41) Any assets pledged to the bank as security for repayment of the loan are the ________ of the
five Cs.
A) collateral
B) capacity
C) capital
D) conditions
Topic: What Lenders and Investors Look for in a Business Plan
AACSB: Analytic Skills
42) The intangible C that lenders examine in evaluating the business plan is that of:
A) capital.
B) character.
C) collateral.
D) capacity.
Topic: What Lenders and Investors Look for in a Business Plan
AACSB: Analytic Skills
43) The C of the five Cs that relates to the circumstances relating to the business, such as
potential growth in the market, form of ownership, location, etc., is called:
A) capital.
B) capacity.
C) conditions.
D) character.
Topic: What Lenders and Investors Look for in a Business Plan
AACSB: Analytic Skills
44) The executive summary should contain which of the following information?
A) A brief statement of the financial needs of the business and what the money would be used for
B) A short description of potential buyers
C) A brief history of the business
D) A complete description of your business
Topic: Suggested Business Plan Elements
AACSB: Analytic Skills
11
45) A description of the key factors that will dictate the success of your business quality, price
competitiveness, etc. should be contained in the ________ section of the business plan.
A) market analysis
B) executive summary
C) description of the business
D) competitor analysis
Topic: Suggested Business Plan Elements
AACSB: Analytic Skills
46) The form of ownership in your company should be explained in the ________ portion of the
business plan.
A) business strategy
B) plan of operation
C) executive summary
D) market analysis
Topic: Suggested Business Plan Elements
AACSB: Analytic Skills
47) You should identify your key people, explain their backgrounds and what they bring to the
business, in:
A) the executive summary.
B) the description of the management team.
C) the strategic plan.
D) the business strategy.
Topic: Suggested Business Plan Elements
AACSB: Analytic Skills
48) Your cash budget and an explanation of how much money you need to make your company
and product a long-term success are the subject matter of the:
A) financial plan.
B) strategic plan.
C) business strategic plan.
D) strategic action plan.
Topic: Suggested Business Plan Elements
AACSB: Analytic Skills
12
49) A ________ is what a customer gains from the product or service feature.
A) feature
B) bonus
C) discount
D) benefit
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
50) One technique involves ________, in which entrepreneurs test their business models on a
small scale before committing serious resources to a business that might not work.
A) a test run
B) business prototyping
C) duplicate business models
D) model prototyping
Topic: Cost Structure
AACSB: Analytic Skills
51) An executive summary should be:
A) a snapshot of the entire plan.
B) 3 to 5 pages.
C) written first.
D) All of the above
Topic: The Executive Summary
AACSB: Analytic Skills
52) The phrase, “avoid the off-the-shelf, ‘cookie-cutter’ approach that produces look-alike plans”
means:
A) avoiding a business plan that looks ordinary.
B) that every business plan is unique.
C) the business plan should reflect the excitement of the entrepreneur.
D) All of the above
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
13
53) An executive summary should:
A) explain the basic business model and the problem the business will solve for customers.
B) briefly describe the owners and key employees, target market(s), and financial highlights.
C) briefly describe the company’s competitive advantage.
D) All of the above
Topic: The Executive Summary
AACSB: Analytic Skills
54) A great source that profiles a variety of industries and offers projections for the future trends
is:
A) the Handbook.
B) an encyclopedia.
C) the Beige Book.
D) the Blue Book.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
55) Proving that a profitable market exists involves:
A) showing customer interest.
B) documenting market claims.
C) Both A and B
D) Neither A nor B
Topic: The Elements of a Business Plan: Marketing Strategy
AACSB: Analytic Skills
56) A business plan presentation should cover:
A) the company’s background and its products or services with a market analysis and a
description of the opportunities it presents.
B) the company’s competitive edge and the marketing strategies it will use to promote that edge.
C) the management team and its members’ qualifications and experience.
D) All of the above
Topic: Making the Business Plan Presentation
AACSB: Analytic Skills
14
57) A ________ is a descriptive fact about a product or service.
A) feature
B) product summary
C) benefit
D) None of the above
Topic: Elements of a Business Plan
AACSB: Analytic Skills
58) What is the synonym for capacity?
