Deck 4: Creativity and the Business Idea

Question 1

As described in the Opening Profile to Chapter 4, the secret to Jimmy Pattison's success is the integrated nature of his many businesses, that is, all of the companies exist to support each other.

Answer 1

False

Question 2

As described in the Opening Profile to Chapter 4, the underlying theme to Jimmy Pattison's success would appear to be those who demand more of themselves and others, get more.

Answer 2

True

Question 3

For a business, planning is a process that never ends.

Answer 3

True

Question 4

Summary: at the end of the chapter you are reminded that business plan may be read by

A) Employees
B) Investors
C) Suppliers
D) Consultants
E) All of the answers are correct.

Question 5

As defined in the text, the marketing plan is a written document describing all relevant internal and external elements and strategies for starting a new venture.

Question 6

To a business, the purpose of planning is to provide guidance and structure to management in a rapidly changing market environment.

Question 7

As discussed in the text, the significance of a business plan to a new business venture can best be illustrated by comparing it to a cookbook of recipes.

Question 8

There is a tendency among entrepreneurs to avoid planning, why is this a problem and how should it be handled?

Question 9

An entrepreneur should consider writing the business plan from three perspectives: their own, from the customer's, and from an investor's.

Question 10

Discuss how Michael Porter's forces model can be used to assess risk in a new venture.

Question 11

The amount of depth and detail in a business plan depends entirely on how successful the entrepreneur wants the new venture to be.

Question 12

Discuss the different factors that would be considered when analyzing a potential location for a new venture.

Question 13

Describe the type of information that might be included in a manufacturing operations feasibility study for a new venture.

Question 14

The business plan can serve as an important tool in helping to obtain financing, because it can help an investor or lender to predict the future viability of the business and its ability to repay money lent to it.

Question 15

To a lender, the four Cs of credit are computers, capital, compromise, and collateral.

Question 16

Venture capitalists and other investors typically demand high rates of return for their investment in a new venture, due to their long-term perspective.

Question 17

Discuss the purpose of the business plan presentation and what an entrepreneur should focus on when putting one together.

Question 18

Discuss the importance of a business plan for a new business venture from the perspective of the entrepreneur and other interested stakeholders.

Question 19

Market information needed to prepare the business plan is generally not available.

Question 20

Discuss the importance of the business plan to a new business venture by describing the questions that the plan should seek to answer.

Question 21

As described in the Opening Profile to Chapter 6, the secret to Jimmy Pattison's success is due to which of the following?

A) Customer satisfaction is the number one priority.
B) His reputation and actions as a tough employer.
C) His fierce determination to remain a privately owned and operated company.
D) His use of strict evaluation practices to avoid overpaying for an asset.
E) All of the answers are correct.

Question 22

As discussed in the Opening Profile to Chapter 6, Jimmy Pattison's attitude towards human resource management can best be described by which of the following?

A) Employees are his companies' greatest asset.
B) Poor performing employees are considered non-productive assets that need to be removed from the company as soon as they are identified.
C) Setting performance expectations at reasonable levels provides everyone with the experience of success, an important aspect of employee development.
D) Happy employees are the most productive employees.
E) None of the answers apply.

Question 23

As discussed in the Opening Profile to Chapter 6, Jimmy Pattison's attitudes towards planning can best be described by which of the following?

A) Planning is best left to the experts, entrepreneurs are more interested in action.
B) Annual business plans for each of his companies are used to evaluate performance and provide direction.
C) Planning is done primarily to satisfy the requirements of being a publicly-traded company in Canada.
D) Planning was more important early in his career when he was just getting started and needed financing.
E) None of the answers apply.

Question 24

As defined in the text, a written document describing all relevant internal and external elements and strategies for starting a new venture is known as a __________.

A) environmental scan
B) operational plan
C) business plan
D) new business prospectus
E) None of the answers apply.

Question 25

Time to take action: generally speaking, it is recommended that in developing a business plan, you should

A) Keep your plans confidential
B) Only talk to a few people
C) Speak to as many people as possible
D) All of the answers are correct.
E) None of the answers apply.

Question 26

While business plans may vary in terms of scope and function, the overall purpose that they all have in common is to __________.

A) provide guidance and structure to management in a rapidly changing market environment
B) reduce the business idea to a set of easily managed tasks to facilitate start-up
C) identify gaps in the entrepreneur's thinking that may hinder success in the new venture
D) ensure flexibility in choice of target markets for the new business venture
E) None of the answers apply.

Question 27

Which of the following interested parties may require or request access to the venture's business plan?

A) suppliers
B) lenders
C) investors
D) customers
E) All of the answers are correct.

