SYB302C

Entrepreneurs cause entrepreneurship.

A. True B. False

What are common motivators for entrepreneurs to start a new venture?

A. To elevate their independence B. To earn more money C. To create new things D. To increase their freedom E. To help others

Innovations must be radical and disruptive in order to be viable for new company creation.

A. True B. False

Nike's development of the "Air Jordan" brand is an example of this type of innovation:

A. Marketing innovation B. Business model innovation C. Product innovation D. Service innovation

Strategic decisions typically share which four processes? A. Selecting the alternative that best satisfies the evaluation criteria B. Generating alternatives C. Evaluating the various alternatives D. Recognizing a problem situation E. All of the above F. None of the above

All of the following are examples of long term incentives to employees that help retain valuable team members EXCEPT A. employee bonuses B. stock grants. C. stock options. D. profit-sharing plans.

Anti-dilution provisions in financing documents protect: A. founders, by preventing their ownership in a company from being significantly reduced by new investors B. investors from dilution in the event of stock splits, stock dividends or sales of stock at a price lower than that the investor paid C. employees who have options issued from the company's option pool D. None of above E. All of above

Cash is composed of all of these forms of money that can be immediately used to make payments EXCEPT: A. receivables. B. demand deposits. C. traveler's checks. D. currency.

Working for a very large organization in the tractor manufacturing industry, John always heard complaints from customers about the parts and service aspect of the business. Taking an early retirement, John started his small business to address the customer complaints he had been hearing. Which of the following best describes the factor that led John to this business idea? A. A similar business B. Chance C. Work experience D. Family and friends

What factor(s) can impact the valuation of your company? A. Hot sectors B. Management team experience C. Early traction (revenues, partnerships, etc.) D. A well developed V1 product E. All of the above

_____ refers to something the business owns that has economic value or is expected to have economic value in the future. A. Asset B. Revolving credit C. Cash flow D. Synergy

_____ is a process of producing an idea or opportunity that is novel and useful, frequently delivered from making connections among distinct ideas or opportunities. A. Ethics B. Creativity C. Imitation D. Flexibility

Customers derive value not just from what companies produce in their factories, but also from what companies add to their factory output in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, and upgrades. A. True B. False

What is the simplest form of corporate structure? A. General partnership B. Limited partnership C. Unincorporated sole proprietorship D. Limited liability company (LLC)

Which of the following statements is correct about the due diligence process? A. Due diligence is not time consuming if done properly B. Due diligence is a two-way process C. Prospective investors will want to investigate legal, financial and strategic matters D. The key to success in due diligence is advance preparation and cooperation among the parties

People who buy ownership rights in your business are considered A. outside equity investors B. family C. debt holders D. creditors

Which of the following statements about a balance sheet is correct? A. Assets = Liabilities + Equity B. Equity = Assets - Liabilities C. Liabilities = Assets - Equity D. All of the above E. None of the above

Which of the following is TRUE regarding intermediary sources of capital? (Select all that apply.) A. This category includes investment bankers. B. They can introduce you to other financing sources. C. They may charge a fee for their services. D. All of the above E. None of the above

Which of the following statements about term sheets is correct? (Select all that apply.) A. They state the pre-money valuation and the amount of the investment. B. No shop clauses are beneficial to the investor but not the company. C. They normally include a statement on the use of the proceeds of the investment. D. All of the above E. None of the above

A cost structure is all costs incurred to operate a business model. By creating and delivering value; maintaining customer relationships, and generating revenue... A. True B. False

Which of following is an advantage of a start-up? A. It begins with a clean slate B. It has initial name recognition C. It is easy to establish and provide postive cash flow D. It has easy access to revolving credit

When an entrepreneur tells an investor "I have no competition", what the investor hears and thinks is: A. The market the entrepreneur is going after must not be very big if no other competitors are entering it B. That's great! This entrepreneur is pretty smart to have built a product in a big market that has no competing products to worry about C. This entrepreneur doesn't know the market very well D. All of the above

The sum of all profits and losses, less all dividends paid since the beginning of the business. A. retained earning B. liabilities C. net income D. tax liability

Compensation, training time, employee tax, and accounting costs are some of the additional expenses involved in adding A. part-time employees. B. full-time employees. C. contract employees. D. temporary employees

When developing a new product, it is necessary to meet every customer desire. A. True B. False

The key market knowledge for a small business A. is to know how to seek and obtain external financing. B. focuses on its immediate marketplace and communities. C. is to know how to cash out through the sale of an initial public offering of stock or through the sale of the company to a larger company. D. focuses on the need to know how to dominate the market and grow dramatically and quickly.

