Better Business (Poatsy) [Testbank A]
Mini-Chapter 2 Constructing an Effective Business Plan
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1)
1
The first step you should take when starting a business is
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A)
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advertising.
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B)
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financing.
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C)
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marketing.
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D)
1
planning.
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Answer:
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D
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Diff: 1
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Page Ref: MC2-2
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2)
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Mateo is planning to open a small car wash service. What would you advise Mateo to do first?
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A)
1
Secure the needed permits
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B)
1
Look for financing sources
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C)
1
Give out flyers and posters
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D)
1
Create a business plan
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Answer:
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D
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Explanation:
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D)
1
A formal business plan defines goals and objectives of the business and the means to achieve them. It is important to write a business plan before putting any other aspect of the business into place.
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Diff: 2
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Page Ref: MC2-3
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3)
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Lisa lost her investors because she failed to attract high-quality employees. How could Lisa have prevented this from happening?
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A)
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Lisa could have used a job search engine or networking site.
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B)
1
Lisa could have included a hiring plan in her business plan.
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C)
1
Lisa could have hired her friends and family.
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D)
1
Lisa is not responsible for the caliber of her employees.
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Answer:
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B
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Explanation:
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B)
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By creating a detailed business plan, you are less likely to overlook important aspects of your business.
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Diff: 3
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Page Ref: MC2-3
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4)
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The purpose of a business plan is to
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A)
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measure a business's risk level.
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B)
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solidify and define business intentions.
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C)
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evaluate potential employees.
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D)
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advertise the product.
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Answer:
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B
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Diff: 1
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Page Ref: MC2-3
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5)
1
Which of the following potential business owners should aim to write a business plan as quickly as possible?
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A)
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Mark, who wants to manufacture a popular fad toy
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B)
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Zara, who wants to open a book store
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C)
1
Mike, who wants to open an auto mechanic business
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D)
1
Aisha, who wants to take over a family diner
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Answer:
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A
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Explanation:
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A)
1
In industries in which change occurs rapidly, the business opportunity might be lost if operations are not started immediately. Whereas diners, auto mechanic businesses, and book stores are consistently stable, children's fad toys gain and lose popularity very quickly. Mark would need to take advantage of the toy's popularity while it is still in high demand.
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Diff: 2
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Page Ref: MC2-3
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6)
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What should a potential business owner do BEFORE writing a business plan?
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A)
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Determine whether personal and business goals are aligned
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B)
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Ensure that the key components are all being addressed
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C)
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Find out if his or her risk tolerance levels are moderate
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D)
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Make sure financial statements and forecasts are all prepared
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Answer:
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A
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Explanation:
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A)
1
Before writing a business plan, it is important for a potential business owner to determine his or her own goals and objectives and to check whether they match those of the business that he or she has imagined.
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Diff: 2
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Page Ref: MC2-5
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7)
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Which of the following statements is TRUE about the components of a business plan?
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A)
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Potential business owners can use a template to write a business plan because all business plans share the same components.
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B)
1
Business plans all have the same key components, but some may be included in a different order.
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C)
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Business plans are unique, but most share a few basic components.
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D)
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All business plans discuss the specific product before analyzing how the product fits the market.
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Answer:
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C
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Explanation:
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C)
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Each business is unique, so business plans can be drawn up in a variety of ways. However, most share a few basic components, such as an executive summary, market analysis, and financial details.
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Diff: 2
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Page Ref: MC2-5
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8)
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The following are all components of a business plan, EXCEPT
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A)
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the chapter summary.
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B)
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descriptions of product or service.
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C)
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details about sales and promotion.
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D)
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the table of contents.
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Answer:
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A
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Explanation:
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A)
1
A chapter summary is not necessary because the business plan content will be organized in the table of contents.
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Diff: 2
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Page Ref: MC2-5
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9)
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This business plan component provides the first impression of the business plan and the proposed business.
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A)
1
Cover sheet
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B)
1
Executive summary
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C)
1
Financials
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D)
1
Market analysis
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Answer:
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A
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Diff: 1
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Page Ref: MC2-6
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10)
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Mario included his company's logo, contact information, and basic company information on the business plan cover sheet. What information did he forget to include?
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A)
1
A unique record number
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B)
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Management resumes
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C)
1
Table of contents
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D)
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Mission statement
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Answer:
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A
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Explanation:
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A)
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By including a unique record number, Mario will be able to track who received the business plan.
