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					               Business 3215 – Principles of Entrepreneurship

                                    Practice Test

                       CHAPTER 3 - Feasibility Analysis

                        MULTIPLE-CHOICE QUESTIONS

Feasibility Analysis

Answer: E       1.     __________ is the process of determining if a business idea is viable.
Easy
Page: 52               A.   Industry analysis
                       B.   Opportunity recognition
                       C.   Probability analysis
                       D.   Possibility breakdown
                       E.   Feasibility analysis

Answer: C       2.     A(n) __________ analysis is completed to determine if an idea is worth
Easy                   pursuing and to screen ideas before spending resources on them.
Page: 52
                       A.   possibility
                       B.   achievability
                       C.   feasibility
                       D.   probability
                       E.   opportunity

Answer: A       3.     According to the textbook, which is the proper sequence of events in
Medium                 developing a young, entrepreneurial firm?
Page: 52
                       A. opportunity recognition, feasibility analysis, development of a
                          business plan
                       B. feasibility analysis, opportunity recognition, development of a
                          business plan
                       C. development of a business plan, opportunity recognition, feasibility
                          analysis
                       D. feasibility analysis, development of a business plan, opportunity
                          recognition
                       E. development of a business plan, feasibility analysis, opportunity
                          recognition
Chapter 3: Feasibility Analysis



Answer: D           4.       One of the “What Went Wrong” features in the book focuses on the
Hard                         development of the satellite phone. Regrettably, Iridium, the company
Page: 53                     that developed the first satellite phone, filed for bankruptcy in 1999.
                             According to the case, what step in the development of a young
                             entrepreneurial firm did Iridium most likely fall short on?

                             A.   opportunity recognition
                             B.   the development of a business plan
                             C.   arranging for adequate funding
                             D.   feasibility analysis
                             E.   establishing a proper ethical foundation for the firm

Answer: B           5.       The initial investment made in a firm is referred to as:
Medium
Page: 54                     A.   launch money
                             B.   seed money
                             C.   start capital
                             D.   instigate capital
                             E.   plant capital

Answer: C           6.       Meredith Williams is planning to launch a new firm in the fitness
Medium                       industry. She just met an investor, who has agreed to invest $20,000 in
Page: 54                     her firm. This initial investment in Meredith’s firm is referred to as:

                             A.   sow capital
                             B.   launch capital
                             C.   seed money
                             D.   launch money
                             E.   activate capital

Answer: A           7.       A(n) __________ is a resource or capability that serves as a source of a
Medium                       firm’s competitive advantage over its rivals.
Page: 55
                             A.   core competency
                             B.   seed competency
                             C.   fundamental proficiency
                             D.   central aptitude
                             E.   fundamental talent




                                                      2
                                                               Chapter 3: Feasibility Analysis



Answer: E      8.     Dell Inc. excels at supply chain management. It can literally take a
Medium                customer’s order, assemble a computer, and have the computer
Page: 55              delivered to the customer’s home in less than a week. Dell’s expertise
                      in this area, which provides it a competitive advantage over its rivals, is
                      referred to in the textbook as a:

                      A.   primary talent
                      B.   fundamental aptitude
                      C.   seed competency
                      D.   deep proficiency
                      E.   core competency

Answer: A      9.     A __________ is a preliminary description of a business idea.
Easy
Page: 56              A.   concept statement
                      B.   proposition statement
                      C.   theory report
                      D.   idea prospectus
                      E.   idea brochure

Answer: C      10.    Which of the following items is typically not included in a concept
Hard                  statement?
Page: 56
                      A. a description of the product or service being offered
                      B. a description of how the product or service will be sold and
                         distributed
                      C. a description of how much money the new venture needs
                      D. the benefits of the product or service
                      E. the intended target market


Product/Service Feasibility Analysis

Answer: E      11.    __________ analysis is an assessment of the overall appeal of the
Easy                  product or service being proposed.
Page: 57
                      A.   Financial feasibility
                      B.   Retailing feasibility
                      C.   Marketing feasibility
                      D.   Organizational feasibility
                      E.   Product/service feasibility




                                            3
Chapter 3: Feasibility Analysis



Answer: C           12.      Which of the following is not one of the four areas of feasibility analysis
Medium                       discussed in the textbook?
Page: 57
                             A.   product/service feasibility
                             B.   financial feasibility
                             C.   institutional feasibility
                             D.   organizational feasibility
                             E.   industry/market feasibility

Answer: D           13.      The following are benefits of __________ feasibility analysis: getting
Medium                       the product right the first time, avoiding any obvious flaws in product or
Page: 57                     service design, a beta (or early adopter) community emerges.