A) Capital
B) Cash flow
C) Collateral
D) Credit
Topic: What Lenders and Investors Look for in a Business Plan
AACSB: Analytic Skills
59) What is the competitive test?
A) It evaluates the company’s relative position to its key competitors.
B) It identifies the competitors only.
C) It finds their address and phone numbers.
D) None of the above
Topic: Three Tests That Every Business Plan Must Pass
AACSB: Analytic Skills
60) Which statement is correct?
A) Lenders and investors are familiar with industry cost structures.
B) A lender’s main consideration in granting a loan is the reassurance that the applicant will
repay.
C) An investor’s major concern is earning a satisfactory rate of return.
D) All of the above
Topic: The Loan or Investment Proposal
AACSB: Analytic Skills
15
61) Which financial forecast should be realistic?
A) Pessimistic
B) Most likely
C) Optimistic
D) All of the above
Topic: Pro Forma (Projected) Financial Statements
AACSB: Analytic Skills
62) Competitor’s analysis should identify:
A) Who are the company’s key competitors?
B) What are their strategies?
C) What images do they have in the marketplace?
D) All of the above
Topic: Competitor Analysis
AACSB: Analytic Skills
63) One effective documentation technique involves ________, in which entrepreneurs test their
business models on a small scale before committing serious resources to a business.
A) forecasting
B) business prototyping
C) collateral
D) None of the above
Topic: Cost Structure
AACSB: Analytic Skills
64) A well-prepared business plan helps determine the risks facing the venture.
Topic: The Benefits of a Business Plan
AACSB: Analytic Skills
65) The business plan has two essential functions; it helps the entrepreneur determine if the
business will succeed and it helps recruit management talent to run the new company.
Topic: The Benefits of a Business Plan
AACSB: Analytic Skills
16
66) The primary purpose of building a business plan is to raise capital.
Topic: The Benefits of a Business Plan
AACSB: Analytic Skills
67) Entrepreneurs who apply for loans without having prepared business plans are less likely to
get the money they need.
Topic: The Benefits of a Business Plan
AACSB: Analytic Skills
68) The quality of the entrepreneur’s business plan has little impact on the first impression
potential lenders and investors have of the company.
Topic: The Benefits of a Business Plan
AACSB: Analytic Skills
69) Often, the presence or absence of a quality business plan is a determining factor in a lender
or investor’s decision to put money into a business venture.
Topic: The Benefits of a Business Plan
AACSB: Analytic Skills
70) General requests for funds are likely to win approval.
Topic: The Benefits of a Business Plan
AACSB: Analytic Skills
71) An executive summary highlights the critical aspects of the plan.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
72) Investors read business plans in such detail that the executive summary is nice to have but it
is optional.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
17
73) The ideal business plan should be at least 100 pages long and somewhat hard to read in order
to demonstrate your thoroughness and to capture the venture capitalist’s attention.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
74) The executive summary should summarize all of the relevant points of the proposed venture
and should be concise—no more than two pages.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
75) The executive summary should highlight significant financial and operational events.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
76) The business plan should cover key people, the opportunity, provide a business context, and
explain the risks and rewards involved.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
77) The company history should explain why the company was formed, its past successes, and its
image in the marketplace.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
78) Objectives are long-range, broad statements of what the company plans to accomplish in the
distant future.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
79) Company goals address the question, “Why am I in this business?”
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
18
80) The industry analysis should cover existing profitability and anticipated profitability of firms
in the targeted market segment, and any significant entry or exit of firms.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
81) Business strategy outlines how the owner plans to achieve business objectives in the face of a
competitive environment.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
82) A feature is what a customer gains from a product.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
83) The executive summary should be written first and should be a broad general discussion of
the business plan.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
84) The “competitor analysis” section of the business plan is optional since few lenders and
investors are concerned about a small company’s rivals in the marketplace.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
85) The business strategy section addresses how the firm will meet the key success factors
necessary for success.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
86) When the entrepreneur describes the product in terms of what the customer gains through its
purchase and use, he/she is describing it in terms of its features.
Topic: The Elements of a Business Plan
AACSB: Analytic Skills
19