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True / False
1. A new venture's health is measured by its balance sheet.
a.
True
b.
False
2. Determining what resources are needed, when they are needed, and how to acquire them is a critical piece of the
feasibility puzzle.
a.
True
b.
False
3. Among the common startup financial metrics sales forecast and headcount.
a.
True
b.
False
4. A process map details how information flows through the business.
a.
True
b.
False
5. Where the new venture lies in the value chain will determine what its margins are, who its customer is, and how much
it can charge for its products and services.
a.
True
b.
False
6. How a product or service is priced is a function of a company's goals.
a.
True
b.
False
7. Price skimming is finding out what customers are willing to pay for the product and pricing it accordingly.
a.
True
b.
False
8. Pricing is not designed to cover total costs but to maximize total contribution - that is, unit price minus unit variable
costs.
a.
True
b.
False
9. The least important part of any financial plan is the assumptions on which it is based.
a.
True
b.
False
10. When an entrepreneur is attempting to gauge levels of demand, the customer is the prime source of information.
a.
True
b.
False
Multiple Choice
11. Pro forma financials are a key part of the ____.
a.
feasibility analysis
b.
business launch
c.
cash flow
d.
startup capital
e.
business plan
12. The bottom line for any new venture is to have ____.
a.
positive inventory
b.
good income statements
c.
great employees
d.
a strong founding team
e.
positive cash flow
13. Determining what resources are needed, when they are needed, and how to acquire them is a critical piece of the ____.
a.
business plan
b.
feasibility analysis
c.
founding team experience
d.
marketing plan
e.
profit and loss statements
14. Which of the following would not be considered a startup resource?
a.
Feasibility analysis
b.
Founding team
c.
Independent contractors
d.
Equipment
e.
Equity
15. Which of the following is not one of the categories into which the resources of a company are often divided?
a.
Human
b.
Social
c.
Financial
d.
Physical
e.
Value chain
16. Creating a ____ is the first step in calculating startup capital requirements.
a.
process map
b.
feasibility analysis
c.
business plan
d.
balance sheet
e.
timeline
17. Once the entrepreneur determines where the new venture lies in the value chain, he or she must create a ____.
a.
process map
b.
feasibility analysis
c.
business plan
d.
timeline
e.
None of these choices
18. Whenever there is competitive rivalry, prices tend to be ____.
a.
the same
b.
slightly higher
c.
lower
d.
50 percent higher
e.
None of these choices
19. How a product or service is priced is a function of the company's ____.
a.
business plan
b.
feasibility analysis
c.
process map
d.
goals
e.
product demand
20. Which of these pricing strategies will help a new firm maximize cash flow?
a.
Lower price to raise volume
b.
Raise price and reduce direct costs
c.
Set a higher price to raise perceived value
d.
Sell online
e.
None of these choices
21. ____ starts with a high price to establish uniqueness; then drops the price as competitors enter the market.
a.
Price skimming
b.
Premium pricing
c.
Product bundle pricing
d.
Captive product pricing
e.
Demand-based pricing
22. It is important to ensure that the final price to the customer or end user is tolerable, given all the mark-ups along the
value chain. This is called ____.
a.
premium pricing
b.
price skimming
c.
product bundle pricing
d.
captive pricing
e.
demand-based pricing
23. One mistake that entrepreneurs make is to set their prices so that they cover ____ costs plus a margin the entrepreneur
is expecting to achieve.
a.
inventory
b.
total
c.
marginal
d.
variable
e.
All of these choices
24. Entrepreneurs can reach a price that can be tested in the market by considering costs, competitor pricing, and ____.
a.
feedback from customers
b.
feedback from value chain partners
c.
customer behavior
d.
Both "feedback from customers" and "feedback from value chain partners"
e.
