Practice questions

Chapters included in MTA

Disclaimer:
The questions in this file are indicative and are made for the sole
purpose of guiding students towards how to deal with essay
questions. The questions in this file do not cover all the different
subjects in the chapters allocated in the Mid-term exam nor should
be used for studying on their own. Students should prepare for the
exam by studying from slides and book on the LMS.

:‫تنبيه‬
‫هذا الملف ال يمكن اإلعتماد عليه بمفرده للتحضير لإلمتحان وينبغي علي الطالب‬
‫و يتحمل‬LMS ‫المتاحة علي‬powerpoint ‫المذاكرة من الكتاب باإلضافة إلي ملفات‬
.‫الطالب مسؤولية فعل ما دون ذلك‬

Practice MCQ:
1. Which of the following is a major reason for the increased interest in small business?
A. There is no major fear of being impacted by recession.
B. There is a growing trend toward self-employment.
C. The rate of profit achieved by small businesses is higher than that of big corporations.
D. There are very few government regulations and paperwork for small businesses.
2. Which of the following statements is true about the impact of small businesses and
entrepreneurship on educational institutions?
A. Entrepreneurship and small business management are accepted as academically respected
disciplines by many high schools, colleges, and universities.
B. Community colleges are reluctant to offer courses for small business owners.
C. Today more students think working for big corporations is a safer haven than self-
employment.
D. Educational institutions have discovered that by teaching entrepreneurship they will be
able to put a restriction on free enterprise.
3. Which of the following statements is true about small businesses?
A. The manager usually owns the business.
B. The area of operations is not necessarily local, although the market is primarily local.
C. Capital is supplied and ownership is held by a large number of individuals.
 D. Management of small businesses is highly dependent, because the businesses are owned
by a group of people.
4. Which of the following features must a business have to be classified as small?
A. Management is independent, and the area of operation is primarily local.
B. It is dominant in its field of operation, and it employs 100-200 people.
C. Ownership is held by a large group of people, and the market is primarily local.
D. Capital is provided by a federal institution, and the objectives are non-profitability and
service to the government.
5. An entrepreneurial venture is characterized by:
A. innovative strategic practices and/or products.
B. independent ownership and operation and no desire for dominance in its field.
C. no scope of growing large, and the owners may not want it to.
D. normal sales, profits, and growth as opposed to rapid growth and a quick sellout.
6. Which of the following is characteristic of a small business owner?
A. Is innovative and focuses primarily on profitability and growth.
B. Perceives the business as being an extension of his or her personality.
C. Starts and manages a business for many reasons other than furthering personal goals.
D. Prefers a less relaxed and more aggressive approach to running the business.
7. _____ is the process of finding a small—but profitable—demand for something and
producing a custom-made product for that market.
A. Lead marketing
B. Challenge marketing
C. Content marketing
D. Niche marketing
8. While working in a fast-food outlet, Harold observed that most of the customers were
working in offices in the neighborhood. Sensing a profitable opportunity, he decided to open
a catering business. He offered to deliver lunch directly to the offices so that the
businesspeople would not have to interrupt their meetings to go out for lunch. In the context
of the above scenario, which of the following was the reason for Harold to start his own
business?
A. To obtain fresh inventory
 B. To take advantage of the latest technology to fill a void.
C. To select a competitive environment
D. To have a free hand in selecting personnel
9. Catherine, who loves dogs, wants to offer dog-walking services in her neighborhood. Her
research leads her to a small professional pet care store operating in the area, which she
decides to buy. Which of the following is a good reason for Catherine to buy the pet care
store?
A. The latest technology can be used to fill a service gap.
B. Fresh inventory can be obtained.
C. A competitive environment may be selected.
D. The facilities are already available.
10. Jane, who wants to start her own business, is considering buying an Internet café which is up
for sale in her neighborhood. However, Jane discovers that Internet connectivity tends to be
erratic in the store since she lives in a remote town and decides against it. Which of the
following is most likely the reason for Jane's refusal to buy the business?
A. Lack of an established product line
B. Lack of an established channel of distribution
C. Problems due to old and obsolete facilities
D. Problems associated with workforce availability.