Question 28

Comparing a business plan to a road map is primarily based on which of the following statements?

A) Both indicate the scale of operations that should be used to evaluate an idea or situation.
B) Both require the ability to interpret information.
C) Both require someone else's prior experience with the task at hand.
D) Both will answer the questions of: where am I now, where am I going, and how do I get there?
E) All of the answers are correct.

Question 29

Generally, the business plan should be prepared by __________.

A) the entrepreneur
B) a qualified business consultant
C) an accountant
D) a marketing research expert
E) None of the answers apply.

Question 30

Which of the following is not one of the three perspectives that should be considered when preparing the business plan?

A) a potential investor
B) the customer
C) a competitor
D) the entrepreneur

Question 31

The entrepreneur should also document customer needs before preparing the plan. Customer needs can be identified from

A) Direct experience
B) Letters from customers
C) Marketing research
D) All of the answers are correct.

Question 32

The business plan is important to the entrepreneur and other interested stakeholders for which of the following reasons?

A) It helps to determine the viability of the venture in a designated market.
B) It provides guidance to the entrepreneur in organizing his or her planning activities.
C) It serves as an important tool in helping to obtain financing.
D) All of the answers are correct.
E) None of the answers apply.

Question 33

The purpose of using the first draft of the business plan as a feasibility study would be to__________.

A) to define the goals and objectives of the venture
B) to identify possible barriers or obstacles to success
C) to determine if there are ways to overcome any identified barriers to success
D) All of the answers are correct.

Question 34

When it comes preparing a business plan, computer-generated software packages __________.

A) can take most of the guesswork and research out of the process
B) should be used as a guideline to assist in the process, not be the process
C) can be used to appeal to different audiences with little to no modification required
D) have replaced most of human judgement previously required in the process
E) None of the answers apply.

Question 35

Generally, a lack of experience will result in failure unless the entrepreneur can.

A) attain the necessary knowledge
B) team up with someone who already has knowledge
C) A and B
D) Lack of experience is not a problem - it is better to have enthusiasm
E) None of the answers apply.

Question 36

Which of the following is not one of the four C's of credit, as used by lenders when evaluating business plans?

A) character
B) cash flow
C) cost projections
D) collateral
E) (equity) contribution

Question 37

As discussed in the text, when evaluating business plans for new ventures, investors often place more emphasis on __________ than lenders do.

A) projected cash flow
B) intellectual property employed
C) the entrepreneur's character
D) amortization of fixed assets
E) None of the answers apply.

Question 38

The business plan presentation for potential investors __________.

A) should be presented only in writing
B) should contain no negative projections
C) should be 20-30 minutes long
D) use electronic multimedia to increase the "wow" factor
E) All of the answers are correct.

Question 39

The essential advice for presenting the business plan to potential investors was __________.

A) keep it simple and be prepared
B) provide as much detail as the audience can handle
C) use repetition to guarantee that your points are understood
D) don't assume that the audience is receptive to new ideas
E) None of the answers apply.

Question 40

As discussed in the text, prior to writing the business plan, the entrepreneur should review the opportunity in terms of __________.

A) its competitive positioning in the marketplace
B) their own quantitative and qualitative goals
C) probability of failure
D) the commitment required to see it through
E) None of the answers apply.

Question 41

As discussed in the text, the first step in attempting to determine the market potential for a new venture is to __________.

A) identify all competitive offerings within the local market
B) define the market
C) gather national industry trends for the specific venture
D) decide on the scope of the business
E) None of the answers apply.

Question 42

When collecting market information the entrepreneur should attempt to __________.

A) evaluate general environmental trends
B) evaluate trends in the specific industry of the new venture
C) assess the local market where the venture will be located
D) analyze the competitive environment for the new venture
E) All of the answers are correct.

Question 43

When collecting market information to determine the market potential of the new venture, the entrepreneur should __________.

A) start with very specific information and work up to more broad-based data and information
B) draw from all available sources of information
C) start with very broad-based data and information and work down to more specific information
D) rely only on publicly-funded sources of information as they are the most unbiased
E) None of the answers apply.

Question 44

When collecting market information to determine the market potential of the new venture, general environmental trends of interest would include which of the following?

A) household income trends
B) population shifts
C) industry-specific consumption trends
D) employment trends
E) All of the answers are correct.

Question 45

As discussed in the text, when collecting market information to determine the potential for the venture, the entrepreneur should first attempt to __________.

A) evaluate general environmental trends
B) evaluate trends in the specific industry of the new venture
C) assess the local market where the venture will be located
D) analyze the competitive environment for the new venture
E) None of the answers apply.