Which of the following items discovered in the due diligence process could be a cause for concern by an investor, which could ultimately lead to a decision by the investor to NOT invest? A. Large accounts payable for goods and services that are all "current" (i.e., within the terms offered by the vendor) B. A large shareholder loan that will be paid upon completion of the current financing C. Significant related party transactions that are properly documented and performed on an arms-length basis D. Accounts receivable from 20 very small customers which are 10 days past due

Which of the following statements is correct about what prospective investors want to see when you pitch your company to them? A. Investors don't care how or if your product works because they assume it does or will B. Why customers will buy your product/solution C. You and your team have an in-depth knowledge of the market D. All of the above E. None of the above

An example or photo of your product or service is a great visual aid in helping you sell your plan in your written market plan. This is an example of A. defining your product price B. defining your product C. using a promotional tool for your product D. defining a distribution system for your product

What is the value Proposition that your company or organization offers to solve customer problems and satisfy their needs? A. Value proposition describes the bundle of products or services that create value for a specific customer segment B. Value propostion describes the profits and losses C. Value propostion describes the price and service D. Value propostion describes the target market E. None of the above

What are the three pillars of Qualitative Research? A. Observation, In-depth interview, Focus groups B. Serveys, Focus groups, In-depth interview C. Serveys, Focus groups, Observation D. Observation, Serveys, Closed Question E. None of the above

When people find a way to turn their hobbies into succesful businesses, which of the following factors is considered as leading them to their business idea? A. Personal interest B. Education and expertise C. Serendipity D. Family and friends

Strategic or corporate venture capital firms make investments: A. Primarily outside of their core businesses to diversify their risk B. Within their core businesses to achieve financial and strategic returns C. Only to achieve financial returns D. To build risk portfolios with excess cash of the corporation

Equity securities include all of the following: (Select all that apply.) A. Warrants B. Preferred stock C. Options D. All of the above E. None of the above

What are the characteristics of industry structure? A. Demographics B. Advertising intensity C. Firm size D. Capital intensity E. All of the above F. None of the above

Search and capture of new ideas that lead to bussiness opportunities is called opportunity recognition A. True B. False

A cap on a convertible note is used to: A. Establish the maximum pre-money valulation at which the note will convert B. Put a limit on the maximum interest rate payable on the note C. Secure the payment of the note upon liquidation D. Put a value on the company

Sustainable competitive advantage can only be maintained until competitors are able to duplicate or develop a compelling substitute. A. True B. False

What are the Customer Segments that your company or organization serves? A. Customer segments define the different groups of products or service B. Customer segments define the different groups of people or organization to serve C. Customer segments define the different groups of partners to serve D. Customer segments define the different groups of suppliers to serve E. All of the above

For small businesses, the key budget is the ______ budget A. Cash B. retained earnings C. sales D. marketing

The entreprenurial focus which refers to doing the most work with the fewest resources is A. customer-focus B. innovation C. effeciency D. creation

It is smart to set your pricing significantly lower than competitors' prices in an effort to capture market share and achieve your revenue goals quickly. A. True B. False

Which of the following are "Do's" of making a pitch: (Select all that apply.) A. Connect emotionally with the investor. B. Give a product demo, if applicable. C. Highlight your and your management team's prior successes. D. All of the above E. None of the above

Entrepreneurs have a natural desire to take risks at a higher level than non-entrepreneurs. A. True B. False

The primary sources of seed and early stage capital include the following: A. Angel investors B. Management team C. Founders D. All of the above E. None of the above

Focus group method refers to gathering data by simple observation A. True B. False

Activities through which cash is obtained from and paid to lenders, owners, and investors are called___ A. marketing B. investing C. financing D. operating

An entreprenur's relationships and contacts with others is termed as A. a social network B. visibility C. the Golden Rule D. mutuality

According to research, start-up entreprenurs felt most confident about obtaining start-up capital A. True B. False

Which of the following is not a characteristic of Preferred Stock? A. Preferred stock is an equity instrument with some characteristic of debt B. Preferred stock shareholders receive the greater of the original purchase plus accrued dividends OR a percentage of the liquidation proceeds on an 'as-converted" basis in a standard liquidation of the company C. Anti-dilution provisions protect the preferred shareholder's pro-rata interests D. It is the financing vehicle of choice for venture capitalists

The percentage amout that the payout of an investment differs from original cost is called as A. Dividend B. Gain on investment C. Risk D. Interest

Which of the following statements is CORRECT about friends and family investors? A. Terms should always be put into writing B. They invest because of the relationship to the founder(s) C. When discussing an investment with a friends and family investor, the entrepreneur should clearly discuss risk versus reward D. Only equity investments are allowed given the relationship to the founder E. All of the above F. None of the above

Entrepreneurs cause entrepreneurship.

A. True B. False

What are common motivators for entrepreneurs to start a new venture? Check all that apply.

A. To elevate their independence B. To earn more money C. To create new things D. To increase their freedom E. To help others

Innovations must be radical and disruptive in order to be viable for new company creation.