11. Which of the following is a benefit of buying a franchise?

A. The franchisee can identify his or her market niche.
B. The franchisee can select his or her own sales activities.
C. The franchiser brings proven methods of operation to aid the franchisee.
D. The franchiser gives complete independence to run the franchise.
12. In a franchise, which of the following is an advantage for a franchiser?
A. Brand recognition
B. Low operating costs
C. Financial assistance
D. Share in national promotion.
13. _____ should be the first management function performed by an effective business owner-
manager.
A. Planning
B. Organizing
C. Staffing
D. Controlling
14. _____ is the process of setting standards, measuring performance against standards, and
taking corrective action to see that planned performance is achieved.
A. Planning
B. Organizing
C. Staffing
D. Controlling
15. _____ provides comprehensive long-term direction to help a business accomplish its mission.
A. Strategic planning
B. Operational planning
C. Elemental cost planning
D. Enterprise resource planning
16. Strategic planning helps a business set its _____.
A. Methods and procedures
B. Policies and visions
C. Missions
D. Budgets
17. Which of the following is an example of operational planning in a company?
A. Formulating the mission statement
B. Setting the personnel policy
C. Selecting the type of business to enter
D. Determining the financial needs
18. A SWOT analysis is used to:
A. Select human resources.
B. Restrict over-usage of physical capital.
C. Formulate the mission of a company.
 D. Identify new markets.
19. The external environment of a SWOT analysis consists of:
A. Strengths and weaknesses.
B. Threats and weaknesses.
C. Opportunities and threats.
D. Opportunities and strengths.
20. A business's _____ defines the present business scope and broadly describes an
organization's present capabilities, focus, and activities.
A. Budget
B. Policy
C. Operational plan
D. Mission statement

21. Identify a true statement about small businesses.

A. The trend toward independently owned small businesses is decreasing.
B. Small businesses are usually formed by those who seek power and prestige.
C. The sole purpose of forming small businesses is to earn a high income.
D. Interest in small business entrepreneurship is increasing in high schools and colleges.
22. Identify a true statement about the interest in small business at high schools, colleges, and
universities.
A. Currently, fewer students believe that self-employment is a safer haven than working for
big corporations.
B. Most high schools do not accept small business as part of their mission.
C. Most students do not have access to courses in family business, franchising, and
international operations.
D. Many community colleges now offer courses for small business owners.
23.Identify a reason for the increased interest in small businesses.
A. They are an attractive option mainly for people above the age of 45.
B. They reflect the decline in self-employment.
C. They are steadily decreasing in number.
D. They generate the most new private employment.
24. Identify the difference between entrepreneurial ventures and small businesses.
A. In entrepreneurial ventures, the main objectives are profitability and growth, whereas in
small businesses, profitability and growth are unimportant.
B. Entrepreneurial ventures usually employ innovative strategic practices, whereas small
businesses are run in a relaxed manner.
C. In entrepreneurial ventures, a relaxed and less aggressive approach is usually used,
whereas in small businesses, an aggressive approach is the norm.
D. Entrepreneurial ventures do not aim to dominate in a particular field, whereas small
businesses invariably strive to become market leaders.
25. Which of the following is characteristic of a small business owner?
A. Is innovative and focuses primarily on profitability and growth.
B. Perceives the business as being an extension of his or her personality.
C. Starts and manages a business for many reasons other than furthering personal goals.
D. Prefers a less relaxed and more aggressive approach to running the business.
26. Amma, who loves dogs, wants to offer dog-walking services in her neighborhood. Her
research leads her to a small professional pet care store operating in the area, which she
decides to buy. Which of the following is a good reason for Amma to buy the pet care store?
A. The latest technology can be used to fill a service gap.
B. Fresh inventory can be obtained.
C. A competitive environment may be selected.
D. The facilities are already available.
27. _____ is the process of finding a small—but profitable—demand for something and
producing a custom-made product for that market.
A. Lead marketing
B. Challenge marketing
C. Content marketing
D. Niche marketing
28. Sara and Alayna decide to start a home spa business. Which of the following indicates that
their business is a small business rather than an entrepreneurial venture? (Check all that
apply.)
A. They have started the business to avoid being financially dependent on their parents.
 B. They are focused on large and immediate profits.
C. They have unique offerings which they strategically market to potential customers.
D. They have competitors who have most of the market share.
29. In a franchise, which of the following is an advantage for a franchiser?
A. Brand recognition
B. Low operating costs
C. Financial assistance
D. Share in national promotion.
30. Many older people become involved in starting small businesses because _____.
A. People believe that entrepreneurs over 45 years of age are more trustworthy.
B. Such businesses offer the most opportunities and flexibility.
C. Such businesses are certain to succeed.
D. Retirees who run businesses pay no taxes.
31. _____ provides comprehensive long-term direction to help a business accomplish its mission.
A. Strategic planning
B. Operational planning
C. Elemental cost planning
D. Enterprise resource planning
32. _____ are those capital requirements that are of a relatively permanent nature and are
necessary for the functioning of a business.
A. Trade credits
B. Fixed assets
C. Current assets
D. Accounts receivables
33. _____ of a company is its current assets, less current liabilities, that a firm uses to produce
goods and services and to finance the extension of credit to customers.
A. Debt capital
B. Equity
C. Flex comp
D. Working capital
34. The working capital needs of a company are projected by estimating what out-of-pocket
expenses will be incurred and when the revenues from sales are to be collected, which is
done by _____.
A. cash budgets
B. dividend statements
C. capital account statements.
D. expense accounts
35. _____ is an owner's share of the assets of a company.
A. Equity
B. Profit
C. Capital
D. Credit
36. In the context of small businesses, _____ comes from lenders who will be repaid at a
specified interest rate within a specified time span.
A. equity financing
B. debt financing
C. profit capital
D. working capital
37. What is the primary purpose of an effective business plan in the context of business
formation?
A. To develop the product
B. To determine the feasibility of an idea
C. To analyze industry competitors
D. To manage the business's finances
38. What key components are typically included in an effective business plan?
A. The expected market for the product and the industry's strengths
B. The strengths and weaknesses of the industry and the planned marketing policies
C. The proposed product and the planned marketing policies
D. The product's expected market and the business's financial activities
39. Which of the following is an example of a variable expense in a business?
A. Rent
 B. Depreciation on building
C. Materials
D. Insurance

