Deck 9: Calculating Startup Capital Requirements

Question 1

The bottom line for any new venture is

A) accountable balance sheets.
B) good income statements.
C) experienced employees .
D) a strong founding team .
E) cash.

Answer 1

E

Question 2

Once an entrepreneur has determined that a business appears to be feasible, pro forma financials will be built as part of a

A) feasibility study.
B) job design strategy.
C) business process map.
D) gross  profit analysis.
E) complete  business plan.

Answer 2

E

Question 3

Price skimming is finding out what customers are willing to pay for a product and pricing it accordingly.

Answer 3

False

Question 4

Which of the following is NOT one of the categories into which the resources of a startup are divided?

A) People
B) Intellectual resources
C) Financial resources
D) Physical assets
E) Value chain

Question 5

At startup the goal is to create a mix of resources that will enable the new venture to start and operate until sales of the business's product or service produce a positive cash flow.

Question 6

Determining what resources are needed, when they are needed, and how to acquire them is a critical piece of the startup feasibility puzzle.

Question 7

Which of the following would NOT be considered a startup resource?

A) Feasibility analysis
B) Founding team
C) Independent contractors
D) Equipment
E) Equity

Question 8

Identifying accurately the resources required to start a business venture, including all the activities and processes in the business, is best accomplished by

A) c onstructing a business process map.
B) creating a timeline.
C) defining a launch strategy .
D) positioning a venture in the value chain.
E) making financial assumptions.

Question 9

A new venture's health is measured by its balance sheet.

Question 10

If DLT Company's goal is to maximize cash flow, which of the following pricing strategies should it adapt?

A) Lower prices to raise the sales volume.
B) Reduce  direct costs and overhead.
C) Set a higher price to raise perceived quality.
D) Set prices at a level that minimizes sales.
E) None of these are correct.

Question 11

A process map notes key milestones that an entrepreneur expects to achieve from idea conception to the launch of the business and beyond.

Question 12

The _____ of a product/service is the price as compared to competing products-the expected price.

A) differentiation value
B) sale price
C) reference value
D) monthly burn rate
E) contribution margin

Question 13

Where a new venture lies in the value chain will determine what its profit margins are, who its customers are, and how much it can charge for its products and services.

Question 14

Pricing is not designed to cover total costs but to maximize total contribution-that  is, unit price minus unit variable costs.

Question 15

The least important part of any analysis of financial feasibility is the assumptions on which the analysis is based.

Question 16

A process map details how information flows through a business.

Question 17

When an entrepreneur attempts to gauge levels of demand, competitors are the prime source of information.

Question 18

How a product or service is priced is a function of a company's

A) resources.
B) compensation policy.
C) process map.
D) goals.
E) job design.

Question 19

Investors focus on the first 18 months to 2 years of a startup because during that time, the entrepreneur is

A) finalizing the formal pro forma financial statements.
B) continually adjusting the business model as he or she responds to the market.
C) discovering ways to decrease overhead.
D) figuring out how to control his or her customers' behaviors.
E) focusing on testing the business model in the market to ensure there are customers and sufficient demand.

Question 20

Once an entrepreneur determines where a new venture lies in the value chain, he or she must create a

A) process map.
B) feasibility study.
C) business activity flow chart .
D) timeline.
E) cash flow statement.

Question 21

Internet ventures have unique metrics because they typically start with three types of "customers": visitors, contributors, and

A) investors .
B) testers.
C) distributors.
D) partners.
E) developers.

Question 22

_____ is an amount of cash that is often based on the sales and collection cycle of a business.

A) The expenditure  flow
B) The  in-process flow
C) The  invoice finance
D) The  safety margin
E) Working capital

Question 23

For feasibility purposes, a(n) _____ statement, essentially a cash budget or sources and uses statement, is used so that cash inflows  and outflows are easy to identify and examine.

A) direct cash flow
B) in-process plan
C) return on investment
D) inferred cash flow
E) resource pro forma

Question 24

Which of the following is NOT an example of a direct selling expense?

