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Indicate whether the statement is true or false.
1. For ventures that get to market first or create intellectual property rights, it is common to price new products or services
at high markups or profit margins.
a. True
b. False
2. Being first to market does not guarantee success.
a. True
b. False
3. A sound business model is a plan to generate investor interest, make profits, and grow asset investments.
a. True
b. False
4. Best practices of high-growth, high-performance firms applied in the management practices area include “assembling a
management team that is balanced in both functional area coverage and industry/market knowledge.”
a. True
b. False
5. Mark Twain said, “Like I tell anybody, if you fail to plan, you’re planning to fail.”
a. True
b. False
6. It has been estimated that venture capitalists invest in about 10 to 30 percent of business plans presented to them.
a. True
b. False
7. In a typical business plan, the section covering the management team does not need to disclose the management team’s
expertise and experience.
a. True
b. False
8. Best practices of high-growth, high-performance firms applied in the financial practices area include “preparing
detailed monthly financial plans for the next year and annual financial plans for the next five years.”
a. True
b. False
9. Venture opportunity screening involves assessment of an idea’s commercial potential to produce revenue growth,
financial performance, and value.
a. True
b. False
10. Once conceptualized, a new idea should be examined for its business feasibility.
a. True
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b. False
11. A viable venture opportunity creates or meets a customer need, provides an initial competitive advantage, is timely in
terms of time-to–market, and offers the expectation of added value to investors.
a. True
b. False
12. Lifestyle firms are growth driven in terms of revenues, profits, and cash flows and also performance oriented as
reflected in rapid value creation over time.
a. True
b. False
13. Business opportunities exist in real time, and most ideas have a relatively narrow window of opportunity to become
successful business ventures.
a. True
b. False
14. Best practices of high-growth, high-performance firms applied in the marketing practices area include “preparing
detailed monthly financial plans for the next year and annual financial plans for the next five years.”
a. True
b. False
15. An entrepreneur may start a number of different types of businesses, including salary-replacement firms, lifestyle
firms, and entrepreneurial firms or ventures.
a. True
b. False
16. Best practices of high-growth, high-performance firms applied in the marketing practices area include “developing
new products or services that are considered to be the best.”
a. True
b. False
17. A sound business model should provide a plan to generate revenues, make profits, and produce free cash flows.
a. True
b. False
18. Asset intensity is the net after-tax profit divided by total assets.
a. True
b. False
19. Free cash flow to equity is the cash flow from producing and selling a product or providing a service.
a. True
b. False
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20. Ideas that are said to be ahead of their time are too late to become viable business opportunities for the inventor or
innovator.
a. True
b. False
21. The process of moving from entrepreneurial opportunities to new businesses, products, or services begins with ideas,
then moves to the preparation of a business plan, and finally ends with a feasibility study.
a. True
b. False
22. Financial bootstrapping refers to the process of minimizing resources such as the need for financial capital and finding
unique sources for financing a new venture.
a. True
b. False
23. The compound rate of return that equates the present value of the cash inflows with the initial investment outlay is
called the internal rate of return (IRR).
a. True
b. False
24. A successful, sound business model does not have to ultimately produce free cash flows.
a. True
b. False
25. A high asset intensity implies a large investment in fixed assets and/or net working capital is needed to support
revenue growth.
a. True
b. False
26. One way to describe asset intensity is the dollar investment in assets needed to generate a dollar in sales.
a. True
b. False
27. A SWOT analysis focuses on strengths (S), worries (W), opportunities (O), and threats (T).
a. True
b. False
28. The first component of a sound business model is the need to generate revenues.
a. True
b. False
29. Entrepreneurial ventures emphasize survival and providing an acceptable living for their owners, with growth being a
secondary goal.
a. True
b. False
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30. The VOS Indicator™ provides both qualitative and quantitative information about a venture’s commercial potential.
a. True
b. False
31. A SWOT analysis should consider as potential strengths or weaknesses whether there are unfilled customer needs and
the extent to which intellectual property rights exist.
a. True
b. False
32. A SWOT analysis should consider as potential strengths or opportunities the extent of existing competition and the
likelihood of substitute products or services.
a. True
b. False
33. Business changes resulting in higher net profit always increases ROA.
a. True
b. False
34. Entrepreneurial ventures are firms that allow owners to pursue specific lifestyles while being paid for doing what they
like to do.
a. True
b. False
35. A well-designed entrepreneurial venture begins with an idea that survives an analysis of its feasibility and results in a
business plan.
a. True
b. False
36. Only a small number of new business ideas become viable business opportunities with funded business plans.
a. True
b. False
37. Asset intensity and asset turnover are calculated as revenues divided by total assets.
a. True
b. False
38. Salary-replacement firms provide their owners with income levels comparable to what they could have earned
working for much larger firms.
a. True
b. False
39. A venture with a low score on the VOS Indicator™ should always be abandoned.
a. True
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b. False
40. A venture opportunity screening is the same thing as preparing a business plan.
a. True
b. False
41. The VOS Indicator™ is useful in assessing the commercial potential of a venture, but should not be used as the sole
tool to determine a venture’s fate.
