MGT 241 final – Flashcards

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Planning is not essential to the success of an undertaking.
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false
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Factors that must be addressed when planning a new venture include setting realistic goals, determining milestones, making a commitment, and having flexibility.
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true
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One of the indicators of the failure to anticipate roadblocks is a lack of priorities.
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false
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A lack of demonstrated experience, no clear market niche, a failure to anticipate roadblocks, no realistic goals set, and a lack of commitment are pitfalls or common points of failure that occur before an entrepreneur ever gets a plan reviewed.
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true
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Lack of any time frame to accomplish things is an indicator of the pitfall known as no realistic goals.
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true
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The easiest way to avoid the pitfall of no commitment or dedication is to designate that the venture is a hobby or a whim.
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false
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An investment prospectus is the same as a business plan.
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true
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The major purpose of a business plan is its utilization as a working document.
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false
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A business plan must illustrate the current status of the venture but not the projected results.
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false
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The business plan is the entrepreneur's road map for a successful enterprise.
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true
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One of the benefits of a business plan for a financial source is that it forces the source to view the plan for miscalculations.
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false
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An entrepreneur is much better off preparing his or her own business plan rather than hiring someone else, even if more experienced, to prepare it.
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true
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A business plan should be no more than 150 pages.
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false
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Because of the competition for funding, an entrepreneur's business plan needs to capture the reader's interest right away by stating the uniqueness of the venture.
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true
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There are only two viewpoints from which a business plan should be written, the entrepreneur's and the financial source.
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false
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An entrepreneur should include a three- to five-year financial projection so that the financial source can adequately evaluate the venture.
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true
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A summary gives a brief overview of what is the follow, helps us put all of the information into perspective, and should be no longer than ten pages.
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false
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A "niche" is a homogeneous group with common characteristics (i.e., all the people who have a need for a newly proposed product or service).
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true
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The manufacturing segment of the business plan should identify key personnel, their responsibilities and their positions, and career experience that qualifies them for those particular roles.
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false
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The pro forma balance sheet is used in the critical risk segment of the business plan
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false
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One suggestion for helping to recall key examples, visual aids, and other details when presenting the business plan is to utilize key words in the outline.
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true
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The entrepreneur should expect to encounter a friendly and supportive audience when presenting the business plan to potential financial sources.
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false
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The entrepreneur's professionalism and how well he or she handles the venture capitalist is far more important than being well organized and prepared.
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false
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In preparing a business plan for oral presentation, the entrepreneur should scan the outline once or twice.
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false
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A common mistake is business planning is to purge all acronyms and technical jargon from the plan
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false
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Every business plan should provide information about future harvest strategies.
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true
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After delivering a pitch, it is not acceptable to question venture capitalists who turn down a funding opportunity.
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false
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Planning entails the information of ______ and ______ for the future of a venture
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goals;directions
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In planning, there are a number of critical factors that must be addressed. On that the textbook mentions is
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commitment
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Which of the following is not a critical factor that should be addressed in planning a venture?
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specific profit goals
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The comprehensive business plan should be the result of
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reflections on the direction of the venture
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Which of the following is a pitfall to avoid in planning, according to the textbook author?
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Lack of priorities
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To avoid the pitfall of "no market niche" (segment), do what?
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clearly target a niche
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A business plan should illustrate
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the projected needs of the new business
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An indicator of the planning pitfall of "failure to anticipate roadblocks" is
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making no admission of possible flaws in the plan
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An indicator of the planning pitfall of "no commitment or dedication" is
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excessive procrastination
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An indicator of the planning pitfall of "no realistic goals" is
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lack of timetable to accomplish things
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Sometimes a business plan is referred to as
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a loan proposal
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The major thrust of the business plan, as defined in the textbook, is
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to encapsulate the strategic development of the project in a comprehensive document
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A business plan is
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a written document that details the proposed venture
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In some professional areas, the business plan is referred to as
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and investment prospectus
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Which of the following statements about a business plan is true?
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It is the minimum document required by financial sources
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A business plan
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may help an entrepreneur avoid a project that is "doomed" from the start
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To an entrepreneur, one of the benefits of a business plan is
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both a and b a. the development of operating strategies for outside evaluators. b. benchmarks for comparing forecasts with actual results
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It is important that an entrepreneur
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prepare his or her own plan
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The completed business plan provides the entrepreneur with
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a tool for communicating with financial sources
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Which of the following is not an important aspect of an entrepreneurial venture?
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family support
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Which of the following would be a benefit gained by financial sources from a business plan?
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The venture's ability to service debt of provide an adequate return on equity
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Which of the following is the most common viewpoint in business plans?
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the entrepreneur's viewpoint
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Which of the following is not one of the steps in reading a business plan discussed in the text?
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the thorough reading of each section
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A business plan _________ potential financial backers.
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establishes a first impression of the company and its principles on
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Which of the following describes advantages of the business plan for financial sources?
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the plan identifies critical risks
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It is recommended that the final copy of the business plan be
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put in a plastic folder
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The cover page should bear
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the name of the company
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An important guideline in putting the plan together is
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to identify the target market
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How can entrepreneurs best orient their plans towards the future?