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Diff: 2
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Page Ref: MC2-6
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11)
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The cover sheet is crucial to the business plan because it
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A)
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makes the investors excited and interested about the business plan.
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B)
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provides investors with easy access to important company information.
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C)
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introduces the company finances to investors.
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D)
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summarizes the key points of the business plan for investors.
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Answer:
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B
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Explanation:
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B)
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The cover sheet is a convenient source for investors because it includes key contact information and company information. The cover sheet does not include specific business plans.
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Diff: 3
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Page Ref: MC2-6
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12)
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Heather has included a cover sheet and table of contents in her business plan. What should she include next?
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A)
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A detailed composition of the management team
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B)
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An analysis of the market and an explanation of why the product will appeal to customers
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C)
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Detailed information about the company's financial history
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D)
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An abbreviated form of the entire business plan
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Answer:
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D
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Explanation:
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D)
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After including a cover sheet and table of contents, a business plan should contain an executive summary. This is an abbreviated form of the entire business plan that should generally be no more than two or three pages long.
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Diff: 2
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Page Ref: MC2-6
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13)
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Which of the following statements is TRUE about an executive summary?
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A)
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An executive summary should include basic company information, such as its name, address, and phone number.
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B)
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An executive summary should avoid mentioning financial issues because this might dissuade potential investors.
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C)
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It is often a good idea to write the executive summary after writing the rest of the business plan to ensure that the plan is sound.
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D)
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When writing an executive summary, it is important to provide detailed information about the expertise and creative ability brought to the company by each member of the management team.
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Answer:
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C
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Explanation:
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C)
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By writing the executive summary after the rest of the business plan, potential business owners are able to summarize their business plan effectively and make sure they have worked out any potential problems.
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Diff: 2
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Page Ref: MC2-7
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14)
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Patrick believes that the excecutive summary his business partner created does not convey excitement about the business. What should he do to improve the summary?
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A)
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Manipulate profit projections.
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B)
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Use colorful language.
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C)
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Extend it to five pages.
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D)
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Emphasize key points.
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Answer:
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D
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Explanation:
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D)
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While manipulating profit projections, extending the length of the summary, and using colorful language might hold the attention of investors, it's the quality of the content that will keep investors excited. By emphasizing the key points, investors will remember them and be interested in the rest of your plan.
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Diff: 3
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Page Ref: MC2-6
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15)
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Which of the following business plan components refers to the clear and concise abbreviated form of the entire business plan?
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A)
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Cover sheet
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B)
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Executive summary
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C)
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Market analysis
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D)
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Sales and promotion
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Answer:
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B
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Diff: 1
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Page Ref: MC2-6
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16)
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When investors read an executive summary, which of the following key points would MOST likely entice them to consider investing in the company?
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A)
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Business's purpose
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B)
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Operating methods
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C)
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Anticipated profitability
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D)
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Unusual product
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Answer:
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C
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Explanation:
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C)
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An executive summary should contain information about the company's unique competitive advantage and projections for future sales, growth, and profits. Investors invest in a company because they expect it will have a high possibility of success.
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Diff: 2
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Page Ref: MC2-6
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17)
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Preston is planning to open an office supply store. Which of the following is an important element to summarize in an executive summary?
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A)
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Company's competitive advantage over competitors
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B)
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Current economic trends in office supplies
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C)
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Anticipated challenges in the market
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D)
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Assessment of Office Corp., Paperclips Company, and other competitors
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Answer:
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A
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Explanation:
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A)
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The executive summary should excite investors, so it is important to emphasize the advantages of the business, not potential obstacles.
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Diff: 2
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Page Ref: MC2-6
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18)
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Which business plan component is often the only part of the plan that is read completely?
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A)
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Executive summary
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B)
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Financial statement
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C)
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Market analysis
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D)
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Sales and promotion
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Answer:
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A
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Diff: 1
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Page Ref: MC2-6
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19)
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The ultimate purpose of an executive summary is to
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A)
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condense the entire plan into a few pages.
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B)
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describe the company's product or service.
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C)
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present the company's financial statements.
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D)
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present the "big picture" by describing the company and its purpose.
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Answer:
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A
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Diff: 1
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Page Ref: MC2-6
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20)
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Is it advisable to write a business plan in chronological order, as it will be read?
