Chapter 7 The Business Plan: Creating and Starting the Venture
True/False Questions
1.Planning the new venture is a process that never ends.Answer: True Page: 199 Difficulty: Easy
2.The business plan addresses both short term and long ter m decision
making.Answer: True Page: 199 Difficulty: Easy
3.To maintain objectivity, the business plan should not be written by the
entrepreneur.Answer: False Page: 200 Difficulty: Medium
4.The business plan is a private document and should not be read by employees
andcustomers.Answer: False Page: 201 Difficulty: Medium
5.In the business plan the entrepreneur should address the needs of the entrepreneur andthe needs of
the market; the investor's perspective is not important.Answer: False Page: 201 Difficulty: Medium
6.The process of writing the business plan provides a self-assessment for
theentrepreneur.Answer: True Page: 201 Difficulty: Easy
7.The best way to address the concerns of all potential audiences when writing the business plan is to
rely exclusively on a computer software package.Answer: False Page: 202 Difficulty: Medium
8.The business plan serves as an i mportant tool in helping to obtain
financing.Answer: True Page: 202 Difficulty: Easy
9.The four Cs of credit are computers, capital, compromise, and
collateral.A n s w e r : F a l s e P a g e : 2 0 2 D i f f i c u l t y : M e d i u m
10.Venture capitalists demand high rates o f return for their investment in the
newventure.Answer: True Page: 203 Difficulty: Medium
11.In preparing the business plan, entrepreneurs can provide their o wn perspective andneed not
consider the needs of external sources.Answer: False Page: 203 Difficulty: Medium
12.A quick feasibility study should be conducted before preparing the business plan touncover
possible barriers to success.Answer: True Page: 204 Difficulty: Medium
13.In building a marketing plan, the entrepreneur should use a process designed as a pyramid,
starting with narrow data and working down to broader-based information.Answer: False Page: 205 Difficulty: Hard
14.Most entrepreneurs have difficulty with gathering market information and do not oftenknow
where to begin.Answer: True Page: 205 Difficulty: Medium
15.When gathering financial information, the entrepreneur should develop a budget thatincludes
expected sales and expense figures for the first year.Answer: True Page: 208 Difficulty: Medium
16.To determine the figures in the b udget, the entrepreneur should identify benchmarks or norms in
the industry.Answer: True Page: 208 Difficulty: Easy
17.Pro forma financial statements should be prepared monthly for the first year of
theventure.Answer: True Page: 208 Difficulty: Medium
18.The Internet is a useful tool to access information but is generally not a good vehiclefor
marketing goods and services.Answer: False Page: 208 Difficulty: Medium
19.Newsgroups are too closely controlled b y comp etitors to be useful for
informationgathering.Answer: False Page: 209 Difficulty: Medium
20.The executive summary section o f the business plan sho uld be written first, beforeother sections
are developed.Answer: False Page: 211 Difficulty: Medium
21.An evaluatio n of cultural changes is irrelevant to the venture and should not beincluded in the
business plan.Answer: False Page: 212 Difficulty: Medium
22.The executive summary section is only meant to highlight key factors and motivate the person
holding the plan to read it in its entirety.Answer: True Page: 212 Difficulty: Medium
23.The entrepreneur need not concentrate on environmental analysis since most of theexternal
factors are generally uncontrollable.Answer: False Page: 212 Difficulty: Easy
24.If a venture is not a manufacturing firm, an operatio ns plan is not
necessary.Answer: False Page: 213-214 Difficulty: Medium
25.The organizational plan section of the business plan should d escribe the venture's formof
ownership.Answer: True Page: 218 Difficulty: Medium
26.Letters from customers, distrib utors, or subcontractors are examples of informationthat should be
included in the executive summary of a business plan.Answer: False Page: 219 Difficulty: Medium
27.Since bills have to be paid at different times of the year, cash flow projections should be
presented monthly.Answer: True Page: 220 Difficulty: Easy
28.Bankers agree that mo st business failures are due to the entrepreneur's inability to
planeffectively.Answer: True Page: 220 Difficulty: Medium
29.Typically business plan projections are made in a 36-month
schedule.Answer: False Page: 220 Difficulty: Medium
30.Which of the following statements is (are) true?
A)T he business plan describes both internal and external elements.
B)The preliminary b usiness plan should be prepared by a lawyer.
C)Most business plan resources on the Internet are too complex and expensive to beof use to the new
venture.
D)Once made, a business plan should no t be changed
.Answer: A Page: 199 Difficulty: Medium
31.Which of the following interested parties sho uld not
have access to the venture's business plan?
A)Suppliers
B ) L e n d e r s
C ) I n v e s t o r s
D ) C o m p e t i t o r s Answer: D Page: 199 Difficulty: Easy
32.The depth and detail of a business plan depend on:
A)the target audience.
B)the experience of the entrepreneur.
C)the size and scope of the new venture.