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by developing trends and forecasts that describe what the venture intends to do
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Which of the following statements is not part of the "five-minute reading" by venture capitalists?
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Determine the strengths and weaknesses of the entrepreneur
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The recommended length of a business plan is
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about 20 to 25 pages
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Which of the following statements would not be an appropriate guideline for successful business plan development?
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Orient the plan to the present
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One thing that should be included in the business description is
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industry background
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A critical point to be included in the business description is
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the potential advantages then new venture has over the competition
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The second section of a business plan is
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the business description
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Which of the following is part of the marketing segment?
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the competitive analysis
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Which of the following is a critical factor to be considered in the management segment?
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organizational structure
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Which of the following statements may be the most important in new venture creation?
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the cash flow statement
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Blueprints, sketches, drawings, and models are often important features to be placed in what section of the business plan?
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research, design and development segment
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Which of the following is a critical factor that should be discusses in the management segment?
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board of directors and consultants
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The textbook recommends which of the following devices to help in the oral presentation of a business plan
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keywords on an outline
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Which of the following is something an entrepreneur should not do when preparing for the oral presentation of a business plan?
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make the presentation rigid
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Which of the following questions should an entrepreneur ask when a business plan is turned down?
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"If you were in my position, how would you proceed?"
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The entrepreneur must be
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able to handle questions from the evaluators
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Should a business plan/venture be turned down the first time, the entrepreneur should
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revise, rework, and improve the plan
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The day of the presentation, the entrepreneur should arrive early to
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set up, test any equipment, and organize notes and visual aids
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What is the significance of a harvest strategy segment in a business plan?
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It is important for the entrepreneur to designate how the business will recruit new talent to the enterprise.
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The actual need for systematic planning will vary with the nature, size, and structure of the business.
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true
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Formal planning can be divided into strategic and nonstrategic.
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false
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A "SWOT" analysis refers to analyzing strengths, weaknesses, opportunities, and threats.
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true
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The "best" strategic plan will be influenced by the abilities of the entrepreneur, the complexity of the venture, and the nature of the industry.
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true
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Participation by subordinates in a strategic plan is never appropriate.
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false
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Most entrepreneurs are unfamiliar with planning information sources.
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true
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Strategic planning is not an easy task for new ventures.
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true
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Research has shown a distinct lack of planning on the part of new ventures.
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true
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Small firm owners/managers are usually very open and trusting about their businesses and the decisions that affect them.
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false
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Lack of expertise has never been considered a reason for the lack of strategic planning in new ventures.
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false
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Many research studies suggest that strategic planning influence's a venture's survival.
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true
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Improved performance is often the result of better planning.
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true
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High - and low-performing firms have many similarities and differences in their long-range planning effort.
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true
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Misunderstanding industry attractiveness can be a fatal flaw in strategic planning.
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true
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The entrepreneurial strategy matrix measures risk and innovation.
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true
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Wealth creation occurs at the intersection of entrepreneurial and strategic actions.
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true
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In principle, incumbents and entrepreneurs face the same challenges in finding new strategic positions. In practice, incumbents often have an edge.
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false
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New ventures rarely exhibit a typical life cycle.
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false
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During the growth stage of a venture, entrepreneurs shift into a managerial style.
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true
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In administrative cultures, there is a need for clearly defined authority and responsibility.
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true
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Emerging ventures that are rapidly expanding with constantly increasing personnel size and market operations will need
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to formalize planning because there is a great deal of complexity
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Formation of long-range plans for effective management in light of a venture's strengths and weaknesses is referred to as
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strategic planning
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In many new small ventures planning is often
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lacking
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Analysis of a firm's external and internal environments provides the firm with the information to develop
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strategic intent and strategic mission
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A "SWOT" analysis refers to
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strength, weaknesses, opportunities, and threats.
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Which of the following factors would not be considered a key dimension that shapes the strategic management activities of a growing firm?
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lack of knowledge
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A reason for lack of strategic planning has been found to be
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lack of expertise
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The reason many small business managers lack expertise is that they are
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generalists
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Which is not perceived as a difficulty in long-range planning?
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arranging vacation time
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New ventures are important to the economy in terms of
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both a and b a. innovation b. employment
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Which of the following is not a reason for the lack of planning in new ventures?
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lack of dominance
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A reason new venture managers lack knowledge in the strategic planning process is because
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they have minimal exposure to the planning process
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Small business owners are often guarded about their business, which leads to
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distrust of others when formulating a strategic plan
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When it comes to strategic planning, most small firms
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really do not engage in true strategic planning
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Which of the following would be considered fatal mistakes in strategic planning, according to researcher Micheal E. Porter?
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a and c only a. no real competitive advantage c. compromising strategy for growth
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The entrepreneurial strategy matrix measures:
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risk and innovation
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In the entrepreneurial strategy matrix, the probability of a major financial loss is categorized as
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a risk
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In the entrepreneurial strategy matrix, the creation of something new and different is categorized as
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an innovation
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In the strategy matrix model, innovation is defined as
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something new and different
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All of the following are characteristic of administrative cultures except:
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need to reduce risk
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All of the following are characteristic of entrepreneurial cultures except:
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hierarchy
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Which is not a distinct form of tolerance for failure?