                             A.   industry/market
                             B.   institutional
                             C.   marketing
                             D.   product/service
                             E.   organizational

Answer: B           14.      Chris Smith is excited about a new product that he just developed. He
Hard                         wants a beta (or early adopter) community to emerge, to become the
Page: 57                     first buyers of his product, and to provide additional feedback as the
                             product goes to market. One way Chris could encourage the emergence
                             of a beta community is to conduct a thorough:

                             A.   organizational feasibility analysis
                             B.   product/service feasibility analysis
                             C.   institutional feasibility analysis
                             D.   financial feasibility analysis
                             E.   industry/market feasibility analysis

Answer: A           15.      Which of the following pairs of tests constitute product/service
Medium                       feasibility analysis?
Page: 57
                             A.   concept testing and usability testing
                             B.   impression testing and beta testing
                             C.   mechanical testing and cognitive testing
                             D.   usability testing and cognitive testing
                             E.   financial testing and concept testing




                                                    4
                                                          Chapter 3: Feasibility Analysis



Answer: E   16.   Concept testing and __________ testing constitute product/service
Medium            feasibility analysis.
Page: 57
                  A.   financial
                  B.   cognitive
                  C.   mechanical
                  D.   idea
                  E.   usability

Answer: D   17.   A(n) __________ test entails showing a representation of the product or
Medium            service to prospective users to gauge customer interest, desirability, and
Page: 57          purchase intent.

                  A.   usability
                  B.   creativity
                  C.   idea
                  D.   concept
                  E.   perception

Answer: A   18.   Sarah James is in the process of developing an exciting new product in
Medium            the computer hardware industry. She’d like to show a representation of
Page: 57          the product to prospective users to gauge customer interest, desirability,
                  and purchase intent. Sarah should complete a(n):

                  A.   concept test
                  B.   usability test
                  C.   early adopter test
                  D.   perception test
                  E.   adoption risk-reward test

Answer: E   19.   A(n) __________ test accomplishes the following three purposes:
Medium            validate the underlying premises of a product or service, help develop an
Page: 57          idea, and estimate the potential market share for a product or service.

                  A.   idea
                  B.   perception
                  C.   usability
                  D.   adoption
                  E.   concept




                                       5
Chapter 3: Feasibility Analysis



Answer: D           20.      A prototype is a(n):
Medium
Page: 58                     A.   form of opportunity recognition
                             B.   tool for evaluating the industry a new firm plans to enter
                             C.   financial model
                             D.   early mock-up of a product or service
                             E.   tool for evaluating the organizational prowess of a new firm

Answer: C           21.      __________ requires that users of a product perform certain tasks in
Medium                       order to measure the product’s ease of use and the users’ perception of
Page: 58                     the experience.

                             A.   Impression testing
                             B.   Concept testing
                             C.   Usability testing
                             D.   Prototyping
                             E.   Mock-up testing

Answer: B           22.      Josh Ryan is working on a new type of joystick that he thinks is better
Medium                       than any joystick that people are currently using to play electronic
Page: 58                     games. Before he takes his idea further, however, he’d like to ask
                             several people to use the joystick, so he can get a feel for its easy of use
                             and the user’s perception of the product. Josh should conduct a:

                             A.   mock-up test
                             B.   usability test
                             C.   concept test
                             D.   durability test
                             E.   perception test

Answer: A           23.      As described in the textbook, Intuit, the maker of Quicken, has a testing
Medium                       methodology, in which it sends teams of testers to the homes of users to
Page: 59                     see how its products are working. This type of test is called a:

                             A.   follow-me-home test
                             B.   close-to-the customer test
                             C.   get-out-of-the lab test
                             D.   cross concept-usability test
                             E.   dig deeper test




