MgtOps 492 - Exam 1

  1. Purpose of a business plan
    It's a way to map out a desired short- and medium-term future.
  2. When should a business plan be written?
    • For any new operating group/division/subsidiary being formed
    • For new product or project
    • When buying or merging with another entity
    • Annually for corporate resource allocation
  3. What functions does a business plan serve?
    • Determine future projects
    • Determine how well goals have been met
    • Raise money
  4. For an ongoing business, what purposes does a business plan serve?
    • It's a way of getting consensus and consistency throughout the company.
    • Assist in strategic planning.
    • Used to test theories of how the company should be run and calculate possible outcomes.
  5. What are the book's "four c's of credit"?
    • Character
    • Cash flow
    • Collateral
    • Contribution (equity)
  6. What are lenders looking for when reviewing loan applications?
    The ability of a company to repay its debt.
  7. What are venture capitalists looking for?
    • Rates of return of 25 to 50-percent or more, compounded annually
    • Investments that will become liquid within a relatively short period of time.
  8. Why is liquidity important?
    At the end of a venture capital fund's defined lifetime, the fund must be split up and returned to investors.
  9. What kind of businesses do venture capitalists look for?
    • Businesses that have an edge on the competition that cannot easily be copied.
    • Proprietary characteristics often marked by patents, licenses, trademarks, or other legal protection.
  10. What are the ___ types of investors?
    • Venture capital funds
    • Self/Family/Friends
    • "Angels"
    • Vendors - by giving better terms on payables
    • Corporate Venture Capitalists
    • Ad Hoc Venture Pools (minority enterprise investment groups)
  11. What are the variables an entrepreneur must deal with when choosing the legal form of a business?
    • Liability
    • Control
    • Ease of bringing in new investors
    • Taxes
  12. What are the six types of legal organizations listed in the book?
    • Sole proprietorship
    • Partnership
    • Limited Partnership
    • LLC
    • Corporation
    • S Corporation
  13. Simplicity characteristics of each type of legal organization
    • Sole Proprietorship: most simple, least expensive
    • Partnership: relatively simple to establish & maintain
    • Limited Partnership: needs a formal written agreement
    • LLC: more complex; needs formal operating agreement & registration in some states
    • Corporation: generally requires the most formality and maintaining
    • S Corporation: same degree of formality and expense as regular corp; maintenance is more expensive due to constant need for oversite.
  14. Liability of various types of organizations
    • Sole Proprietorship: owner has unlimited personal liability
    • Partnership: each has unlimited personal liability
    • Limited Partnership: general partners are personally liable; limited partners are only responsible up to the extent of their investment
    • LLC: Owners not generally liable
    • Corporation: Stockholders not generally liable
    • S Corp: shareholders
  15. List the Financial Risks analyzed while doing due diligence
    • Market risk
    • Credit risk
    • Liquidity risk
    • Fraud
    • Tax
    • Exit strategy
  16. List the operational risks reviewed during due diligence
    • Product risks
    • - Raw materials
    • - Design / engineering
    • - Supply chair
    • - Manufacturing operations
    • - Compliance with legal and regulatory standards
    • Distribution channels
    • Information security
    • Business continuity
  17. List the business risks associated with due diligence
    • Technological disruption
    • Changing forms of competition
    • Intellectual property
    • Governance and human resource risks
    • CEO succession
    • Employee relations
    • Compliance with laws, regulations and the company's governing documents on business conduct and ethics
    • Environmental
  18. List the transaction risks associated with due diligence
    • Deal structure
    • Tax and accounting considerations
    • Comparable valuations of competitors or industry leaders
  19. What info is included in the general company description?
    • What type of business
    • What customers does it want to serve
    • Location
    • Business objectives
    • Mgmt team overview
  20. What is in the "Products and Services" section of a business plan?
    • Physical description
    • Use and appeal
    • Stage of development

    Convey as concisely as possible the nature of the business offerings
  21. What is in the "Marketing Plan" section of a business plan?
    • Market definition and opportunity
    • Competition and other influences
    • Marketing Strategy
    • Market Research
    • Sales Forecast
    • Support Material
  22. What is the purpose of the "Major Milestones" section of the business plan?
    • Plans and objectives for a venture
    • It's a schedule and a set of goals against which progress can be measured
    • It should focus on major events, such as financing commitments, prototype development, first market test, break-even attainment, etc.
    • Should be clearly defined and easily measured
Card Set
MgtOps 492 - Exam 1
MgtOps Ernst & Young Business Plan Guide - 3rd Edition