a. True
b. False
42. The nonfinancial options available to managers as the venture progresses through its life cycle are known as real
options.
a. True
b. False
43. A SWOT analysis is an examination of the strengths, weaknesses, opportunities, and threats to determine the business
opportunity viability of an idea.
a. True
b. False
44. A venture opportunity screening guide, called the VOS Indicator™, is used to screen venture opportunities for
potential attractiveness.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
45. A viable venture opportunity is characterized by all of the following except:
a. creating or meeting a customer need
b. having perceived attraction to prospective investors
c. providing an initial competitive advantage
d. being timely in terms of time-to-market
46. Determine the asset intensity of a venture with the following financial information: net profit = $22,000; revenues =
$132,000; and return on assets 30%.
a. 0.1
b. 0.6
c. 1.8
d. 2.0
47. Revenues minus the cost of goods sold is called:
a. gross profit
b. gross profit margin
c. net profit
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d. net profit margin
48. A venture’s value to its owners is determined by the:
a. size and timing of its future free cash flows (to equity)
b. level of its past revenues
c. prior losses and expenses
d. all of these choices
49. Which of the following is not one of the factor categories of the VOS Indicator™?
a. industry/market considerations
b. pricing/profitability considerations
c. financial/harvest considerations
d. location/profitability considerations
50. The factor categories in a VOS Indicator™ are:
a. industry/market considerations
b. industry/market and pricing/profitability considerations
c. industry/market, pricing/profitability, and financial/harvest considerations
d. industry/market, pricing/profitability, financial/harvest, and management team considerations
51. The evaluation of entry barriers occurs under which of the factor categories of the VOS Indicator™?
a. industry/market considerations
b. pricing/profitability considerations
c. financial/harvest considerations
d. management team considerations
52. Determine the return on assets (ROA) for a venture with the following financial information: revenues = $500,000; net
profit = $70,000; and asset turnover = 2.0 times.
a. 10%
b. 14%
c. 28%
d. 34%
53. A written document that describes the proposed venture in terms of the product or service opportunity, current
resources, and financial projections is called a(n):
a. financial plan
b. business plan
c. entrepreneurial plan
d. survival plan
54. Free cash flow, which can be paid back to investors, occurs when cash generated from operations exceeds all of the
following except:
a. borrowing costs
b. noncash depreciation
c. taxes
d. investment in assets
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55. A VOS Indicator™ stands for:
a. “venture opportunity screening” indicator
b. “viable opportunity statement” indicator
c. “venture only success” indicator
d. “viable assessment screening” indicator
56. Some venture investors like to draw analogies between baseball terms and venture performance. The baseball term
used to reflect a total loss of an investment is:
a. “home run”
b. “single”
c. “strikeout”
d. “double”
57. Which of the following is not a standard component of a sound business model?
a. produce low-cost products
b. generate revenues
c. make profits
d. produce free cash flows
58. Firms that allow owners to pursue specific lifestyles while being paid for doing what they like to do are referred to as:
a. salary-replacement firms
b. lifestyle firms
c. entrepreneurial ventures
d. rapid-value-creation firms
59. A typical business plan includes all of the following sections except:
a. executive summary
b. business description
c. marketing plan and strategy
d. disclosure of pending litigation
60. A sound business model provides a plan to do all of the following except:
a. generate revenues
b. make profits
c. retain all its earnings
d. produce free cash flows
61. The dollar profit left after all expenses, including financing costs and taxes, have been deducted from the firm’s
revenues is called:
a. gross profit
b. gross profit margin
c. net profit
d. net profit margin
62. An effective entrepreneurial management team should do all of the following except:
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a. provide expertise in the areas of marketing, finance, and operations
b. have successful experience in the venture’s industry and markets
c. always work independently of each other
d. share the entrepreneurial spirit
63. All else held constant, a higher asset turnover:
a. increases ROA
b. decreases ROA
c. has no effect on ROA
d. may raise or lower ROA, depending on how it affects revenues.
64. Which of the following assessment categories is not used at the end of a qualitative-based venture opportunity
screening exercise?
a. natural commercial potential
b. high commercial potential
c. average commercial potential
d. low commercial potential
65. Asset intensity is:
a. total assets divided by total revenues
b. total revenues divided by total assets
c. calculated the same as asset turnover
d. one-half of the asset turnover
66. A SWOT analysis does not focus on which of the following components or areas?
a. strengths
b. weaknesses
c. new ideas
d. opportunities
67. If the asset intensity is 0.80, the asset turnover would be:
a. 0.80 times
b. 1.00 times
c. 1.25 times
d. 1.50 times
68. The direct costs of producing a product or providing a service is called:
a. gross profit
b. gross profit margin
c. net profit margin
d. cost of goods sold
69. Determine the cost of goods sold for a venture with the following financial information: revenues = $50,000; net profit
margin = 20%; and gross profit margin = 70%
a. $40,000
b. $35,000
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c. $15,000
d. $10,000
70. Developing new and delivering high-quality products or services that command higher prices and margins best
describes strong:
a. marketing practices
b. financial practices
c. operating practices
d. management practices
71. Determine the dollar amount of total assets for a venture with the following financial information: revenues =
$500,000; net profit = $70,000; and asset turnover = 2.0 times.