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A)
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No, it is a good idea to write the executive summary last.
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B)
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No, the financial statements should be written before everything else.
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C)
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Yes, this will ensure that all the sections of the plan are well organized.
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D)
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Yes, this way it is possible to present a business plan to investors even if it is not completely finished.
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Answer:
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A
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Explanation:
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A)
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Writing the executive summary last enables potential business owners to work out any problems with the rest of the plan.
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Diff: 2
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Page Ref: MC2-7
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21)
1
Vince has created several mission statements for his car dealership. Which mission statement is the most successful?
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A)
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We strive to provide the best automobile sales assistance and service possible.
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B)
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Our promise is to make you feel like family.
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C)
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We want you to be satisfied with every purchase.
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D)
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Our promise is to develop leaders in automobile sales and service in your community.
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Answer:
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A
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Explanation:
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A)
1
A good mission statement identifies the customer and business strategy, and it explains how the business will benefit them. Unlike some of the other options, the first response focuses on the service the business will provide.
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Diff: 3
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Page Ref: MC2-7
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22)
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Which of the following provides specific details about how the business works?
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A)
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Company profile
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B)
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Executive summary
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C)
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Management team
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D)
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Mission statement
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Answer:
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A
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Diff: 1
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Page Ref: MC2-7
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23)
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In the company section of most business plans, which element summarizes the company's plans for growth and profits?
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A)
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Company profile
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B)
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Company strategy
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C)
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Mission statement
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D)
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Industry profile
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Answer:
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B
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Diff: 1
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Page Ref: MC2-7
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24)
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William's business has a pending lawsuit. In which section of a business plan should William mention the lawsuit?
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A)
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William should include it in the company section.
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B)
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William should add the lawsuit information to the executive summary.
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C)
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William should add it to the financials section.
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D)
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William should not mention the lawsuit.
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Answer:
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A
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Explanation:
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A)
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Anticipated challenges should be included in the company and management team section. It's important to discuss how lawsuits could positively or negatively affect the business.
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Diff: 3
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Page Ref: MC2-7
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25)
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Board members of a company are listed in the
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A)
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market analysis.
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B)
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cover sheet.
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C)
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executive summary.
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D)
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management team.
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Answer:
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D
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Diff: 1
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Page Ref: MC2-7
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26)
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Based on market analysis, which customer is most likely to benefit from purchasing a commercial grade washing machine that operates with half the time and half the energy costs of other washing machines?
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A)
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A homeowner
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B)
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A hotel owner
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C)
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A restaurant owner
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D)
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A doctor's office
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Answer:
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B
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Explanation:
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B)
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Market analysis identifies customers who are most likely to benefit from a business because the business will save cost or time.
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Diff: 3
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Page Ref: MC2-7
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27)
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In which section of a business plan would you find a description of how the product benefits the customer?
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A)
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Executive summary
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B)
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Market analysis
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C)
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Product or service
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D)
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Sales and promotion
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Answer:
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B
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Diff: 1
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Page Ref: MC2-7
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28)
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Which of the following would be found in the market analysis section of a business plan?
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A)
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Assessment of the competition
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B)
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Description of the product or service
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C)
1
Profile of the industry
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D)
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Company mission statement
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Answer:
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A
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Diff: 2
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Page Ref: MC2-7
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29)
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A potential investor wants to know whether a company will offer warranties. In which section of the business plan should the investor look?
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A)
1
Appendices
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B)
1
Cover sheet
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C)
1
Product or service
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D)
1
Sales and promotion
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Answer:
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C
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Diff: 1
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Page Ref: MC2-8
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30)
1
Arthur is planning to buy raw materials from an international supplier. How could he incorporate this information in his business plan?
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A)
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It's not important for Arthur to include the information in his plan.
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B)
1
Arthur should mention this information in the appendix section.
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C)
1
Arthur should list his supplier in the product section of his business plan.
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D)
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Arthur should include details about his supplier in the company profile section of the plan.
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Answer:
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C
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Explanation:
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C)
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If part of your product is dependent on outside suppliers, you should list those suppliers in the product section of your business plan and verify their reliability.
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Diff: 3
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Page Ref: MC2-8
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31)
1
In which section of a business plan is a company's pricing strategy discussed?