40. A business's _____ defines the present business scope and broadly describes an
organization's present capabilities, focus, and activities.
A. Budget
B. Policy
C. Operational plan
D. Mission statement

Matching Practice
1. 1. A business that is independently owned and operated, is not A. Business Plan
dominant in its field, and doesn’t engage in new or innovate
practices. C

2. A formal plan prepared to serve as a tool for attracting the other B. Reinvention
components of the business formation package, including people
and money. A

3. The owner who cannot make it financially and so voluntarily C. Small Business
calls it quits. I

4. Is a fundamental redesign of a business, often resulting in D. Stock

reduction in size and markets for a business, which can lead to
fewer job opportunities for those individuals who are less well
trained and educated. B

5. Represents ownership in a corporation. D E. Re-engineering

6. Is the process of setting objectives and determining actions to F. Planning

reach them. J

7. The redesign of operations, starting from scratch. Involves the G. Strategic planning
radical redesign of core business processes to achieve dramatic
improvements in productivity, cycle times and quality. E

8. Are the means by which the mission and objectives sought by a H. Lenders
 small business can be achieved. F

9. Provides comprehensive long-term direction to help a business I. Personal failures

accomplish its mission. G

10. Are those outsiders who provide business owners money for a J. Strategies
limited time at a fixed rate of interest. H

2. 1. Make investments based on projected future income and K. Consignment

generally require a substantial return as either equity or profit. B
selling

2. Payments to suppliers are made only when the products are L. Venture capital
sold, rather than when they are received in stock.A (VC)
3. Permits a business to borrow up to a set amount without red M. A line of credit
tape.C

4. Are wealthy local businesspeople and other investors who may N. Stock
be external sources of equity funding E

5. Represents ownership in a corporation. D O. Angel capitalists

6. Is the process of setting objectives and determining actions to P. Debt Financing

reach them. G

7. Consists of two or more companies exchanging items of roughly Q. Strategic planning

equal value. I

8. Is a contract that permits use of someone else’s property for a R. Lease

specified time period. H

9. Provides comprehensive long-term direction to help a business S. Barter

accomplish its mission. J

10. Are those outsiders who provide business owners money for a T. Strategies
limited time at a fixed rate of interest. F

QUESTION 1
A. Define a small business
B. What are business incubators? How do they help young firms succeed?
C. Mention four reasons for the increased interest in small business
The answer for this question is based on chapter 1.