D)the amount of capital nee
Answer: C Page: 201 Difficulty: Medium
33.While preparing the first draft of the business plan, the entrepreneur should not:
A)prepare it from his or her personal vie wpoint.
B)take into consideration the constituencies that will ultimately read and evaluate the plan's
feasibility.
C)prepare it with an aim to identify possible barriers to success.
D)try to define the goals and objectives of the venture.
Answer: B Page: 202 Difficulty: Medium
34.When evaluating business plans _________ are primarily concerned with the four Csof
credit.
A)investors
B ) l e n d e r s
C ) v e n d o r s
D)employees
Answer: B Page: 202 Difficulty: Medium
35.The business plan presentation for potential investors:
A)should be presented only in writing.
B)should contain no negative projections.
C)sho uld enable the entrepreneur to “sell” his or her business concept in adesignated period of time..
D)should provide the entrepreneur’s o wn persp ective.
Answer: C Page: 203 Difficulty: Medium
36.Investors often place more emphasis on the entrepreneur’s _________ than lenders do.
A)experience
B ) c h a r a c t e r
C)financial records
D)personal viewpoint
Answer: B Page: 203 Difficulty: Medium
37.Before beginning the business plan, the entrepreneur should define the venture's goalsand
objectives. These goals should be:
A)general and broad.
B ) f e a s i b l e .
C)guaranteed.
D ) u n i q u e .
Answer: B Page: 204 Difficulty: Medium
38.When collecting marketing information the entrepreneur should:
A)not include general environmental information.
B)start with narrow-based data and work do wn to a more broader scope of information.
C)identify competitors.
D)not aim to define a specific market.
Answer: C Page: 205 Difficulty: Medium
39.To assess the potential profitability of a venture, the entrepreneur needs to
ascertainexpected sales and expense figures for the first:
A ) m o n t h .
B ) y e a r .
C ) q u a r t e r .
D)three years.
Answer: B Page: 208 Difficulty: Medium
40.Groups of Internet visitors who share opinions and have si milar interests are called:
A)page groups.
B)newsgroups.
C)library sources.
D)news homes.
Answer: B Page: 209 Difficulty: Medium
41.The usefulness of the title or introductory page is:
A)that it provides informatio n about the comp any.
B)such that it requires several pages.
C)questionable, especially to investors.
D)that it contains backup data.
Answer: A Page: 209-210 Difficulty: Medium
42 .The executive summa ry section sho uld:
A)be prepared before the total plan is written.
B)highlight key financial milestones that have been achieved.
C) be abo ut two to three p age s in le ngth
. D)try to summarize every section of the plan.
Answer: C Page: 212 Difficulty: Eas
43.The section of the business plan in which the entrepreneur identifies
changesoccurring on the national and international level is the:
A)merchandising plan.
B)description of the venture
C)environmental and industry analysis.
D)executive summary.
Answer: C Page: 212 Difficulty: Medium
44.The part of the plan that describes the location and size of the business, the
personneland office equipment that will be needed, and the history of the venture is called the:
A) organizational plan.
B) description of the venture.
C) production plan.
D)executive summary.
Answer: B Page: 213-214 Difficulty: Hard
45.If the new venture is a manufacturing operation a(n) __________ in the business
planis necessary.
A)ownership plan
B)quality control plan
C)production plan
D)partnership agreement
Answer: C Page: 215 Difficulty: Easy
46.If the new venture is not a manufacturing operation, but a retail store or service, a
newsection of the business plan is required which is called the:
A)organizational plan.
B)production plan.
C)operational plan.
D)executive summary.
Answer: C Page: 216 Difficulty: Medium
47.Distribution, pricing, and promotion of the product are discussed in which section
of the plan?
A)Marketing
B)Production
C)Merchandising
D)Organization
Answer: A Page: 217 Difficulty: Medium
48.The organization plan describes the business':
A)physical plant and machinery layout.
B)location as well as its plant(s).
C)system of distribution.
D)form of ownership.
Answer: D Page: 218 Difficulty: Medium
49.Which of the following documents is
not usually included in the Financial Plan?
A)Statement of cash flows
B)Income statement
C)Price lists from suppliers
D)Projected balance sheet
Answer: C Page: 219 Difficulty: Easy
50.The business plan is designed to guide the entrepreneur:
A)through the first year of operations.
B)through the distribution process.
C)in the financing process.
D)in case of a change in ownership.
Answer: A Page: 219 Difficulty: Medium
51.The tendency among many entrepreneurs is to:
A)avoid planning.
B)not take initiative.
C)not market their product or services.
D)lose focus on the business plan.
Answer: A Page: 220 Difficulty: Medium
52.By controlling ___________, the firm can ensure maximum service to the customer.
A)production
B ) s a l e s
C ) i n ve n t o r y
D ) c o s t s
Answer: C Page: 221 Difficulty: Medium