Test Bank for Ventures Feasibility Part 2

37) Which of the following is an example of a resource that normally would not be evaluated as part of the "resource sufficiency" stage of organizational feasibility analysis? A) the availability of office space B) financial resources C) the quality of the labor pool in the area where the business will be located D) the possibility of obtaining intellectual property protection on key aspects of the business E) the possibility of locating in a university or community sponsored incubator Answer: B 38) According to the textbook, two of the most important factors to consider regarding "management prowess" are: A) the passion the sole entrepreneur or the management team has for the business idea and the extent to which the management team or sole entrepreneur understands the markets in which the firm will participate B) whether the members of the management team have worked successfully together before and the passion the sole entrepreneur or the management team has for the business idea C) whether the members of the management team are good "networkers" and the extent to which the management team or sole entrepreneur understands the markets in which the firm will participate D) the educational and functional backgrounds of the management team or sole entrepreneur E) whether the members of the management team are good "networkers" and the passion the sole entrepreneur or the management team has for the business idea Answer: A 39) To test resource sufficiency, a firm should list the ________ most critical non-financial resources that it will need to move its business idea forward and determine if those resources are available. A) 1 to 2 B) 3 to 5 C) 6 to 12 D) 10 to 16 E) 15 to 25 Answer: C 40) The focus in organizational feasibility analysis is on: A) financial resources for manufacturing firms and nonfinancial resources for service firms B) financial resources for service firms and nonfinancial resources for manufacturing firms C) nonfinancial and financial resources equally D) nonfinancial resources E) financial resources Answer: D 41) The Partnering for Success feature in Chapter 3 focuses on the task of finding the right business partner. According to the feature, which of the following is an incorrect rule-of-thumb in finding a business partner? A) Know the skills and experiences you need in a partner. B) Make sure you and your partner's work habits are compatible. C) Make sure you and your partner have common goals and aspirations. D) Pick a partner that is similar rather than different from you in terms of skills, abilities, and functional background. E) Hire a lawyer to negotiate the partnership agreement. Answer: D 42) ________ is a quick financial assessment of the viability of a business idea. A) Organizational feasibility analysis B) Institutional feasibility analysis C) Product/service feasibility analysis D) Financial feasibility analysis E) Industry/market feasibility analysis Answer: D 43) The most important issues to consider in financial feasibility analysis are: A) resource sufficiency, industry attractiveness, and total start-up cash needed B) total start-up cash needed, financial performance of similar businesses, and the overall financial attractiveness of the proposed venture C) target market attractiveness, resource sufficiency, and product/service demand D) total start-up cash needed, management prowess, and product/service demand E) concept testing, total start-up cash needed, and financial performance of similar businesses Answer: B 44) The most important issues to consider in financial feasibility analysis are: financial performance of similar businesses, overall financial attractiveness of the proposed venture, and: A) identification of a niche market B) market timeliness C) management prowess D) total start-up cash needed E) concept testing Answer: D 45) The Savvy Entrepreneurial Firm feature in Chapter 3 focuses on the importance of a business's location. The main point made by the feature is: A) a business's location is more important for manufacturing firms opposed to retail firms B) a business's location is equally important for manufacturing firms and retail firms C) a business's location is always important D) a business's location is rarely important E) the importance of location varies in importance depending on the type of business Answer: E 46) Which of the following is incorrect regarding the "total start-up cash needed" component of financial feasibility analysis? A) It's not necessary to complete an actual budget of startup expenses. B) When explaining where the startup funds will come from, avoid cursory explanations such as "I plan to bring investors on board" or "I'll borrow the money." C) There are worksheets posted online that help entrepreneurs determine the startup costs to launch their venture. D) An explanation of where the startup funds will come from should be included. E) If the money will come from friends and family or is raised through other means, a reasonable plan should be stipulated to repay the money. Answer: A 47) Which of the following factors is a negative as it pertains to the financial feasibility of a business venture? A) steady and rapid growth in sales during the first five to seven years in a clearly defined market niche B) high percentage of recurring revenue meaning that once a firm wins a client, the client will provide recurring sources of revenue C) inability to forecast income and expenses with a reasonable degree of accuracy D) internally generated funds to finance and sustain growth E) availability of an exit opportunity for investors to convert equity into cash Answer: C 48) Which of the following factors is a positive as it pertains to the financial feasibility of a business venture? A) inconsistent and slow growth in sales during the first five to seven years in a clearly defined market niche B) high percentage of recurring revenue C) inability to forecast income and expenses with a reasonable degree of accuracy D) reliance on externally generate funds to finance and sustain growth E) absence of an existing opportunity for investors to convert equity into cash Answer: B 49) The First Screen feasibility analysis template included in Chapter 3 is called "First Screen" because: A) it is the first feasibility analysis template created B) it is the first and most important step in the opportunity recognition process C) it is the first step in a sequence of several steps that must be completed before a business idea is deemed to be feasible D) feasibility analysis is an entrepreneur's initial or first pass at determining the feasibility of a business idea E) it is the first of several "screens" that a business idea must pass through before it is considered to be feasible Answer: D 50) Which of the following statement is incorrect regarding the First Screen? A) The mechanics of filling out the First Screen worksheet are straightforward. B) It covers three of the four areas of feasibility analysis described in the textbook. C) It is a template for completing a feasibility analysis. D) Completing a First Screen is not meant to be a lengthy process. E) The value of the First Screen is that it draws attention to the most