                                                    6
                                                                Chapter 3: Feasibility Analysis


Industry/Market Feasibility Analysis

Answer: A      24.    The Apple Customer Seeding Program, which is the subject of one of
Medium                the boxed features in the textbook, is important to Apple because it
Page: 60              helps the company:

                      A.   test the feasibility of its products
                      B.   raise money from investors
                      C.   secure intellectual property protection on its products
                      D.   study its competitor’s products
                      E.   recruit potential employees

Answer: E      25.    __________ feasibility analysis is an assessment of the overall appeal of
Easy                  the industry and market for the product or service being proposed.
Page: 61
                      A.   Institutional
                      B.   Financial
                      C.   Organizational
                      D.   Product/service
                      E.   Industry/market

Answer: C      26.    For __________ feasibility analysis there are three primary issues that a
Medium                proposed business should consider: industry attractiveness, market
Page: 61              timeliness, and the identification of a niche market.

                      A.   product/service
                      B.   institutional
                      C.   industry/market
                      D.   organizational
                      E.   financial

Answer: D      27.    Which of the following issues should be considered in industry/market
Hard                  feasibility analysis?
Page: 61
                      A.   management prowess
                      B.   capital requirements
                      C.   financial rate of return
                      D.   identification of a niche market
                      E.   concept testing

Answer: C      28.    Which of the following is not an attribute of an attractive industry?
Medium
Page: 61              A.   is large and growing
                      B.   is not crowded
                      C.   is fairly old rather than young and less mature
                      D.   is important to the customer
                      E.   has high operating margins


                                             7
Chapter 3: Feasibility Analysis




Answer: C           29.      Which of the following is an attribute of an attractive industry?
Medium
Page: 61                     A. is small and losing sales
                             B. is unimportant to the customer
                             C. is fairly young rather than older and more mature
                             D. has low rather than high operating margins
                             E. is crowded

Answer: A           30.      Research that is original and is collected by the entrepreneur is called:
Easy
Page: 61                     A.   primary research
                             B.   minor research
                             C.   secondary research
                             D.   derived research
                             E.   principal research

Answer: C           31.      Jill Payne is thinking about starting a coffee shop that sells specialty
Medium                       coffees and other beverages. One thing Jill plans to do, is to go door to
Page: 61                     door in the neighborhoods surrounding her shop, and survey people
                             regarding the type of coffee shop they’d like to see open in their
                             community. Jill is conducting:

                             A.   secondary research
                             B.   institutional research
                             C.   primary research
                             D.   open research
                             E.   derived research

Answer: D           32.      __________ probes data that are already collected.
Medium
Page: 61                     A.   Primary research
                             B.   Principal research
                             C.   Action research
                             D.   Secondary research
                             E.   Minor research




                                                   8
                                                            Chapter 3: Feasibility Analysis



Answer: A   33.   Trevor Wilcox is thinking about starting a firm in the electronics games
Medium            industry. To get a full appreciation of the competitive nature of the
Page: 61          industry, and how he might position his product, Trevor has spent
                  considerable time looking at industry-related publications, Hoover’s
                  Online, and ABI-Inform, which is a database that provides access to
                  articles covering a wide-variety of business and industry related issues.
                  Trevor is conducting:

                  A.   secondary research
                  B.   primary research
                  C.   minor research
                  D.   temporary research
                  E.   action research

Answer: A   34.   Breakthrough products and services:
Medium
Page: 62          A.   establish new markets or new market segments
                  B.   do not qualify for patent protection
                  C.   do not require feasibility analysis
                  D.   typically create salary substitutes rather than entrepreneurial firms
                  E.   typically are in industries that are easy to research

Answer: D   35.   A(n) __________ advantage is a sometimes insurmountable advantage
Medium            gained by the first significant company to move into a new market.
Page: 63
                  A.   out-of-the gate
                  B.   second-mover
                  C.   primary-mover
                  D.   first-mover
                  E.   initial leader

Answer: C   36.   Tim Thompson is thinking about starting a firm to make specialized
Medium            indoor exercise equipment for cyclists. As far as Tim knows, his firm
Page: 63          will be the first firm to make equipment specifically designed for this
                  market, and as a result he hopes that his firm will set the standard for the
                  industry and have an advantage in terms of brand recognition and
                  market power. Tim is hoping that his firm captures what the textbook
                  refers to as a(n):