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innovation failure
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Which of the following management principles does not emanate from Steve Jobs?
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strive to reach practical milestones
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The past is the best predictor of the future, according to which mind-set?
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the managerial mind-set
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What is the one-person-band syndrome?
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failure to delegate
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The textbook describes three types of leadership of consequence to new ventures. What are they?
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visionary, strategic, and managerial
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Unique managerial concerns of growing ventures encompass all of the following except:
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agency problems
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Tangible assets as well as intangible assets of a business need to be assessed for proper venture evaluation.
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true
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"Why is the business being sold?" in not an important question to ask when analyzing the viability of buying a business.
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false
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An entrepreneur does not need to know how to calculate the value of a competitor's operation.
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false
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Business valuation is essential when attempting to buy out a partner.
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true
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Buyers and sellers assign different values to a business
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true
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Emotional bias is not an underlying issue in valuing a business
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false
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Entrepreneurs should try to be as objective as possible in determining the fair market value for their enterprise.
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true
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Increasing market share by acquiring a firm in the company's industry is one reason for the acquisition.
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true
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One of the most common reasons for acquiring a business is developing more growth-phase products.
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true
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Insufficient controls signify strength when analyzing the business being valued.
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true
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Adjusted tangible book value is a popular method of valuation.
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true
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The price/earnings ratio (multiple of earnings) method is determined by dividing the market price of common stock by retained earnings.
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false
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The real value of any venture is its potential earning power.
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true
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The timing of projected income or cash flows is not a critical factor in establishing the value of a firm.
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false
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Replacement value of a business is based upon the value of each asset if it had to be replaced at a certain cost.
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true
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Avoiding start-up costs is a factor to consider when valuing a business.
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true
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Brazil's human, mineral, and agricultural resources are on par with those of the United States.
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true
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When a company is liquidated, preferred stock holders received a certain fixed amount after assets are distributed to common stock holders.
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false
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Knowing a venture's pre-money valuation is not possible.
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false
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On what occasion is a business valuation not usually essential?
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when hiring a new director of operations
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Specific factors of a venture being offered for sale that should be examined include
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profits, sales, and operation ratios
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Emotional bias is likely to have what effect on a seller's valuation of a business?
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increase the valuation
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What is a rollup?
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the acquisition and merging of small companies in the same market
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________ refers to conducting a thorough analysis of every facet of an existing business.
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Due diligence
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Closely held ventures usually suffer from which of the following shortcomings?
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a lack of management depth
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Besides the purchase price, what else should be considered when buying a business?
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all of the above a. new inventory and living expenses b. three months' operating expenses and sales tax
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Which of the following is not a shortcoming that many closely held ventures possess?
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high equity and low debt
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Traditional valuation methods including all of the following except:
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high equity/low debt
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If cash flow is deemed the most important consideration in buying a business, which valuation method is likely to be used?
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discounted earnings
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When considering sales and distribution, the entrepreneur should be concerned about
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whether any sales are made on consignment
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When considering employees, the entrepreneur should be concerned about
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total number of employees by function
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When considering physical facilities, the entrepreneur should be concerned about
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which facilities are owned vs. leased
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When considering management, the entrepreneur should be concerned about
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ownership positions
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Return on investment
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is net profit divided by investment
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The primary advantage of the price/earnings approach to valuation is that
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it is simple to use
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The discounted earnings method of valuation establishes
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potential earning power
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Price/earnings ratio is a method of valuation that is
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most common with public corporations
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When Facebook went public in May of 2012, what was its starting valuation?
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more than $100 billion but less than $150 billion
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A drawback to the price/earnings ratio method is that
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the stated net income of a private company may not truly reflect its actual earning power
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What hidden costs are involved when establishing the value of a firm
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personal expenses
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Goodwill, family members on the payroll, and planned losses are examples of
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establishing the value of a firm
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If you agree that the real value of a business venture is its potential earning power, which valuation method, more than the others, would best determine its true value?
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discounted earnings method
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Which of the following are considered methods for valuation of a venture?
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a and c are correct a. return on investment c. multiple of earnings
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Book value of a firm is also known as
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balance sheet method
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Which of the following methods of valuation was developed by the U.S Treasury to determine a firm's intangible assets?
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excess earnings
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What does a post-money valuation include that a pre-money valuation does not?
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venture capital investment
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An adjusted tangible book value method includes
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both a and b a. goodwill b. patents
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The price/earnings ratio is determined by
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dividing market price of common stock by earnings per share
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Potential earning power, which determines the true value of the firm, is best calculated using
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the discounted earnings method
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One reason to keep projections in perspective is
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fluctuating markets
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Some buyers are willing to pay more for a business than what valuation methods determine its worth to be. What are these buyers attempting to avoid?
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start-up costs
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Sales and earnings of a venture are projected from
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historical financials
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In the context of buying a business, a know commodity may command a higher price for what reason?
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avoiding start-up costs has value
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When is the size of the labor force in Africa expected to top that of China?
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by 2040
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