A) Telephone expenses
B) Advertising costs
C) Travel expenses
D) Sales salaries
E) Commissions

Question 25

Entrepreneurs can reach a price that can be tested in a market by considering costs, any competitor pricing, and

A) feedback from competitors.
B) revenue per salesperson.
C) gross margin and revenue per unit.
D) feedback from customers and value chain partners.
E) credit history.

Question 26

Entrepreneurs need to remember that _____ costs are the biggest costs a business will bear because of all the associated taxes and any benefits offered.

A) production
B) startup
C) product delivery
D) inventory setup
E) employee

Question 27

In manufacturing businesses, forecasting expenditures is a bit more complex than in wholesale businesses because _____ must be derived first.

A) employee  salaries
B) inventory expenses
C) factory overhead
D) cost of goods sold
E) maintenance expenses

Question 28

The _____ represents how a startup uses its cash to cover its overhead before it generates a positive cash flow from operations.

A) m onthly burn rate
B) c ontribution margin
C) gross margin
D) bootstrap process
E) product resource guide

Question 29

In service businesses, the cost of goods sold is equivalent to the time expended to _____ and _____ the service.

A) sell; deliver
B) produce; deliver
C) produce; market
D) test; produce
E) test; sell

Question 30

Which of the following common pricing strategies is a company using when it creates a complex pricing structure by combining multiple products and services into one package?

A) P remium pricing
B) Psychological pricing
C) Product bundle pricing
D) Captive product pricing
E) Demand-based pricing

Question 31

When creating a timeline, the lead times with respect to milestones that indicate a change in the current revenue pattern are known as

A) translations.
B) variations.
C) transformations.
D) inducers.
E) triggers .

Question 32

Which of the following is NOT a strategy that can help entrepreneurs arrive at a realistic forecast of demand for their product or service?

A) Talking to customers   and intermediaries
B) Using historical analogy with similar products/services
C) Preparing revenue budgets
D) Applying their own knowledge and experience
E) Going into limited production

Question 33

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 are correct.
E) N one of these are correct.

Question 34

With regard to pricing models, _____ products are defined as those whose price is transparent, easily identified, and most subject to downward pricing pressure.

A) complex
B) simple
C) commodity
D) optional
E) minimal

Question 35

The best way, and sometimes the only way, to accurately gauge customer demand is to

A) test a prototype .
B) go into business in a limited way.
C) perform a profit/loss estimate.
D) conduct a market study of competitors.
E) N one of these are correct.

Question 36

Which of the following is an example of an indirect selling expense?

A) C ost of promotional supplies
B) Salaries of nonsales personnel
C) Postal charges
D) Rent
E) Utilities

Question 37

_____ is a strategy in which a company starts with a high price to capture uniqueness and competitive advantage, and then drops the price as competitors enter the market in order to stay ahead of competition.

A) Price skimming
B) Demand-based pricing
C) Product bundle pricing
D) Captive product pricing
E) Consumer -based pricing

Question 38

Which of the following metrics would Right Fit, an Internet-based business, most likely use to measure its financial success?

A) Revenue per salesperson
B) Inventory turn
C) Economies of scale
D) Qualified lead
E) Occupancy

Question 39

In figuring _____, entrepreneurs must convert time to dollars and consider the opportunity cost.

A) customer acquisition costs
B) revenue for direct sales
C) revenue per salesperson
D) lifetime value per customer
E) customer retention costs

Question 40

_____ 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) Resource utilization
D) Product expenditure
E) The monthly burn rate

Question 41

With regard to calculating a business's sales forecast, briefly identify the factors that can influence an increase in sales.

Question 42

While cost is one important factor in regard to pricing model considerations, another equally important factor is the relationship between how a product or service is priced and a company's goals. Briefly identify the typical goals and their impact on price.

Question 43

Are pro forma financial statements needed during feasibility analysis? Why or why not?

Question 44

Briefly discuss the positioning of a venture in the value chain.

Question 45

List the goals that a launch strategy should have.

Question 46

Name the common pricing strategies at startups.

Question 47

Explain the importance of creating a process map.

Question 48

Briefly discuss what startup resources include.

Question 49

List some various financial metrics, both common and unique, employed by startups.

Question 50

Discuss the purpose and sections of a cash flow statement.