a market demand for the product or service that the company is offering, and that the company has a realistic and cost-effective plan for developing and delivering that product or service.

Question 6

A business plan is a written summary of an entrepreneur's proposed venture, its operational and financial details, its marketing opportunities and strategy, and its managers' skills and abilities.

Accepted Answer

This statement accurately describes what a business plan is.

Question 7

The most common reason cited by banks for rejecting small business loans is:

Accepted Answer

Undercapitalization and too much debt is the most common reason cited by banks for rejecting small business loans.

Question 8

After presenting her business plan to a group of potential lenders and investors, an entrepreneur should:

Accepted Answer

Taking a proactive approach by following up with every potential lender and investor to whom she makes a presentation is the best choice. This shows that the entrepreneur is serious about her venture and willing to put in the effort to secure the necessary funding. Sitting back and waiting or conducting credit checks may not help in securing the required funding.

Question 9

A product or service feasibility analysis determines the degree to which a product or service idea appeals to potential customers and identifies the necessary resources.

Accepted Answer

A product or service feasibility analysis evaluates the market demand, financial feasibility, and technical feasibility of a product or service, as well as the necessary resources and potential challenges. It helps to determine whether the idea is viable and valuable to potential customers.

Question 10

Capital requirements, estimate earnings, and return on investment are three aspects of the financial feasibility analysis.

Accepted Answer

Capital requirements, estimate earnings, and return on investment are indeed three aspects of the financial feasibility analysis.

Question 11

Which of the following statements about the preparation of a business plan is/are not true?

Accepted Answer

Grammatical and spelling errors in a business plan can reflect poorly on the professionalism and attention to detail of the person preparing the plan, which can negatively impact the evaluation of the plan by potential lenders and investors.

Question 12

The primary purpose of building a business plan is to raise capital.

Accepted Answer

While raising capital may be one of the goals of a business plan, the primary purpose is to outline the strategy and direction of the business, including its goals, target customers, market analysis, financial projections, and operational plan. The business plan serves as a roadmap for the business owner and management team, helping them to make informed decisions and track progress towards their objectives.

Question 13

The five forces model would assess economies of scale factors in the "threat of new entrants" portion of the model.

Accepted Answer

The answer of The five forces model would assess economies...

Question 14

New entrants to an industry can erode existing companies' market share and profits.

Accepted Answer

This statement is true. When new entrants come into an industry, they bring new ideas, technology, and innovation, leading to increased competition that can erode the market share and profits of existing companies in that industry.

Question 15

A feasibility analysis is the process of determining whether an entrepreneur's idea is a viable foundation for creating a successful business.

Accepted Answer

A feasibility analysis assesses the potential of an entrepreneur's idea and helps determine whether it can be turned into a profitable business.

Question 16

A well-prepared business plan forces an entrepreneur to assess the venture's chances of success more objectively.

Accepted Answer

A well-prepared business plan helps an entrepreneur to analyze their business idea more objectively and evaluate its potential for success. Through market research, financial projections, and other analysis, an entrepreneur can identify potential pitfalls and opportunities for growth. This can help them refine their strategy, make more informed decisions, and increase the chances of success for their venture.

Question 17

Porter's five forces model only considers direct competitors within a single industry.

Accepted Answer

Porter's five forces model considers five factors - bargaining power of suppliers, bargaining power of buyers, threat of new entrants, threat of substitute products, and rivalry among existing competitors. While it primarily focuses on competition within an industry, it also takes into consideration the influence of suppliers, buyers, and substitutes.

Question 18

A synonym for capacity is:

Accepted Answer

The answer of A synonym for capacity is:
...

Question 19

To get external financing, an entrepreneur's business plan must pass the reality test, the competitive test, and the value test with potential lenders and investors.

Accepted Answer

To attract external financing, a business plan must demonstrate its feasibility, competitiveness within the market, and its potential value to investors or lenders.

Question 20

Primary research is information that has already been complied and is available for use, often at very reasonable costs or sometimes at no cost to the entrepreneur.

Accepted Answer

Primary research is information that is gathered firsthand by the entrepreneur through surveys, interviews, or observation. It is not readily available and may require significant time, effort, and resources to collect.

Quiz 4: Conducting a Feasibility Analysis and Crafting a Winning Business Plan