A. True B. False

Nike's development of the "Air Jordan" brand is an example of this type of innovation:

A. Marketing innovation B. Business model innovation C. Product innovation D. Service innovation

What makes a decision "strategic"? Check all that apply.

A. Results in substantial gains or losses as a result of the decision and its subsequent outcomes B. Involves planning actions in an uncertain and unpredictable future C. Requires significant allocations of resources

Strategic decisions typically share which four processes? Choose the four that apply.

A. Recognizing a problem situation B. Generating alternatives C. Evaluating the various alternatives D. Assessing the environmental impact E. Selecting the alternative that best satisfies the evaluation criteria

The Opportunity Analysis Canvas is designed to help individuals develop which areas? (Check all that apply).

A. Thinking entrepreneurially B. Seeing entrepreneurially C. Acting entrepreneurially

Entrepreneurs have a natural desire to take risks at a higher level than non-entrepreneurs.

A. True B. False

Which type of individuals are more likely to discover and act on an entrepreneurial opportunity?

A. External locus of control B. Internal locus of control

Which is the more valuable measure of your social capital?

A. The diversity of the people that you know. B. The number of people that you know.

Why build social capital? (Check all that apply.)

A. To be a more valuable collaborator B. To be more creative C. To be a more efficient problem solver D. To be better informed

What four attributes influence an industry's favorability to new firm entry? Choose the four that apply.

A. Demand conditions B. Knowledge conditions C. Industry lifecycle D. Innovation potential E. Industry structure F. Market attractiveness

What are the four characteristics of industry structure? Choose the four that apply.

A. Demographics B. Advertising intensity C. Firm concentration D. Regulatory issues E. Psychographics F. Capital intensity G. Firm size

Sustainable competitive advantage can only be maintained until competitors are able to duplicate or develop a compelling substitute.

A. True B. False

When developing a new product, it is necessary to meet every customer desire.

A. True B. False

Within the product design and development decisions, successful entrepreneurs create multiple products simultaneously that are uniquely positioned for every potential market segment.

A. True B. False

It is smart to set your pricing significantly lower than competitors' prices in an effort to capture market share and achieve your revenue goals quickly.

A. True B. False

Strategic planning requires near-term commitment for long-term benefits.

A. True B. False

What factors may make it economically unattractive to produce your anticipated product or service? Choose all that apply.

A. Over-designing the product to the point where the price is beyond your customer B. Designing the product for a market niche that is too small to generate the desired revenue goals of your company C. Agreeing to minimum production volume requirements that exceed your ability to pay for the production costs and invest in marketing appropriately

What are the four key items do customers want to know? (Choose Four)

A. How does this impact my end state? B. Do I have chemistry with this seller? C. Is this the right solution? D. Can I afford this solution? E. What are the technical specifications of the solution?

Which "customers" do most solutions involve? (Choose All That Apply)

A. Decision-Maker B. End-user C. Recommender D. Payer E. Influencer F. Saboteur

A "customer archetype" is a "customer type"?

A. True B. False

A winning value proposition typically requires a "gain creator" or "pain killer" for a major "customer job".

A. True B. False

Customers derive value not just from what companies produce in their factories, but also from what companies add to their factory output in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, and upgrades.

A. True B. False

The Total Product Concept consists of which four main elements? (Choose Four)

A. Core B. Cost of doing business C. Augmented D. Potential Product E. Expected

What are the three pillars of Qualitative Research? (Choose Three)

A. In-depth interviews B. Focus groups C. Observation D. Surveys

What are the three types Of Strategic Partnerships? (Choose Three)

A. Vertical partnerships B. Co-opetition C. Acquisitions D. Horizontal partnerships

The four purposes of prototypes are: (Choose Four)

A. Pricing B. Learning C. Milestones D. Integration E. Communication

High fidelity prototyping tools are best for concept sketching and basic story boards.

A. True B. False

What is the first step of the Experience Map?

A. The lens B. The journey model C. Quantitative information D. Qualitative insight

Customer insights is the fuel that drives effective marketing in all companies.

A. True B. False

Anti-dilution provisions in financing documents protect:

A. (a) founders, by preventing their ownership in a company from being significantly reduced by new investors B. (b) investors from dilution in the event of stock splits, stock dividends or sales of stock at a price lower than that the investor paid C. (c) employees who have options issued from the company's option pool D. (d) both (a) and (b)

Bridge financing is a term that means:

A. An interim financing round that provides cash to a company that is anticipating either a larger financing round, a merger or an initial public offering B. A special kind of construction loan C. An interim financing round that provides cash to a company that "bridges" the gap between cash on hand and the next monthly payroll D. None of the above

The key components of a business plan are:

A. Income Statement, Balance Sheet, Cash Flow Statement B. Company Description, Product Description, Market Analysis, Headcount Plan, Customer List, Patents C. Executive Summary, Company Description, Product/Service Description, Market Opportunity, Sales & Marketing Plan, Management Team, Financial Projections D. Early-stage companies do not need to write business plans because they new to the market and too many variables are unknown

The 4 "M's" that investors look for in a company are:

A. Momentum, Management Team, Market Potential, Money B. Monthly Sales, Management Team, Money, Mystery C. Momentum, Monthly Sales, Money, Management Team D. None of the above

Which of the following is false about a Term Sheet?

