Q1. An effective market analysis in a business plan should include:
a. a clear definition of the company's target market.
b. the types of advertising and promotional campaigns that will reach the intended audience most effectively and efficiently.
c. market size and trends.
d. all of the above.
Q2. Which of the following is a technique that top salespeople use?
a. Use an indirect sales approach so that customers never suspect that a sales call is taking place.
b. Measure their success strictly by the volume of sales they generate.
c. See themselves as problem solvers for their customers rather than just vendors.
d. Never leave sales literature with customers unless they specifically ask for it.
Q3. The first step in conducting market research is:
a. collecting the data
b. analyzing the data
c. defining the problem
d. buying a mailing list from a list broker
Q4. Nigel Bruce, owner of The Men's Market, an upscale men's clothing store, is reviewing his company's balance sheet for the previous month. Where on the balance sheet will Nigel find the value of the company's inventory listed?
a. current liabilities
b. long-term liabilities
c. current assets
d. fixed assets
Q5. When making a business plan presentation, an entrepreneur should:
a. plan to have at least one hour to explain the business, its benefits and its value.
b. explain in detail the technology or the mechanics behind the product or service and the effort and time required to develop it.
c. Use visual aids to punctuate the presenter's spoken message and to focus the audience's attention on the most important points.
d. All of the above.
Q6. Fans of which of the following sports demonstrate the highest loyalty to sponsors' products?
a. football
b. baseball
c. golf
d. NASCAR racing
Q7. Companies selling high-tech products such as computers and cellular phones often rely on a __________ pricing strategy in which they initially establish a high price for a product and then, as technological advancements lower their costs, push its price down, preferably ahead of the competition.
a. penetration
b. skimming
c. sliding down the demand curve
d. cyclical
Q8. __________ is any sales presentation that is nonpersonal in nature and is paid for by an identified sponsor.
a. publicity
b. personal selling
c. advertising
d. promotion
Q9. The __________ ratio measures the owners' rate of return on their investment in the business.
a. current
b. quick
c. net profit on sales
d. net profit to equity
Q10. A __________ pricing strategy for a new product or service maintains a relatively low profit margin so that a company can gain its quick acceptance into the market and quickly achieve a high volume of sales.
a. penetration
b. skimming
c. sliding down the demand curve
d. cyclical
Q11. __________ estimates the sales revenue a company would lose by measuring the percentage of customers who would leave because of poor service.
a. Data mining
b. Customer sensitivity analysis
c. Customer alignment
d. Revenue at risk
Q12. A typical manufacturing company pays __________ percent of the value of its inventory to cover the cost of borrowed money, warehouse space, materials handling, staff, lift-truck expenses, and fixed costs.
a. 10 to 15
b. 25 to 30
c. 35 to 40
d. 50 to 55
Q13. The __________ ratio measures the percentage of a company's sales that remains as profit after paying all of its expenses.
a. current
b. quick
c. net profit on sales
d. net profit to equity
Q14. The __________ cost of an advertisement measures its cost per potential customer reached.
a. absolute
b. relative
c. differential
d. parametric
Q15. The heart of the cash budget is the __________ forecast.
a. income
b. profit
c. sales
d. accounts receivable
Q16. In the __________ stage of the product life cycle, sales volume continues to rise, but profit margins peak and then begin to decline as competitors enter the market.
a. growth and acceptance
b. maturity
c. saturation
d. decline
Q17. In __________ advertising, a manufacturing company shares the cost of advertising with a small retailer if the retailer features its products in those ads.
a. cause
b. shared
c. cooperative
d. conjunctive
Q18. Radio advertisements reach __________ percent of all customers each week.
a. 25
b. 55
c. 75
d. 95
Q19. One study found that __________ percent of small business owners analyzed their companies' financial statements as part of the managerial planning and decision making process.
a. 11
b. 21
c. 36
d. 48
Q20. To calculate the breakeven point, a business owner should use which of the following formulas?
a. total variable expenses / contribution margin as a percentage of sales
b. total fixed expenses / contribution margin as a percentage of sales
c. (total revenue - total expenses) / total revenue
d. contribution margin as a percentage of sales / total expenses
Q21. The __________ ratio expresses the relationship between the capital contributions to a company from its creditors and those of its owners; it measures what a business "owes" to what it "owns."
a. current
b. debt
c. debt to net worth
d. times interest earned
Q22. A business plan:
a. should be at least 50 pages long to prove to potential lenders and investors that an entrepreneur has researched the business opportunity thoroughly.
b. should follow a standard format so that potential lenders and investors know where to find what they are looking for.
c. does not guarantee success, but it does improve the chance of succeeding.
d. all of the above
Q23. __________ define(s) where an entrepreneurs wants to take her business; __________ address(es) the question of how to get there.
a. Strategy; goals and objectives
b. Vision; goals and objectives
c. Goals and objectives; strategy
d. Strategy; vision
Q24. To get external financing, every business plan must pass three tests. The __________ test involves proving to lenders and investors that the business offers a high probability of repayment or an attractive rate of return.