                  A.   second-mover advantage
                  B.   innovators advantage
                  C.   first-mover advantage
                  D.   instigators advantage
                  E.   primary advantage




                                         9
Chapter 3: Feasibility Analysis



Answer: A           37.      The term __________ is used to describe the advantage that the second
Medium                       rather than the first entrant has in entering a market.
Page: 63
                             A.   second-mover advantage
                             B.   next-mover advantage
                             C.   subsequent-mover advantage
                             D.   first-mover advantage
                             E.   follower advantage

Answer: E           38.      Julie Norton just opened a firm that sells a unique type of virus-removal
Medium                       computer software. Julie’s company is actually the second firm to sell
Page: 63                     this particular type of software. Julie is glad that her firm didn’t get to
                             market first, because she has had the advantage of studying all the
                             mistakes that the first company that sold the product made. Julie’s firm
                             has what the textbook refers to as a:

                             A.   follower advantage
                             B.   first-mover advantage
                             C.   subsequent-mover advantage
                             D.   next-mover advantage
                             E.   second-mover advantage

Answer: D           39.      A(n) __________ market is a place within a larger market segment that
Medium                       represents a narrower group of customers with similar interests.
Page: 64
                             A.   opening
                             B.   position
                             C.   slot
                             D.   niche
                             E.   role


Organizational Feasibility Analysis

Answer: D           40.      __________ is conducted to determine whether a proposed business has
Easy                         sufficient management expertise, organizational competence, and
Page: 64                     resources to successfully launch its business.

                             A.   Industry/market feasibility analysis
                             B.   Institutional feasibility analysis
                             C.   Financial feasibility analysis
                             D.   Organizational feasibility analysis
                             E.   Product/service feasibility analysis




                                                  10
                                                            Chapter 3: Feasibility Analysis



Answer: B   41.   The two primary issues to consider in organizational feasibility analysis
Medium            are:
Page: 64
                  A.   identification of a niche market and financial rate of return
                  B.   management prowess and resource sufficiency
                  C.   capital requirements and identification of a niche market
                  D.   concept testing and financial rate of return
                  E.   industry attractiveness and overall attractiveness of the investment

Answer: A   42.   The two primary issues to consider in organizational feasibility analysis
Medium            are resource sufficiency and:
Page: 64
                  A.   management prowess
                  B.   market timeliness
                  C.   identification of a niche market
                  D.   overall attractiveness of the investment
                  E.   capital requirements

Answer: C   43.   According to the textbook, the group of founders, key employees, and
Medium            advisers that either manage or help manage a new business in its start-up
Page: 64          years is referred to as the:

                  A.   begin team
                  B.   fresh-start team
                  C.   new venture team
                  D.   initiate team
                  E.   launch team

Answer: A   44.   There are a number of semiconductor firms located in the Silicon
Medium            Valley, near San Jose, California. Among other reasons, similar firms
Page: 65          tend to locate near one another because it is easy for their employees to
                  network with one another and it is easy for them to gain access to
                  specialized suppliers and technological expertise indigenous to the area.
                  When similar firms locate near one another, they form a(n) __________
                  of firms, according to the language used in the textbook.

                  A.   cluster
                  B.   huddle
                  C.   assembly
                  D.   mass
                  E.   gathering




                                       11
Chapter 3: Feasibility Analysis


Financial Feasibility Analysis

Answer: D           45.      __________ is a quick financial assessment of the viability of a business
Easy                         idea.
Page: 65
                             A.   Organizational feasibility analysis
                             B.   Institutional feasibility analysis
                             C.   Product/service feasibility analysis
                             D.   Financial feasibility analysis
                             E.   Industry/market feasibility analysis

Answer: E           46.      The most important issues to consider in financial feasibility analysis
Medium                       are:
Page: 65
                             A. management prowess, concept testing, and overall attractiveness of
                                 the investment
                             B. identification of a niche market, resource sufficiency, and concept
                                 testing
                             C. concept testing, industry attractiveness, and capital requirements
                             D. usability testing, market timeliness, and management prowess
                             E. capital requirements, financial rate of return, and overall
                                attractiveness of the investment