Question 46

As discussed in the text, when collecting market information to determine the potential for the venture, the second task for the entrepreneur should be to __________.

A) evaluate general environmental trends
B) evaluate trends in the specific industry of the new venture
C) assess the local market where the venture will be located
D) analyze the competitive environment for the new venture
E) None of the answers apply.

Question 47

As discussed in the text, when collecting market information to determine the potential for the venture, the third task for the entrepreneur should be to __________.

A) evaluate general environmental trends
B) evaluate trends in the specific industry of the new venture
C) assess the local market where the venture will be located
D) analyze the competitive environment for the new venture
E) None of the answers apply.

Question 48

As discussed in the text, when collecting market information to determine the potential for the venture, the fourth task for the entrepreneur should be to __________.

A) evaluate general environmental trends
B) evaluate trends in the specific industry of the new venture
C) assess the local market where the venture will be located
D) analyze the competitive environment for the new venture
E) None of the answers apply.

Question 49

The end result(s) of the four-step gathering market information process discussed in the text should be__________.

A) to clarify the product or service offering
B) to determine the actual market positioning in the competitive environment
C) to help set the market objectives for the new venture
D) All of the answers are correct.

Question 50

A feasibility study of the manufacturing operations for a new venture would include which of the following types of information?

A) equipment required
B) location and type of facility required
C) sources of raw materials
D) labour skills required
E) All of the answers are correct.

Question 51

A study that included information on the location, facility, equipment, processes, raw materials, labour skills, overhead expenses, and space for a new business venture would most likely to be which of the following?

A) market feasibility study
B) manufacturing operations feasibility study
C) business plan
D) marketing plan
E) None of the answers apply.

Question 52

The entrepreneur and his or her family must make a total commitment to the business in order to be able to meet the demands of a new venture.

A) it is very possible to operate a new venture on a part-time basis while still holding on to a full-time position
B) it is difficult to operate a new venture on a part-time basis while still holding on to a full-time position
C) it is very easy to operate a new venture on a part-time basis while still holding on to a full-time position
D) it is "no problem" to operate a new venture on a part-time basis while still holding on to a full-time position to make extra cash
E) None of the answers apply.

Question 53

The initial budget for the first year of operations should include which of the following expenditures?

A) capital expenditures
B) direct operating expenses
C) cash expenditures for non-expense items
D) All of the answers are correct.

Question 54

The initial budget for the first year of operations should include which of the following sources of funds?

A) revenue from sales
B) owner's investment
C) funds from external investors
D) funds from external lenders
E) All of the answers are correct.

Question 55

Benchmarks, industry norms, and financial ratios are typically used in preparing proforma financial statements for which of the following reasons?

A) They can provide reasonable assumptions regarding expenditures based on industry history and trends.
B) They take the guesswork out of estimating sales and expenses.
C) They are readily available for most industries.
D) They can be used as a basis for comparison with the entrepreneur's estimates.
E) All of the answers are correct.

Question 56

In preparing the business plan, the Internet can be used as a source of information for which of the following?

A) industry analysis
B) competitor analysis
C) measurement of market potential
D) demographic information
E) All of the answers are correct.

Question 57

The Internet can be used by entrepreneurs for which of the following reasons?

A) as a source of business intelligence for decision making
B) as part of their marketing strategy for communicating with customers
C) as a source of competitive intelligence
D) as a way of selling products or services to customers
E) All of the answers are correct.

Question 58

Newsgroups on the Internet can be useful to an entrepreneur for which of the following reasons?

A) People who participate in newsgroups are potential customers who can provide marketing intelligence.
B) Staying current with general news is part of an environmental scanning initiative.
C) Entrepreneurs need unbiased support from many sources, including those found on the Internet.
D) Newsgroups tend to be more objective than commercially available marketing research information.
E) None of the answers apply.

Question 59

When it comes to writing the business plan, many entrepreneurs are shocked or surprised to find out__________.

A) how quickly it comes together due to their enthusiasm and energy level
B) that more than one type or versions of the plan will be needed
C) how easily and cheaply the plan can be purchased online
D) that interested stakeholders encourage the use of different formats as it shows creativity
E) None of the answers apply.

Question 60

The primary difference between a business plan written for investors and the master business plan is__________.

A) the plan for potential investors is much longer than the master plan
B) the plan for potential investors focuses only on financial considerations
C) the master plan is more comprehensive in nature and therefore, much longer
D) the degree of optimism shown in the investor's plan
E) None of the answers apply.

Question 61

As presented in the text, the purpose of the snapshot business plan is to __________.

A) capture the business idea at one given point in time
B) get the attention of potential investors and sell them on the business idea
C) describe the business idea in 100 words or less
D) fairly represent both the merit and the risk of the proposed business venture
E) None of the answers apply.