a. reality
b. competitive
c. value
d. market
Q25. Although banner ads produce a click-through rate of just __________ percent, they remain a popular form of advertising on the World Wide Web
a. less than 10
b. 10 to 25
c. 25 to 50
d. more than 50
Q26. Quantitative data from the entrepreneur's market research form the basis of the financial projections throughout the business plan.
a. true
b. false
Q27. The typical direct mail advertising campaign produces a response rate of __________ percent.
a. 2
b. 7
c. 16
d. 24
Q28. Inventory represents the largest investment for most businesses.
a. true
b. false
Q29. The __________ takes a "snapshot" of a business, giving the owner an estimate of the company's worth as of a given date.
a. income statement
b. balance sheet
c. statement of cash flows
d. debt ratio
Q30. Which of the following ratios tells business owners how fast merchandise is moving through their companies?
a. quick ratio
b. average collection period ratio
c. average inventory turnover ratio
d. net profit to equity
Q31. Which of the following statements most accurately reflects the relationship between the startup cash required for a company and its anticipated inventory turnover ratio?
a. The higher a company's average inventory turnover, the greater the amount of startup cash it will require.
b. The higher a company's average inventory turnover, the smaller the amount of startup cash it will require.
c. A company's startup cash requirement is equal to its average inventory turnover times 12.
d. There is no connection between a company's average inventory turnover and the amount of startup cash it will require.
Q32. The first and most important function a business plan serves is:
a. guiding a startup company's operations by charting its future course and devising a strategy for following it.
b. attracting money from lenders and investors.
c. convincing suppliers to sell to a startup company on credit.
d. to attract customers and clients who otherwise would not consider doing business with a startup company.
Q40. Stop 'N Shop, a small convenience store, is running a special sale on candy bars from a particular maker. The candy bars normally sell for 50 cents each, but Stop 'N Shop is pricing them at "4 for $1.75" for a limited time. Stop 'N Shop is using which pricing technique?
a. zone pricing
b. price lining
c. multiple pricing
d. cash discount
Q41. Which factor do Americans rank as the most important determinant of "quality"?
a. low price
b. reliability (average time between failures)
c. durability (how long it lasts)
d. ease of use
Q42. When a customer's account becomes past due, a business owner should:
a. not bother the customer over the past due bill, even if it is a sizeable one, for fear of alienating the customer and losing him or her forever.
b. take immediate action in the form of either a letter or a telephone call that serves as a polite reminder that the bill is due and asks for payment.
c. immediately turn the account over to a collection agency.
d. call the "deadbeat" customer and threaten to ruin his or her credit by telling the customer's other suppliers about the past due account.
Q43. Annette Tosca is planning to launch a retail gift store and has been busy gathering financial information for her business plan. If Annette knows that the net profit margin for the typical gift store is 6.3 percent, what sales level must she achieve to reach her target net income of $28,000?
a. $29,882
b. $176,400
c. $204,400
d. $444,444
Q44. Vern Schlichter, owner of The Import Shop, a garage specializing in foreign auto repairs wants to make sure that the hourly price he charges for his company's repair service will cover his costs and generate the desired profit. Using his most recent income statement, Vern estimates that he and his employees spent 8,465 hours repairing cars at a total cost (excluding parts) of $281,461. If Vern's target net profit margin is 20 percent, what price per hour should he set for labor (excluding parts)?
a. $26.60
b. $39.89
c. $41.56
d. $166.25
Q45. The two-thirds rule says that:
a. only two-thirds of the entrepreneurs with a viable business venture will find financial backing.
b. of those entrepreneurs who get financing will get just two-thirds of what they initially requested.
c. getting the financing to start a business will take entrepreneurs two-thirds longer than they expected.
d. all of the above
Q46. To get external financing, every business plan must pass three tests. The __________ test revolves around proving that a market for the company's products or services actually does exist.
a. reality
b. competitive
c. value
d. financial
Q47. __________ involves the exchange of goods and services for other goods and services rather than for cash and is an effective way to conserve valuable cash.
a. Speculation
b. Arbitrage
c. Barter
d. Leasing
Q48. __________ are a form of World Wide Web advertising that involves attaching a small program to users' computers whenever they visit a Web site which creates an electronic footprint of users and sends pop-up ads that would be of interest to them.
a. Banner ads
b. Push technology ads
c. Cookies
d. Full-page ads
Q49. The Downtown Hobby Shop expects net daily sales of $1200, with the cost of goods sold at $750 and total expenses of $250. Variable expenses, including cost of goods sold, is estimated at $800, with fixed expenses of $200. What is the breakeven sales?
a. $250
b. $800
c. $1000
d. $606
Q50. A business plan that an entrepreneur is planning to present to someone outside the company should:
a. be visually appealing, including color charts, figures, and diagrams to illustrate key points.
b. be free of spelling and grammatical errors.
c. include a table of contents that makes it easy for the reader to navigate the plan.
d. all of the above.
Q51. Breakeven volume equals:
a. Total Variable Costs / (Sales Price per Unit - Variable Costs per Unit)
b. Total Fixed Costs / (Sales Price per Unit - Variable Costs per Unit)
c. Fixed Costs per Unit / (Sales Price per Unit - Variable Costs per Unit)
d. Variable Costs per Unit / (Sales Price per Unit - Fixed Costs per Unit)