A. A small business: a business that is independently owned and operated, is not

dominant in its field, and doesn’t engage in new or innovate practices.
B.
 Nurture young firms and help them to survive and grow during the start-up
period when they are most vulnerable
 They provide hands on management assistance, access to financing, and
they may even provide shared office spaces, equipment, and flexible leases
C. Mention four reasons for the increased interest in small business
 The number of small businesses is growing rapidly.
 Small firms generate most new private employment.
 The public favors small business.
 There is increasing interest in small business entrepreneurship at high
schools and colleges.
 There is a growing trend toward self-employment.
 Entrepreneurship is attractive to people of all ages.

QUESTION 2
A. Define Niche Marketing
B. What are the advantages and disadvantages of purchasing an existing small
business? Identify two advantages and two disadvantages of purchasing an
existing small business
C. How would a potential entrepreneur use market research to obtain information
about the market?

The answer for this question is based on chapter 5.

Q2

A. The process of finding a small—but profitable— demand for something and

producing a custom-made product for that market.
B. Advantages of purchasing an existing small business
  Personnel are already working.
 The facilities are already available.
 A product is already being produced for an existing market.
 The location may be desirable.
 Relationships have been established with banks and trade creditors.
 Revenues and profits are being generated, and goodwill exists.

B.Disadvantages of purchasing an existing business

• The physical facilities may be old or obsolete.

• The employees may have a poor production record or attitude.
• The accounts receivable may be past due or uncollectible.
• The location may be bad.
• The financial condition and relations with financial institutions may be poor.
• The inventory may be obsolete or of poor quality.

C. How would a potential entrepreneur use market research to obtain

information about the market?
1. Determine the size of the industry and market segment you want to enter.
2. Estimate your competition and determine how you stack up against it.
3. Estimate your own share of the market.

QUESTION 3
A. Define a mission statement
B. How can strategies help a small business reach its mission?
C. What are the three types of financial planning that can help a small business
owner improve his or her chances for success?

The answer for this question is based on chapter 6.

Q3

A. Mission statement: defines the present business scope and broadly describes
the organization’s present capabilities, focus, and activities.
 B. Strategies are the means by which the mission and objectives sought by a small
business can be achieved
 To be most effective, strategies should give a business a competitive
advantage in the marketplace. They should combine the activities such as
marketing, production or operations, research and development,
finance, and personnel in order to use the firm's resources more
effectively
C. What are the three types of financial planning that can help a small business
owner improve his or her chances for success?
1. Estimating income and expenses:

Incomes from sales (also called revenue) can be estimated by studying the market,
and expenses (also called cost) can be calculated from past experience, such as
knowledgeable people, a library, or a trade association.

2. Estimating initial investment required.

You will need money and/or credit to start your business. You must pay for items
such as building, equipment, materials, personnel, inventory, machine at the outset
before income from sales starts providing the means to pay these expenses from
internal sources.

3. Locating sources of funds.

1. Using your own funds: Some small business owners prefer to invest only their
personal; funds and not borrow to start or operate a business.
2. Use funds from others: There are several sources of outside funds. They can
generally divide into:
A. Equity investors: Examples relatives, friends, attorney, bankers.
B. Lenders: Example: Banks, credit unions, and other financial institutions that
provide loans to small and medium-sized businesses (SMEs).
C. Microloans: such as government agencies and non- government organizations.

QUESTION 4
 A. In the context of small businesses, what is trade credit?
B. What are the sources of debt and equity financing? Explain two sources of debt
financing and two of equity financing

The answer for this question is based on chapter 7.

Q4

A. Trade credit: Extended by vendors on purchases of inventory, equipment,

and/or supplies. Is an arrangement to buy goods and/or services on account
without making immediate cash or cheque payments. Example: Consignment
selling: Payments to suppliers are made only when the products are sold, rather
than when they are received in stock
B. Sources of debt financing

1. Trade credit: Extended by vendors on purchases of inventory, equipment,

and/or supplies. Is an arrangement to buy goods and/or services on account
without making immediate cash or cheque payments. Consignment selling:
Payments to suppliers are made only when the products are sold, rather than
when they are received in stock.