important issues pertaining to the feasibility of a business idea. Answer: B 51) Feasibility analysis is the process of determining if a business idea is viable. Answer: TRUE 52) The proper sequence for developing successful business ideas is to first conduct a feasibility analysis, then progress through the opportunity recognition stage, and finish with the completion of a business plan. Answer: FALSE 53) The four forms of feasibility analysis include: product/service feasibility, industry/target market feasibility, organizational feasibility, and financial feasibility. Answer: TRUE 54) Primary research is research that is collected by the person or persons completing the analysis. Answer: TRUE 55) Census Bureau data, analyst forecasts, and other pertinent information gleaned through library and Internet research are examples of primary research. Answer: FALSE 56) Product/service feasibility analysis is an assessment of the overall appeal of the product or service being proposed. Answer: TRUE 57) There are two components to product/service feasibility analysis: product/service desirability and total startup funds needed. Answer: FALSE 58) A concept statement should be two-three pages long. Answer: FALSE 59) The temptation to show a concept statement to friends and family members should be avoided because they are predisposed to give positive feedback. Answer: TRUE 60) A buying intentions survey is used to gauge customer interest in a product or service. Answer: TRUE 61) Industry/target market feasibility is an assessment of the overall appeal of the industry and the target market for the product or service being proposed. Answer: TRUE 62) Organizational feasibility analysis is conducted to determine whether a proposed business venture has sufficient management expertise, organizational competence, and resources to successfully launch its business. Answer: TRUE 63) The focus in organizational feasibility analysis is on financial resources. Answer: FALSE 64) There are two primary areas to consider in organizational feasibility analysis: management prowess and resource sufficiency. Answer: TRUE 65) A new venture team is the group of founders, key employees, and advisers that either manage or help manage a new business in its start-up years. Answer: TRUE 66) In regard to management prowess, two of the most important factors in this area are the passion that the solo entrepreneur or the management team has for the business idea and the extent to which the management team or solo entrepreneur understands the markets in which the firm will participate. Answer: TRUE 67) For financial feasibility analysis, a very detailed and comprehensive financial analysis is required. Answer: FALSE 68) The most important issues to consider in financial feasibility analysis are: total start-up cash needed, financial performance of similar businesses, and overall financial attractiveness of the proposed venture. Answer: TRUE 69) The mechanics for filling out a First Screen worksheet are complicated. Answer: FALSE 70) First Screen is a template for completing industry analysis Answer: FALSE 71) Describe the purpose of feasibility analysis. When should a feasibility analysis be conducted relative to opportunity recognition and the development of a business plan? Answer: Feasibility analysis is the process of determining if a business idea is viable. As a preliminary evaluation of a business idea, a feasibility analysis is completed to determine if an idea is worth pursuing and to screen ideas before spending resource on them. Feasibility analysis follows the opportunity recognition stage but comes before the development of a business plan. 72) Describe what a concept statement is, and what it should include. Answer: A concept statement is a preliminary description of a business. It should include: ∙ ∙ ∙ ∙ ∙ A description of the product or service being offered. The intended target market. The benefits of the product or service. A description of how the product will be positioned relative to similar ones in the market. A description of how the product or service will be sold and distributed. The concept statement is administered as part of product/market feasibility analysis and should be used to get initial feedback and input regarding a business idea. 73) What is gumshoe research and why is it important? Answer: Gumshoe research is simply doing what it takes to collect sufficient information to assess the target market feasibility of a product idea. A gumshoe is a detective or an investigator that scrounges around for information or clues wherever they can be found. This type of research can take creative forms. For example, if your idea is to sell educational toys, you might spend a week volunteering at a day care center and watch how children interact with toys. Similarly, you might spend some time browsing through a toy store and observing the types of toys that get the most attention. Gumshoe research is simply being inventive in regard to the activities that can be undertaken to better understand your industry and target market's attractiveness. 74) Describe the purpose of industry/target market feasibility analysis, and identify the two primary issues that should be considered. What is the difference between a firm's industry and its target market? Answer: Industry/market feasibility analysis is an assessment of the overall appeal of the market for the product or service being proposed. For product/market feasibility analysis, there are two primary issues that a proposed business should consider: industry attractiveness and target market attractiveness., market timeliness, and the identification of a niche market. There is a distinct difference between a firm's industry and its target market. An industry is a group of firms producing a similar product or service, such as computers, cars, or electronic games. A firm's target market is the limited portion of the industry that it goes after or to which it wants to appeal. Most firms do not try to service their entire industry. Instead, they select or carve out a specific target market and try to service that market very well. 75) Briefly describe the purpose of the First Screen and how it's used. Answer: The First Screen is a template for completing a feasibility analysis. It is called First Screen because a feasibility analysis is an entrepreneur's initial pass at determining the feasibility of a business idea. The mechanics for filling out the First Screen worksheet are straightforward. It maps the four areas of feasibility analysis accentuating the most important points in each area. The final section of the worksheet, "Overall Potential," includes a section that allows for suggested revisions of a business idea to improve its potential for feasibility. The value of the First Screen is that it (1) provide an entrepreneur an overall sense of the feasibility of a business idea and (2) draws attention to issues that suggest the idea has low potential. The fact that and issue, such as total startup cash needed, is low potential does not necessarily mean that the business idea is not feasibility. By drawing attention to this issue, an entrepreneur may think through less expensive ways to launch the venture.