A. It includes the pre-money valuation of the company. B. It is binding on the investor for 60 days. C. It specifies the use of proceeds. D. It specifies the form of investment.

The primary purpose of the 'cap' in a convertible note is:

A. To convert into equity at the value of the next round of financing, regardless of the valuation of that round. B. To delay the valuation of an early-stage company. C. To establish an arbitrary valuation of an early-stage company. D. To place a ceiling on the valuation at which the note converts into equity.

Series A, Series B and Series C preferred refers to the:

A. Value of the preferred stock. B. Priority of the preferred stock in liquidation. C. Class of the preferred stock. D. Nothing - they are simply given a letter to distinguish each preferred stock issuance.

An investor invests $2.5 million on $5 million post-money valuation in a participating Preferred Stock. The company subsequently sells for $10 million. What is the ownership of the Preferred investor and how much of the $10 million will the investor receive?

A. 33%; $3.3 million. B. 50%; $5 million. C. 50%; $6.25 million. D. 33%; $5 million.

Which of the following statements about a balance sheet is correct?

A. Assets = Liabilities + Equity B. Equity = Assets - Liabilities C. Liabilities = Assets - Equity D. All of the above

What is the simplest form of corporate structure?

A. General partnership B. Limited partnership C. Unincorporated sole proprietorship D. Limited liability company (LLC)

BACKGROUND - Ima Founder starts her own business, NEWCO, on January 1, 2014 and sets up a corporation with 10,000 shares of common stock, with a par value of $0.001 per share. She invests $1,000 in NEWCO in exchange for the 10,000 shares of common stock.

She subsequently raises $150,000 in convertible notes, which she closes on March 1, 2014. The notes accrue simple interest at 12% per year. The maturity date of the notes is March 1, 2017, at which time all principal and accrued interest are payable to the noteholders, unless the notes are converted earlier in accordance with the note terms.

From April 1 through December 31, 2014, Ima spends $72,000 in payroll costs to develop her first product, a web application used to book doctor appointments online. All costs to develop the application are expensed as incurred.

On March 1, 2014, Ima enters into a lease agreement to rent office space for NEWCO. The terms of the lease include an upfront payment of a $3,000 security deposit to guarantee timely rent payment and provide for repairing any damages to the office that are not considered "normal wear and tear", but which is refundable upon completion of the lease term. Rent is $3,000 per month, which includes ALL costs, including use of the office space, phones, use of common facilities and all Internet connectivity. Rent is payable in arrears (that is, payable on the first day of each month following a month during which the office space is occupied).

On September 1, 2014, she engages the services of a UX/UI consultant to provide a professional user experience in using the web application. The consultant is paid $5,000 monthly, payable on the first day of the month following the month the work is performed.

On December 1, 2014, she sells 4 annual contracts of her web application to doctor offices at a price of $60,000 per contract per year. The doctor offices have immediate use of the web application and are given 30 day payment terms. (Note: for purposes of this exercise, assume the cost of the mobile applications is negligible).

ASSIGNMENT - Develop a balance sheet and an income statement for NEWCO based upon the above facts. Based on the balance sheet and income statement developed, answer the following questions: QUESTION 1: What is NEWCO's cash balance on December 31, 2014?

A. $17,000 B. $34,000 C. $68,000 D. $6,800

What is the balance of convertible notes (including accrued interest) at December 31, 2014?

A. $247,500 B. $150,000 C. $82,500 D. $165,000

What is NEWCO's Shareholders' Equity at December 31, 2014?

A. $(45,000) B. $(4,400) C. $(22,500) D. $(116,000)

What is NEWCO's pre-tax income or loss for the year 2014?

A. Loss of $117,000 B. Loss of $67,000 C. Gain of $67,000 D. Gain of $117,000

Deferred revenues are revenues that have been booked (contracted for) but not yet earned as of a reporting date. What is Newco's deferred revenue balance at December 31, 2014?

A. $240,000 B. $220,000 C. $65,000 D. $120,000

What is the accrued expense balance on the balance sheet at December 31, 2014?

A. $8,000 B. $4,000 C. $16,000 D. $12,000

Early stage companies, owing to the lack of history and collateral, rarely raise money via debt with one notable exception, which is:

A. Preferred stock, with a dividend that acts like an interest rate B. Convertible notes, which are a hybrid, more closely related to equity C. Common stock D. Shareholder loans