2. Credit cards: Visa, Mastercard, American Express

3. Line of credit: is a flexible loan from a financial institution that consists of a

defined amount of money that you can access as needed and repay either
immediately or over time.

4. Insurance companies

5. Seller Financing: Refers to the elimination of a third party when financing.

Sources of equity financing

1. Venture capital (VC) firms

 2. Angel capitalists or Business Angels: Wealthy local businesspeople and other
investors who may be external sources of equity funding. Example: Shark Tank TV
series.

3. Barter: Consists of two or more companies exchanging items of roughly equal

value.

4. Business incubators

QUESTION 5:

A. Small businesses are the backbone of a country’s economy, Based on

BUS 115 course, discuss any four of the unique contributions of small businesses?
Support your answer with some examples

The answer for this question is based on chapter 1, Week 1

1.Encourage innovation and flexibility.

Small businesses are often sources of new ideas, materials, processes, and
services that larger firms may be unable or reluctant to provide. As an
example, Steve jobs (age 21) and Steve Wozniak (age 19) essentially started
the PC industry by founding Apple computer in 1976 with capital obtained by
selling Job’s Volkswagen microbus and Woznaik’s Hewlett-Packard scientific
calculator.

2.Generate new employment.

Small businesses generate employment by creating job opportunities

3.Keep larger firms competitive.

With the introduction of new products and services, small businesses

encourage competition, if not in price, then at least in design and efficiency,
as happened in the area of California (Silicon Valley), where the personal
computer was developed.

4.Develop risk takers.

Small business owners have relative freedom to enter or leave a business at

will. To start small or grow big, to expand or contract, and to succeed or fail.
Yet founding a business in an uncertain environment is risky, planning must
before start-up.

5.Maintain close relationships with customers and the community.

Small businesses tend to be close touch with their communities and

customers. They can do a more individualized job than big firm can, thereby
attracting customers based on specialty products, quality, and personal
services rather than solely based on the price.

6.Provide employees with comprehensive learning experience.

Small business employees have more freedom to make decision, which can
flourish their working experience. Also, small businesses train people to
become better leaders and managers and to develop their talents and
energy more effectively.

B. Many successful small business owners start a new business because they want others to
recognize that the success is all theirs. Based on BUS 115, define a small business and
identify four reasons FOR and four reasons AGAINST starting a new business?.
The answer for this question is based on chapter 5, Week 2
Reasons for starting a new business lie in the owner’s freedom to:

• Define the nature of the business.

• Create the preferred type of physical facilities.
• Obtain fresh inventory.
• Have a free hand in selecting and developing personnel.
• Take advantage of the latest technology, equipment, materials, and
tools.
• Select a competitive environment.

Reasons for NOT starting a new business

• Problems in finding the right business.

• Problems associated with assembling the resources,
• Lack of an established product line.
• Production problems associated with starting a new business.
• Lack of an established market and channels of distribution.
 • Problems in establishing basic management systems and controls.

A small business: a business that is independently owned and operated, is

not dominant in its field, and doesn’t engage in new or innovate practices.

QUESTION 6:

A. Planning is one of the most difficult activities small business owners do.
Planning should be the first in performing a series of managerial
functions because it sets the future course of action for all aspects of
business. Planning is the foundation you build on. Based on BUS 115
course,

The answer for this question is based on chapter 6, Week 2

1. Define what is business planning

Planning: Is the process of setting objectives and determining actions to

reach them.

1. Why is planning so important to small businesses?

Well-developed business plans can:

1. Interest moneyed people in investing in your business.

2. Guide the owner and managers in operating the business.

3. Give direction to and motivate employees.

4. Provide an environment to attract customers and prospective

employees.

2. Why small business owners Neglect planning?

 Day-to-day activities leave them little or no time for planning.

 They fear the problems and weaknesses planning may reveal.

  They lack knowledge of how to plan.

 They feel that future changes cannot be planned for.