Both "feedback from customers" and "customer behavior"
25. In figuring ____, entrepreneurs must convert time to dollars and consider an opportunity cost
a.
customer acquisition cost
b.
revenue for direct sales
c.
revenue per sales person
d.
lifetime value per customer
e.
customer retention cost
26. Internet ventures have unique metrics because they typically start with three types of "customers": visitors,
contributors, and ____.
a.
investors
b.
end users
c.
distributors
d.
partners
e.
traffickers
27. ____ is found by subtracting variable costs from revenues and dividing the difference by revenues to yield a
percentage.
a.
Return on investment
b.
Contribution margin
c.
Profit margin
d.
Cash flow
e.
None of these choices
28. Which of the following is not a technique that can help entrepreneurs arrive at a realistic forecast of demand for their
product or service?
a.
Talk to customers
b.
Interview prospective end-users and intermediaries
c.
Prepare revenue forecasts
d.
Apply the entrepreneur's knowledge and experience
e.
Go into limited production
29. In a manufacturing business, which of the following is not part of the calculations used to forecast the costs of goods
sold (COGS)?
a.
Direct labor
b.
Cost of materials
c.
Direct factory overhead
d.
Product delivery
e.
Work-in-process flow
30. In service businesses, the cost of goods sold (COGS) is equivalent to the time expended to ____ and ____ the service.
a.
sell / deliver
b.
produce / deliver
c.
produce / market
d.
test / produce
e.
None of these choices
31. Which of the following is not part of direct selling expenses?
a.
Telephone expenses
b.
Advertising costs
c.
Travel costs
d.
Sales salaries
e.
Commissions
32. Indirect selling expenses are not linked to the sale of a specific product and include interest, telephone expenses, and
____.
a.
cost of promotional supplies
b.
salaries of non-sales personnel
c.
postal charges
d.
rent
e.
utilities
33. In manufacturing businesses, forecasting expenditures is a bit more complex because ____ must be derived first.
a.
salaries
b.
inventory expenses
c.
factory overhead
d.
cost of goods sold
e.
in-process flow
34. Entrepreneurs need to remember that ____ costs are the biggest costs the business will bear.
a.
production
b.
startup
c.
overhead
d.
inventory
e.
employee
35. A/an ____ statement is, essentially, a cash budget or sources and uses statement.
a.
direct cash flow
b.
in-process flow
c.
return on investment
d.
cost of goods sold
e.
pro forma
36. The ____ is an amount of cash that is often based on the sales and collection cycle of the business.
a.
cash flow
b.
in-process flow
c.
risk factor
d.
safety margin
e.
None of these choices
37. For ____ companies, the actual delivery costs must be based initially on information gathered from other companies in
the industry.
a.
product
b.
service
c.
technology
d.
All of these choices
e.
None of these choices
38. The best way, and sometimes the only way, to accurately gauge customer demand is to ____.
a.
test a prototype
b.
go into limited production
c.
do market research
d.
do a feasibility study
e.
None of these choices
39. ____ represent(s) how the startup uses its cash to cover its overhead before it generates a positive cash flow from
operations.
a.
Monthly burn rate
b.
Contribution margin
c.
Financial metrics
d.
Bootstrapping
e.
Process map
40. A month-by-month timeline shows a year in the life of a business with key milestones and anticipated ____.
a.
pricing
b.
growth
c.
financial metrics
d.
losses
e.
triggers
Subjective Short Answer
41. Briefly discuss what startup resources include.
42. Briefly discuss why a full set of pro forma financial statements is not needed at the feasibility analysis stage.
43. Briefly discuss the elements of a process map.
44. Briefly discuss the positioning of the venture in the value chain.
45. Discuss the importance of pricing strategies.
46. Briefly discuss product bundle pricing.
47. Briefly discuss the various items needed to develop estimates of demand.
48. Briefly discuss the financial metrics employed by startups.
2.0 ventures, acquisition, retention, revenue, and viral coefficient.
49. Discuss the sections of the cash flow statement.
50. What pricing strategies are most common for startups?