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A)
1
Financials
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B)
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Market analysis
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C)
1
Product or service
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D)
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Sales and promotion
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Answer:
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C
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Diff: 1
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Page Ref: MC2-8
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32)
1
Nina plans to promote her nail salon through an aggressive radio and mail marketing campaign. How can she incorporate this information in her business plan?
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A)
1
It's not important to include the information in her business plan.
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B)
1
Nina should include details in the market analysis section.
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C)
1
Nina should describe the campaign in the in the financials section.
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D)
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Nina should mention this in the sales and promotion section.
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Answer:
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D
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Explanation:
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D)
1
Your marketing and sales plans should be included in the sales and promotion section of the business plan.
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Diff: 3
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Page Ref: MC2-8
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33)
1
The following are all included in the sales and promotion section of a business plan, EXCEPT
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A)
1
details about repaying investors.
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B)
1
information about promotional avenues.
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C)
1
evidence of promotional success.
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D)
1
information about selling approaches.
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Answer:
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A
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Diff: 1
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Page Ref: MC2-8
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34)
1
What is included in the financials section of a business plan?
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A)
1
Cash flow statement
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B)
1
Contracts and agreements
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C)
1
Professional references
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D)
1
A record number
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Answer:
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A
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Diff: 1
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Page Ref: MC2-8
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35)
1
Margot is seeking financial assistance for her business and needs to include a statement of funding requirements in her business plan. The statement of funding requirements should include all of the following, EXCEPT
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A)
1
the amount of money needed.
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B)
1
her personal credit history.
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C)
1
the type of funding needed.
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D)
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the term of the loan.
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Answer:
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B
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Explanation:
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B)
1
If one of the primary purposes of a business plan is to seek outside financing assistance, another component of the financials section is a statement of funding requirements indicating information such as the amount of money needed, the type of funding, term of loan, and how funds will be used. Since the statement of funding is based on corporate accounts, personal credit is not included.
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Diff: 2
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Page Ref: MC2-9
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36)
1
What is the purpose of appendices in a business plan?
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A)
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To include key information that is referenced in the body of the plan
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B)
1
To summarize the plan to remind investors of the key points
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C)
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To provide a comprehensive account of projected sales figures
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D)
1
To provide key definitions for industry terms used in the business plan
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Answer:
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A
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Diff: 1
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Page Ref: MC2-9
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37)
1
In which section of a business plan would you MOST likely find pictures of a company's products, facilities, and production?
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A)
1
Appendices
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B)
1
Company section
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C)
1
Executive summary
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D)
1
Sales and promotion
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Answer:
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A
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Diff: 1
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Page Ref: MC2-9
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38)
1
If you need information or resources, which Web site should you reference?
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A)
1
Wikipedia
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B)
1
Encyclopedia Britannica
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C)
1
Your local newspaper
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D)
1
U.S. Small Business Association
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Answer:
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D
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Diff: 1
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Page Ref: MC2-9
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39)
1
A business plan summarizes how a business opportunity will translate into profits.
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Answer:
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TRUE
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Diff: 1
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Page Ref: MC2-3
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40)
1
Andrea's business plan is a good one: she's defined the goals and objectives of her hat-making business, and she thoroughly explains how she plans to achieve them, complete with promotional ideas and financial statements.
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Answer:
1
TRUE
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Explanation:
1
A good business plan has clear and realistic goals, and explains how these goals will be met. Andrea's business plan has this information, and she's included ideas and data that support her plan, which makes the plan even better.
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Diff: 2
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Page Ref: MC2-3
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41)
1
There is a standard format that most companies use to write a business plan.
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Answer:
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FALSE
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Diff: 1
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Page Ref: MC2-5
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42)
1
The business's name, logo, address, contact information, the date, the preparer's name, and a tracking number should all be included on the cover sheet of a business plan.
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Answer:
1
TRUE
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Explanation:
1
A business plan's cover sheet is where all the basic information for a business will go. This is the first page the investors will see, and therefore needs to look professional in order to make a positive impression.
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Diff: 2
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Page Ref: MC2-6
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43)
1
The executive summary of a business plan highlights key points, organizes content, and conveys excitement to encourage investors to continue reading.
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Answer:
1
TRUE
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Diff: 1
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Page Ref: MC2-6
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44)
1
Seamus will use the sales and promotion section of his business plan to summarize his company's plans for growth and expected profits.