Answer: C           47.      The most important issues to consider in financial feasibility analysis are
Medium                       capital requirements, financial rate of return, and:
Page: 65
                             A.   market timeliness
                             B.   identification of a niche market
                             C.   overall attractiveness of the investment
                             D.   management prowess
                             E.   concept testing

Answer: D           48.      According to the “Savvy Entrepreneurial Firm” boxed feature in
Medium                       Chapter 3, facilities that help businesses get started by providing them
Page: 66                     subsidized office space, access to business services at a reduce cost, and
                             the opportunity to network with other startup entrepreneurs are referred
                             to as:

                             A.   initiation clusters
                             B.   development facilities
                             C.   nurture labs
                             D.   business incubators
                             E.   startup labs




                                                  12
                                                                  Chapter 3: Feasibility Analysis



Answer: C       49.    Which of the following factors is a negative as it pertains to the financial
Hard                   feasibility of a business venture?
Page: 67
                       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: B       50.    Which of the following factors is a positive as it pertains to the financial
Hard                   feasibility of a business venture?
Page: 67
                       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


                            TRUE-FALSE QUESTIONS

Feasibility Analysis

Answer: T       51.    Feasibility analysis is the process of determining if a business idea is
Easy                   viable.
Page: 52

Answer: F       52.    “Launch money” is the term used to denote the initial investment made
Medium                 in a firm.
Page: 54

Answer: F       53.    The four forms of feasibility analysis include: product/service
Medium                 feasibility, institutional feasibility, organizational feasibility, and
Page: 54               financial feasibility.

Answer: T       54.    A core competency is a resource or capability that serves as a source of
Medium                 a firm’s competitive advantage over its rivals.
Page: 55



                                            13
Chapter 3: Feasibility Analysis



Answer: F           55.      A concept statement is a preliminary description of how a business plans
Medium                       to raise money.
Page:56


Product/Service Feasibility

Answer: T           56.      Product/service feasibility is an assessment of the overall appeal of the
Easy                         product or service being proposed.
Page: 57

Answer: F           57.      A usability test entails showing a representation of the product or
Medium                       service to prospective users to gauge customer interest, desirability, and
Page: 57                     purchase intent.

Answer: T           58.      Prototyping is iterative, meaning that the mock-up is refined and refined
Medium                       again until the customer and designer agree on the final design.
Page: 58


Industry/Market Feasibility Analysis

Answer: T           59.      There are three primary issues that should be considered in industry/
Medium                       market feasibility analysis: industry attractiveness, market timeliness,
Page: 61                     and the identification of a niche market.

Answer: F           60.      Primary research probes data that are already collected.
Medium
Page: 61

Answer: T           61.      Breakthrough products or services establish new markets or new market
Medium                       segments.
Page: 62

Answer: F           62.      The term next-mover advantage is used to describe the advantage that
Medium                       the second rather than the first entrant has in entering a market.
Page: 63

Answer: T           63.      The term second-mover advantage is used to describe the advantage that
Medium                       the second rather than the first entrant has in entering a market.
Page: 63

Answer: T           64.      A niche market is a place within a larger market segment that represents
Medium                       a narrower group of customers with similar interests.
Page: 64



                                                 14
                                                               Chapter 3: Feasibility Analysis




Organizational Feasibility Analysis

Answer: F       65.    There are two primary areas to consider in organizational feasibility
Medium                 analysis: management prowess and the identification of a niche market.
Page: 64

Answer: T       66.    A new venture team is the group of founders, key employees, and
Medium                 advisers that either manage or help manage a new business in its start-up
Page: 64               years.

Answer: T       67.    In regard to management prowess, two of the most important factors in
Hard                   this area are the passion that the sold entrepreneur or the management
Page: 64               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.


Financial Feasibility Analysis

Answer: F       68.    For financial feasibility analysis, a very detailed and comprehensive
Easy                   financial analysis is required.
Page: 65

Answer: T       69.    The most important issues to consider in financial feasibility analysis
Medium                 are: capital requirements, financial rate of return, and overall
Page: 65               attractiveness of the investment.

Answer: F       70.    A business incubator is a place where firms that are five years old or
Medium                 older locate in to build their management teams and manage their
Page: 66               growth.




                                          15

				
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