Question 62

In writing the snapshot version of the business plan, the entrepreneur should __________.

A) avoid buzz words and long phrases
B) use lists, bullet points, pictures, graphs, and diagrams to present information
C) use headers to separate the text and draw attention of key statements
D) never exaggerate or lie
E) All of the answers are correct.

Question 63

As discussed in the text, to avoid becoming overwhelmed by the task of writing the business plan, an entrepreneur should __________.

A) hire someone else to do the job
B) start with the operations plan
C) start by writing the executive summary first and then expand from there
D) start with the marketing plan and go from there
E) None of the answers apply.

Question 64

Setting goals requires the entrepreneur to be well informed .... Goals should be

A) Specific
B) Mundane
C) General
D) Non-specific to allow flexibility
E) None of the answers apply.

Question 65

The executive summary section of the business plan __________.

A) serves as the introductory page for most interested stakeholders
B) should be written after the complete plan is finished
C) is not intended to sell the business idea but rather present both sides
D) should summarize every section of the plan
E) All of the answers are correct.

Question 66

A poorly prepared business plan can be blamed on which of the following?

A) goals set by the entrepreneur are unreasonable
B) the entrepreneur has no experience in the planned business
C) the entrepreneur has not made a total commitment to the business
D) no customer need was established for the product
E) All of the answers are correct.

Question 67

As discussed in the text, bankers often say that many businesses fail due to __________.

A) lack of cash
B) the entrepreneur's inability to plan effectively
C) lack of initiative
D) lack of customers
E) None of the answers apply.

Question 68

Control measures that entrepreneurs may use to evaluate the progress of the business venture include which of the following?

A) inventory control
B) production control
C) quality control
D) sales control
E) All of the answers are correct.

Question 69

A discussion of how the economy, culture, technology, legal issues, industry demand, and competition could potentially affect the new venture would be found in the __________ section of the business plan.

A) description of venture
B) assessment of risk
C) environmental and industry analysis
D) operations plan
E) None of the answers apply.

Question 70

Cash flow statements are used in conjunction with income statements in the financial plan section of the business plan because __________.

A) sales and receipts from customers may be irregular while expenses tend to be more consistent
B) they provide a financial picture of the business at one point in time
C) sales and receipts from customers tend to be consistent while expenses may be irregular
D) they cover a shorter time frame than income statements
E) None of the answers apply.

Question 71

Which of the following is not one of the three major components of the financial plan section of the business plan?

A) proforma cash flow statement
B) statement of ownership
C) balance sheet
D) proforma income statement

Question 72

A discussion of raw materials, equipment, suppliers, and subcontractors needed in a new venture would be found in the __________ section of the business plan.

A) description of venture
B) production plan
C) assessment of risk
D) organizational plan
E) None of the answers apply.

Question 73

A business plan for a retail store or service would include a(n) __________ section which would describe the flow of goods and services from production to the customer.

A) organizational plan
B) production plan
C) operational plan
D) description of venture
E) None of the answers apply.

Question 74

For a service, the focus of the operations plan section of the business plan is to __________.

A) describe how the venture intends to make money providing the service
B) describe how internal factors will influence demand for its services
C) describe how the business will deliver its desired level of service quality
D) describe how the venture will be organized and managed
E) None of the answers apply.

Question 75

As discussed in the text, Michael Porter's forces model uses which of the following categories to assess risk?

A) threat of substitutions
B) buyer and supplier power
C) rivalry among competitors
D) threat of new entrants
E) All of the answers are correct.

Question 76

As discussed in the text, investors regard the __________ section of the business plan as critical to the success of the venture.

A) organizational plan
B) financial plan
C) marketing plan
D) assessment of risk
E) None of the answers apply.

Question 77

The marketing plan section of the business plan is generally regarded as being critical to the success of the venture for which of the following reasons?

A) It is typically the largest section of the plan.
B) It is the only section of the plan that deals with revenues.
C) The information contained within it is the least certain of the entire plan.
D) It provides the sales forecasts backed by research, and the strategies that will be used to achieve them.
E) None of the answers apply.

Question 78

Planning for the human resource requirements of the new venture are essential to success for which of the following reasons?

A) The incredibly high cost of a poor hiring decision
B) The difficulty in finding good people.
C) The lack of accountability for senior management.
D) The lack of company loyalty in today's generation of workers.
E) None of the answers apply.

Question 79

The form of ownership and lines of authority and responsibility of members of the new venture can be found in the __________ section of the business plan.

A) marketing plan
B) operations plan
C) organizational plan
D) human resources plan
E) None of the answers apply.