B. Small businesses often need money. Start-up small businesses may

use equity financing or debt financing to obtain money when they lack
cash. Based on BUS 115 course,
1. Explain what is debt financing and equity financing
Debt financing
Comes from lenders who will be repaid at a specified interest rate within a
specified time span.
Equity financing
Is an owner’s share of the assets of a company. In a corporation, it is
represented by shares. OR equity financing offer shares of your company to
family, friends, and other small investors. It often involves venture capitalists
or angel investors.
2. Discuss four sources of debt financing and four sources of equity
financing
Sources of debt financing

6. Trade credit: Extended by vendors on purchases of inventory,

equipment, and/or supplies. Is an arrangement to buy goods and/or
services on account without making immediate cash or cheque
payments. Consignment selling: Payments to suppliers are made
only when the products are sold, rather than when they are received in
stock.

7. Credit cards: Visa, Mastercard, American Express

8. Line of credit: is a flexible loan from a financial institution that

consists of a defined amount of money that you can access as needed
and repay either immediately or over time. Interest is charged on a
line of credit as soon as money is borrowed. Similar to a credit card
that offers you a limited amount of funds
 9. Insurance companies: Insurance company may be a good source of
funds for a small firm. The business owner can go directly to the
company or directs its agent.

10. Seller Financing: Refers to the elimination of a third party

when financing. This includes a promissory note with interest rate,
repayment schedule, and default consequences.

Sources of equity financing

1. Venture capital (VC) firms: Make investments based on projected

future income and generally require a substantial return as either equity
or profit.

2. Angel capitalists or Business Angels: Wealthy local businesspeople

and other investors who may be external sources of equity funding. A
diverse group of high-income individuals who will invest part of their
assets in high-risk, high-return entrepreneurial ventures. Example: Shark
Tank TV series.

3. Barter: Consists of two or more companies exchanging items of

roughly equal value. Barter lend itself to many uses such as business
travels, closing a sale, employee perks and bonuses

4. Business incubators

• Managing in-house and revolving loan funds.

• Networking it to locate and connect venture capitalists.

• Connections with angel investors.

• Assisting with loan applications.

QUESTION 7

A. In the context of small business failure, what is the difference between formal
and informal failure
 B. Explain, four reasons/motivations, why people start small businesses

C. What are the common areas that create problems for small business owners
and entrepreneurs? Identify four problems facing small businesses

The answer for this question is based on chapter 1.

Q7

A. Formal failures: Failures ending up in court with loss to creditors. Personal

(informal) failures: The owner who cannot make it financially and so voluntarily
calls it quits. Personal failures are far more numerous than formal ones.
B. Motivations for starting a small business
 Satisfy personal objective.
 achieve independence.
 Obtain additional income.
 Help their families.
 Provide products not available elsewhere.
C. Four problems facing small businesses
 Political and economic issues: Political issues such as bureaucracy and
corruption level. Economic issues such as inflation rate, interest rate,
employment level.
 World economy: Example, Covid-19 pandemic.
 Capital or financing issues: Lack of cashflow, insufficient marketing and
advertising.
 Succession/Retirement or transition: Examples retirement, death, or disability.
 Burdensome government regulations and paperwork
 Inadequate financing
 Inadequate Management
 Unexpected growth

QUESTION 8

A. What is franchising?
 B. What are the advantages and disadvantages of purchasing an existing small
business? Identify two advantages and two disadvantages of purchasing an
existing small business
C. What are the reasons for starting a new business and reasons for not starting a
new business? Identify two reasons for starting a new business and two
reasons for not starting a new business?

The answer to this question is based on chapter 5.

Q8
A. Franchising is a marketing system whereby an individual owner conducts
business according to the terms and conditions set by the franchiser
B. Advantages of purchasing an existing small business
 Personnel are already working.
 The facilities are already available.
 A product is already being produced for an existing market.
 The location may be desirable.
 Relationships have been established with banks and trade creditors.
 Revenues and profits are being generated, and goodwill exists.

B.Disadvantages of purchasing an existing business

• The physical facilities may be old or obsolete.
• The employees may have a poor production record or attitude.
• The accounts receivable may be past due or uncollectible.
• The location may be bad.
• The financial condition and relations with financial institutions may be poor.
• The inventory may be obsolete or of poor quality.
C. Reasons for starting a new business lie in the owner’s freedom to
• Define the nature of the business.
• Create the preferred type of physical facilities.
• Obtain fresh inventory.
• Have a free hand in selecting and developing personnel.
• Take advantage of the latest technology, equipment, materials, and tools.
 • Select a competitive environment.
C.Reasons for NOT starting a new business
 Problems in finding the right business.
 Problems associated with assembling the resources,
 Lack of an established product line.
 Production problems associated with starting a new business.
 Lack of an established market and channels of distribution.
 Problems in establishing basic management systems and controls.