a. $100,000
b. $250,000
c. $375,000
d. $500,000
72. Return on assets can be stated as:
a. net after-tax profit divided by total assets
b. total assets divided by net after-tax profit
c. total assets divided by revenues
d. revenues divided by total assets
73. When moving from entrepreneurial opportunities to new businesses, products, or services, which of the following is
not considered a component?
a. ideas
b. feasibility
c. business plan
d. harvest of venture
74. The definition of an entrepreneurial firm is:
a. survival
b. high growth
c. high growth and high performance
d. survival and average performance
75. The process involving minimizing the need for financial capital and finding unique sources for financing a new
venture is referred to as:
a. mezzanine financing
b. financial bootstrapping
c. seed financing
d. startup financing
76. A SWOT analysis focuses on which of the following components or areas?
a. strengths and weaknesses
b. weaknesses and opportunities
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c. strengths, opportunities, and threats
d. threats, opportunities, weaknesses, and strengths
77. When conducting a SWOT analysis, assessing unfilled customer needs is examined in terms of:
a. strengths or weaknesses
b. weaknesses or threats
c. opportunities or threats
d. threats or strengths
78. In a study of high-growth, high-performance firms by the Kauffman Center for Entrepreneurial Leadership of best
practices, which of the following practices was not included?
a. marketing practices
b. financial practices
c. management practices
d. production/operations practices
79. A well-designed entrepreneurial venture typically includes:
a. generating ideas
b. analyzing the feasibility of ideas
c. producing a business plan
d. generating ideas, analyzing the feasibility of ideas, and producing a business plan
80. A venture’s value is determined by its:
a. future free cash flows (to equity)
b. revenues
c. profits
d. assets
81. A sound business model includes a plan to:
a. generate revenues and make profits
b. make profits and produce free cash flows
c. produce free cash flows for the owners of the venture
d. generate revenues, make profits, and produce free cash flows
82. Free cash flow to equity is the cash available to the entrepreneur and venture investors after all of the following
except:
a. net cash flows
b. net increases in debt capital
c. financing and tax cash flows
d. investment in assets needed to sustain the venture’s growth
83. An average score using the VOS Indicator™ would fall in the range:
a. 0.00–0.99
b. 1.00–1.66
c. 1.67–2.33
d. 2.34–3.00
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84. A score in the range of 2.34–3.00 using the VOS Indicator™ would be considered a(n):
a. low score
b. average score
c. high score
d. very high score
85. The return on assets (ROA) model measures:
a. revenues divided by net profit multiplied by the asset turnover
b. net profit margin multiplied by the equity multiplier
c. net profit margin multiplied by the asset turnover
d. net profit divided by total assets multiplied by the asset turnover
86. The first two requirements of a sound business model are:
a. generate revenues and make profits
b. make profits and produce free cash flows
c. produce free cash flows for creditors and owners of the venture
d. generate revenues and produce free cash flows
87. When conducting a SWOT analysis, which of the following areas would not be considered as a potential opportunity
or threat?
a. existing competition
b. reputation value
c. possibility of new technologies
d. recent or potential regulatory changes
88. A typical business plan includes all of the following sections except:
a. management team
b. financial plans and projections
c. risk and opportunities
d. initial public offering information
89. Venture capitalists invest in approximately what percent of business plans presented to them?
a. 1%–3%
b. 10%–13%
c. 20%–23%
d. 30%–33%
90. When composing the financial plans and projections section of a business plan, all of the following should be included
except:
a. income statements and balance sheets
b. statements of cash flows
c. past and present dividends per share information
d. funding needs and sources
91. U.S. small businesses are predominately:
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a. salary-replacement or entrepreneurial firms
b. lifestyle or entrepreneurial firms
c. entrepreneurial ventures
d. salary-replacement or lifestyle firms
92. In the venture life cycle, moving from the development stage to the startup stage frequently begins with the
preparation of a business plan. The business plan is a written document that describes the proposed venture in all of the
following terms except:
a. the proposed product or service opportunity
b. the accounting data for the last five years
c. current resources available to the venture
d. financial projections
93. Determine the net profit for a venture with the following financial information: revenues = $500,000; return on assets
= 20%; and asset turnover = 2.0 times.
a. $10,000
b. $25,000
c. $50,000
d. $60,000
94. A firm’s option to abandon a venture is an example of a:
a. bootstrapping option
b. financial option
c. survival option
d. real option
95. Free cash flow to equity of an entrepreneurial firm includes cash flows to:
a. venture investors
b. creditors
c. the entrepreneur
d. venture investors and the entrepreneur
96. Determine the dollar amount of revenues for a venture with the following financial information: net profit = $60,000;
assets turnover = 1.5 times; and return on assets 30%.
a. $300,000
b. $500,000
c. $800,000
d. $1,200,000
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Answer Key
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