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44) There is an emerging school of thought that opposes the idea of writing a business plan and
advocates experimentation and trial-and-error learning gleaned through customer feedback and
formal planning. How does the approach to writing a business plan described in this book differ
from this philosophy? How does trial-and-error learning figure into the approach to writing a
business plan advocated in this book?
45) The ________ is a short overview of the entire business plan.
A) summary statement
B) executive summary
C) managerial review
D) founder’s introduction
E) abstract
46) Which of the following statements is incorrect regarding the executive summary of a
business plan?
A) It is a short overview of the entire business plan.
B) In many instances an investor will first ask for a copy of a firm’s executive summary and will
request a copy of the full business plan only if the executive summary is sufficiently convincing.
C) It is arguably the most important section of the business plan.
D) It should not exceed two single-spaced pages.
E) The executive summary is the first thing that should be written in preparing a business plan.
47) Melanie Summer spoke to an investor who is interested in her business idea. Melanie offered
to send the investor a copy of her full business plan, but the investor asked for a short overview
of the business plan instead. What portion of her business plan should Melanie send the investor?
A) Marketing plan
B) Executive summary
C) Elevator pitch
D) Company description
E) Operations plan
48) According to the textbook, in many instances an investor will first ask for a copy of a firm’s
________ and will request a copy of the full business plan only if that portion of the plan is
sufficiently convincing.
A) appendix
B) industry analysis
C) operations plan
D) financial plan
E) executive summary
49) The Savvy Entrepreneurial Firm feature in Chapter 6 focuses on three companies: Songkick,
GrubHub, and Instagram. The overarching point of the feature is ________.
A) most business plans require major changes after the business is launched and the founders
start getting customer feedback
B) the degree to which business plans pan out as their founders envisioned varies
C) most business plans require only minor changes after the business is launched and the
founders start getting customer feedback
D) the most effective business plans take four to eight weeks to complete
E) most business plans are quickly discarded after the business is launched
50) Which of the following statements is incorrect regarding the industry analysis portion of a
firm’s business plan?
A) It is important to focus simultaneously on a business’s industry and its target market.
B) Industry structure refers to how concentrated or fragmented an industry is.
C) Most industries have 6 to 10 key success factors that should be reported in the industry
analysis.
D) Industry trends, which include both environmental and business trends, should be discussed.
E) The industry analysis should conclude with a brief statement of your beliefs regarding the
long-term prospects for the industry.
51) A company’s mission statement should be placed in the ________ section of its business
plan.
A) marketing plan
B) management team and company structure
C) company description
D) market analysis
E) industry analysis
52) Industry structure refers to how ________ an industry is.
A) concentrated or fragmented
B) traditional or progressive
C) innovative or conservative
D) hierarchical or flat
E) large or small
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53) A(n) ________ statement describes why a company exists and what it aspires to become.
A) tactical
B) values
C) mission
D) operations
E) strategic
54) A(n) ________, in a business plan context, is a noteworthy event in the past or future
development of a business.
A) aspiration
B) intention
C) signpost
D) milestone
E) target
55) The ________ section of a business plan breaks the industry into segments and zeroes in on
the specific segment (or target market) to which the firm will try to appeal.
A) competitive analysis
B) current status
C) market analysis
D) marketing plan
E) operations plan
56) A competitor analysis should be included in the ________ section of a business plan.
A) market analysis
B) industry analysis
C) company description
D) management team and company structure
E) operations plan
57) The Partnering for Success feature in Chapter 6 focuses on the need to involve others in what
the entrepreneurs are doing. This community of supporters is called ________.
A) the entrepreneurial team
B) the industry
C) stakeholders
D) shareholders
E) early evangelists
58) The ________ section of the business plan addresses the basic logic of how profits are
earned in the business.
A) economics of the business
B) operations plan
C) executive summary
D) design and development plan
E) market analysis
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59) Operating leverage is highest in companies that have ________.
A) a service rather than a manufacturing emphasis
B) virtually no fixed costs
C) equal variable and fixed costs
D) a high proportion of variable costs relative to their fixed costs
60) Which of the following statements is incorrect regarding the marketing plan section of a
business plan?
A) The marketing plan focuses on how the business will market and sell its product or service.
B) The two most important items to include in a marketing plan are (1) overall marketing
strategy and (2) the nuts and bolts of marketing a firm’s product in terms of product, price,
promotion, and place.
C) The best way to describe a company’s marketing plan is to begin by talking about its
competitors.
D) A firm’s marketing strategy refers to its overall approach for marketing its products and
services.
E) A firm’s overall approach to marketing typically boils down to how it positions itself in its
market and how it differentiates itself from its competitors.
61) A computer-generated image of an invention that displays the invention as a 3D model that
can be viewed from all sides and rotated 360 degrees is called a(n) ________.
A) virtual prototype
B) concept visualization
C) abstract prototype
D) virtual design
E) usability test
62) A prototype is ________.
A) a form of opportunity recognition
B) a tool for evaluating the industry a new firm plans to enter
C) a financial model
D) the first physical depiction of a new product
E) a tool for evaluating the organizational prowess of a new firm
63) What section of the business plan deals with the day-to-day operations of a company?
A) Financial plan
B) Marketing plan
C) Operations plan
D) Industry analysis
E) Executive summary
64) The facilities and equipment that a business needs should be described in the ________
section of its business plan.
A) marketing plan
B) management team and company structure
C) company description
D) market analysis
E) operations plan
65) According to the textbook, many investors and others who read business plans look first at
the executive summary and then go directly to the ________ section of the business plan to make
their preliminary assessment.
A) management team and company structure
B) product (or service) design and development plan
C) industry analysis
D) marketing plan
E) operations plan
66) A(n) ________ is a graphic representation of how authority and responsibility are distributed
within a company.
A) organizational chart
B) personnel chart
C) human resources chart
D) administrative chart
E) directional chart
67) The document that lays out specifically how much money a firm needs, where the money
will come from, and what the money will be used for is referred to as a(n) ________.
A) sources and uses of funds statement
B) assumptions sheet
C) pro forma financial statement
D) credit and debit statement
E) capital and operational budgeting statement
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68) Kate Payne was reading the business plan for New Venture Fitness Drinks, and noticed that
prior to its financial statements, New Venture Fitness Drinks placed an explanation of the
sources of the numbers for the statements and the assumptions used to generate them. This
explanation is called a(n) ________.
A) estimate sheet
B) hypothesis sheet
C) assumptions sheet
D) forecast sheet
E) forecast hypothesis
69) According to the textbook, the ________ are the heart of the financial section of a business
plan.
A) financial ratios
B) pro forma financial statements
C) budgets
D) sources and uses of funds statements
E) break-even analyses
70) Most business plan writers interpret or make sense of a firm’s historical and/or pro forma
financial statements through ________ analysis.
A) ratio
B) assumptions
C) scenario
D) proportion
E) relative
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71) What is an “executive summary?” Why is the executive summary often called the most
important part of a business plan?
72) Why is the “management team and company structure” section of the business plan often
given disproportionate weight among investors?
73) According to the textbook, the first rule in making an oral presentation is to ________.
A) follow instructions
B) be creative
C) emphasize all the positive aspects of a business venture
D) appear confident
E) do something out of the ordinary
75) How should the entrepreneur approach the oral presentation of the business plan?