QUESTION 9

A. What is a business plan?

B. What are the components of business plan? Identify four components of
business plan
C. What is a SWOT analysis, and how is it used?

The answer to this question is based on chapter 6.

Q9

A. Business plan: is a formal plan prepared to serve as a tool for attracting the
other components of the business formation package, including people and
money. It provides details for the activities needed to finance the business,
develop the product, market it, and manage the new business
B. Business plan components
 C. SWOT Analysis study is made of the opportunities and threats in the external
environment and the strengths and weaknesses in the internal environment

C.SWOT analysis is one tool that most strategic planners use to scan the
business’s environments and base objectives. It allows the owner to identify new
markets and to prepare for perceived downturn or competitions (5 marks).

QUESTION 10

A. What is the difference between equity and stock?

B. What are the sources of debt and equity financing? Explain two sources of debt
financing and two of equity financing.

The answer for this question is based on chapter 7.

Q10

A. Equity is an owner’s share of the assets of a company. In a corporation, it is

represented by shares of common or preferred stock
Stock: Represents ownership in a corporation
B. Sources of debt financing
 1. Trade credit: Extended by vendors on purchases of inventory, equipment,
and/or supplies. Is an arrangement to buy goods and/or services on account
without making immediate cash or cheque payments. Consignment selling:
Payments to suppliers are made only when the products are sold, rather than
when they are received in stock.

2. Credit cards: Visa, Mastercard, American Express

3. Line of credit: is a flexible loan from a financial institution that consists of a

defined amount of money that you can access as needed and repay either
immediately or over time.

4. Insurance companies

5. Seller Financing: Refers to the elimination of a third party when financing.

Sources of equity financing

1. Venture capital (VC) firms

2. Angel capitalists or Business Angels: Wealthy local businesspeople and other

investors who may be external sources of equity funding. Example: Shark Tank TV
series.

3. Barter: Consists of two or more companies exchanging items of roughly equal

value.

4. Business incubators

Question 11:

1. What are the benefits and drawbacks of buying a franchise? Identify two benefits
and two drawbacks of buying a franchise
Two benefits
2. Franchiser can provide supplemental help through its experience and concentrated study
of the field. You don't necessarily need business experience to run a franchise.
Franchisors usually provide the training you need to operate their business model.
3. Franchises often have an established reputation and image, proven management and work
practices, access to national advertising and ongoing support.
 Two drawbacks
• Not having enough money to cover all needs (including personal funds).
• Unsuccessful marketing.
• Issues affecting the franchisee understanding their role in the responsibilities of operating
the franchise.
• Buying a franchise means ongoing sharing of profit with the franchisor.
• Bad performances by other franchisees may affect your franchise's reputation.

Class Revision on Ch1 till Ch6

Question 1: (10 min)

Explain the difference between Entrepreneurial ventures and small businesses.

Question 2: (15 min)

Discuss in details the occupational and industry shifts.

Question 3: (10 min)

List the steps in in starting a new business.

Question 4: (5 min)

What is a SWOT analysis, and how is it used?

Question 5: (10 min)

Describe Operational Planning and support your answers with relevant examples.

Question 6: (20 min)

Advise on the pros and cons of the different sources of funding a business

Question 7: (15 min)

List and explain the sources from which a small business owner can raise money

Question 8: (15 min)

Through crowdfunding, you can reach a global audience for either a loan or a stake in the business.
Explain the pros and cons of this funding methods

Question 9: (10min)

What are the top five reasons to write a plan

Question 10: (10 min)

List the types of start-up funding

Answer Q.1 (ch.1):

Entrepreneurial Ventures

The principal objectives of the owner are profitability and growth.

Entrepreneur: starts and manages a business for many reasons including achievement, profit, and
growth, achieved through innovation and strategic management.

Small business, sometimes called a micro-business: Independently owned and operated and is not
dominant in its field. It may never grow large, and the owners may not want it to, as they prefer a more
relaxed approach to running a business. Generally, small business owner establishes a business
primarily to further personal goals, including making a profit.
Answer Q.2 (Ch.1):

Industry is the type of activity at a person's place of work; occupation is the kind of work a person does
to earn a living. One example would be the trend toward hiring more professional workers and fewer
clerical workers in a wide variety of industries.

