Chapter 4

Question 1

1) Starting a business from scratch may be chosen by an entrepreneur because:
A) there is lots of government funding for this strategy.
B) it provides a sense of satisfaction.
C) it is the most likely strategy to lead to success.
D) customers are often sympathetic to such start-ups.

Answer 1

B) it provides a sense of satisfaction.

Question 2

2) Starting a business from scratch can:
A) is a proven model for surviving the first few years of operation.
B) result in the least amount of start-up costs.
C) requires a significant personal investment of money from the entrepreneur.
D) reduce the usual risks inherent in a new business.

Answer 2

B) result in the least amount of start-up costs.

Question 3

3) Organizing a new business from scratch:
A) is a good strategy for eliminating risk.
B) eliminates the need to do significant market research. C) often fails because of the lack of historical information.
D) often overcomes the new owner’s uncertainties.

Answer 3

C) often fails because of the lack of historical information.

Question 4

4) When a competent feasibility study has been done by a new business owner:
A) starting a business from scratch is the most appropriate strategy.
B) some uncertainties will always remain.
C) it is possible to eliminate uncertainties.
D) demand after start-up is likely to be sufficient.

Answer 4

B) some uncertainties will always remain.

Question 5

5) A new business \_\_\_\_\_\_\_\_ has start-up problems. 
A) never
B) always
C) only sometimes 
D) rarely

Answer 5

B) always

Question 6

6) Writing a business plan is essential for:
A) managing the new business.
B) attracting reliable suppliers.
C) both raising money and assisting with day-to-day management.
D) raising money.

Answer 6

C) both raising money and assisting with day-to-day management.

Question 7

7) A business plan helps to: 
A) generate growth.
B) direct retail store layout.
C) keep business growth on course. 
D) attract customers.

Answer 7

C) keep business growth on course.

Question 8

8) Business plan formats and emphasis: 
A) define success.
B) vary depending on the use.
C) reflect the adequacy of funding. 
D) are standard.

Answer 8

B) vary depending on the use.

Question 9

9) It is recommended that business plans:
A) should only be used when required by lenders.
B) should be adapted from existing successful business plans.
C) should be written by the entrepreneur.
D) should be written by an outside consultant.

Answer 9

C) should be written by the entrepreneur.

Question 10

10) It is advisable to:
A) draft sections of a business plan as information becomes available.
B) plan the preparation of your business plan.
C) work on a business plan in its entirety at once.
D) work on a business plan based on intuition.

Answer 10

B) plan the preparation of your business plan.

Question 11

11) The executive summary:
A) is primarily for investors.
B) is primarily for management. 
C) is primarily for employees. 
D) is primarily for lenders.

Answer 11

A) is primarily for investors.

Question 12

12) A business plan is of value to: 
A) start-ups.
B) established businesses.
C) both start-ups and established businesses. 
D) new business owners.

Answer 12

C) both start-ups and established businesses.

Question 13

13) An analysis of competitors in a marketing plan would: A) assess legal restrictions.
B) be written for investors.
C) consider suppliers’ needs.
D) determine who the competitors are.

Answer 13

D) determine who the competitors are.

Question 14

14) Some well-known investors insist on business owners: 
A) who are younger than 55.
B) with relevant industry experience. 
C) who are well funded.
D) with engaging personalities.

Answer 14

B) with relevant industry experience.

Question 15

15) A business plan should include:
A) location impact on industry history.
B) product failure statistics.
C) industry growth trends.
D) social media contact information for management.

Answer 15

C) industry growth trends.

Question 16

16) New laws can mostly negatively: 
A) change product usefulness.
B) affect proposed marketing practices. 
C) influence customer attraction.
D) impact management passion.

Answer 16

B) affect proposed marketing practices.

Question 17

17) A saturation index refers to:
A) the frequency with which customers encounter products in retail outlets.
B) the number of units of products owned by customers in the trading area.
C) the ratio of competing retail sales to competing retail space.
D) the age and history of a product.

Answer 17

C) the ratio of competing retail sales to competing retail space.

Question 18

18) The personnel plan would include the:
A) plan for hiring, training, and managing those who will work in the business.
B) computer systems that would contain job descriptions.
C) renovation required for physical facilities.
D) accounting system that contains payroll information.

Answer 18

A) plan for hiring, training, and managing those who will work in the business.

Question 19

19) The following advice is offered to new entrepreneurs:
A) if you are very confident of your likely success, don’t be distracted by thoughts of losing it all.
B) it is good business to risk your own savings.
C) assume that you could possibly lose at least half of your personal investment in a business.
D) don’t risk more than you can afford to lose.

Answer 19

D) don’t risk more than you can afford to lose.

Question 20

20) Which is not a control element to measure business plan progress? 
A) Customer control
B) Inventory control 
C) Production control 
D) Disbursements

Answer 20

A) Customer control

Question 21

21) Business owners would consider incorporation mostly because:
A) they wish to limit liability.
B) it makes them feel successful from the beginning.
C) they are confused by a partnership arrangement.
D) it presents a more sophisticated-looking image.

Answer 21

A) they wish to limit liability