Examples of these shifts could be:

• Reinvention: Is a fundamental redesign of a business, often resulting in reduction in size and

markets for a business, which can lead to fewer job opportunities for those individuals who are
less well trained and educated.

• Netflix, for example, started as a DVD rental and sales business, allowing customers to rent
unlimited DVDs and have them delivered by mail for a monthly fee. The company transitioned
to online streaming about 10 years later and became the most popular service of its kind.

• Reengineering: The redesign of operations, starting from scratch. Involves the radical redesign
of core business processes to achieve dramatic improvements in productivity, cycle times and
quality. This resulted in downsizing ‘sometimes called rightsizing’. Reducing the number of
employees to increase efficiency. Boeing as an example of successful downsizing. The company
downsized approximately 55,000 people over a five-year period. between 1997 and 2002, the
company partnered with labour and government to create Reemployment Centres that helped
retrain laid-off workers for new jobs.

Answer 3 (ch.5):

1. Search for and identify a needed product.

2. Study the market for the product, using as many sources as feasible.

3. Decide whether to start a new business, buy an existing one, or buy a franchise.

4. Make strategic plans, including setting your mission, strategic objectives, and strategies.

5. Make operational plans including setting policies, budgets, standards, procedures, and methods,
and planning the many aspects of producing and marketing the product.

6. Make financial plans, including estimating income estimating initial investment, and locating
sources of funding.

7. Develop these plans into a detailed business plan.

8. Implement the plan.

Answer Q.4 (Ch.6):

A SWOT (Strength, Weaknesses, Opportunities, Threats)

SWOT analysis is one tool that most strategic planners use to scan the business’s environments and
base objectives. It allows the owner to identify new markets and to prepare for perceived downturn
 or competitions. SWOT Analysis study is made of the opportunities and threats in the external
environment and the strengths and weaknesses in the internal environment.

Answer Q.5 (Ch.6)

Answer: Question 6: (20 min)

Debt- This involves borrowing money—bank loans or finance secured against your personal or business assets.

PROS CONS

❯ No need to sell equity to outside investors, meaning you keep ❯ Loans mean detailed paperwork in the form
control. cash flow projection.

❯ Short-term borrowing helps with cash flow issues in times of ❯ You may need security for a loan.
growth.
❯ Interest rates can be much higher if your le
❯ All profits are yours, with no need to share with investors risk.

Equity - This depends on investors providing funds in return for a share in the profits or control of your business.

PROS CONS

❯ Removes the burden of debt and eases financial worries. ❯ Likely to be time-consuming to find the rig

❯ You benefit from the expertise of experienced business developers. ❯ Investors share profits and may want a ret

❯ Investors can help build your business through their networks. ❯ You may lose some control over the runnin

Answer: Question 7: (15 min)

Capital for new enterprises comes from two main sources: lenders and investors. Lenders, such as
banks, provide debt capital in the form of a loan that is returned with interest. Investors, such as
business angels and venture capitalists (VCs), provide equity capital in the form of a share in the
business that may include a proportionate share of control and rewards.

Both types of funding can be corporate—from a company—or quirkier and more alternative, such as
crowdfunding

Answer: Question 8: (15 min)

Crowdfunding - Through crowdfunding, you can reach a global audience for either a loan or a stake in the business.

PROS CONS

❯ Wide pool of potential investors can be targeted online ❯ May be more demanding, since funders do n
personally
❯ Can raise money quickly, and you control the terms of the funding
❯ You must reimburse investors if you fail to r
❯ Funding appeal might go viral and raise more cash than expected target

❯ Fierce online competition for investors’ fund

Answer: Question 9: (10min)

TOP FIVE REASONS TO WRITE A PLAN

❯ The process Working through each element ensures nothing is forgotten.

❯ Costing The only way to find out whether the business is viable is to work out de
and sales.

❯ Funding A good business plan improves chances of getting a loan.

❯ Areas of expertise Making a business plan clarifies where outside help is needed
in bookkeeping or marketing.

❯ Getting to know the competition Conducting market research is the best way to
business an edge.
Question 10: (10 min)

Slide 26, 29, and 30.