Questions and Answers of Small Business Management

What is the pro forma statement, and how important is it for a business?
Briefly compare replacement value to liquidation value of an asset.
Briefly describe what quality control is all about, and explain the three statistical types of control.
What do we mean by budgeting, and how would this process serve the firm?
Briefly explain the budgetary variances and the way it is used.
Briefly describe the two most common types of budget.
What are the best practical recommendations to be given to a small business owner in order to help in the business budgetary control?
What is entrepreneurial finance, and how different is it from the other fields of finance?
How does the Small Business Administration (SBA) define the small business and determine its size?
How does the small business contribute to the economy?
What are the advantages of owning a small business?
If you are an owner of a small business, what would be the disadvantages that you may face?
List at least five possible ways that you may do to improve the possibilities of success in a small business.
Make a distinction between an entrepreneur and manager, and between entrepreneurship, management, and leadership.
List at least five characteristics of a successful entrepreneur.
What is the survival phase in a project life cycle?
Briefly describe Stage II of turning a business idea into a real product.
What are the alternatives to consider if you are an entrepreneur contemplating getting into the small business market?
If you find yourself leaning toward starting up a new project right from the beginning, what would be the convincing reasons?
Compare the advantages of buying an existing business and starting it up from zero.
List the major disadvantages of starting up a business from scratch.
What is the due diligence, and how can you utilize it when buying a business?
List and briefly explain the different purchase options available to anyone who wants to consider buying a business.
What is meant by “the final steps” in regard to buying a business?
What are the benefits of franchise to both the franchisee and franchiser?
List and briefly explain the different types of franchise.
Define and compare home business to family business.
What are the two approaches to estimate the value of a business?List the methods of estimation in each approach.
What is the difference between book value and replacement value?
What is the cash flow–based value, and what is the formula to estimate a business value under the cash flow method?
Briefly explain how a business value can be estimated using the market-based method.
What is the capitalized rate of return and how is it selected?
What is the capitalized earning value, and how is the projected earnings needed in this method calculated?
Briefly explain the financial ratios–based value method.
What kind of business would use the price-earnings ratio (RIE) to estimate its own value?
What's the forecasting assumption used in assigning weights to the past period to product earnings?
Why is it important for an entrepreneur or owner to determine the legal form of business ownership?
What are the four major forms of business? Define them briefly.
List at least five advantages of sole proprietorship.
Discuss at least four disadvantages of sole proprietorship.
What are the partners' rights and responsibilities?
Define at least three different types of partnership.
What are the differences between C-corporation and S-corporation?
What justified the creation of corporation? Briefly discuss three justifications.
Define at least three of the other forms of business.
What are the areas in which choosing the legal form of business would make a difference?
Define the business plan, and briefly explain why it is important in the business world.
List and briefly explain the three major types of business plan.
What is the executive summary and how significant is it?
Explain the elevator pitch and how important is it?
What is the difference between the vision and mission of a plan?
Is the appendix of a plan necessary? And what would it contain?
What is the milestone chart? Is it necessary to be included in a business plan?
What is meant by critical risks in a business plan?
Briefly explain why a succession plan is necessary.
List at least five common questions which are expected to be asked after a business plan has been presented to a group of potential investors? And what would be the appropriate way to answer them?
What is the significance of financial statements, and who would benefit from them?
What are the most common financial statements? Briefly describe each of them.
What would immediately identify the balance sheet and the income–expense statement?
What is meant by the analysis of financial statements, and who would need it?
List and briefly explain three types of financial statement analysis.
What are the main categories of the financial ratios, and what are their subcategories?
What are the differences between return on investment ratio (ROIR) and return on equity ratio (ROE)?
What is Tobin's Q ratio and what would it refer to?
What is the difference between debt–asset ratio and solvency ratio and how can they be interpreted?
What is the DuPont model? Explain briefly.
What is meant by capital structure, and why is it important?
What is debt capital and equity capital, and how would a firm decide to depend on any of them?
Which capital is often preferred by the owner-manager and why?
What are the criteria to classify types of debt capital?
Is there anything such as an optimal capital structure? And what did the different experts say about that?
Briefly explain the traditional approach on optimality of capital structure.
How is Modigliani–Miller approach different from the traditional approach?
What is leverage? And why would a firm need it?
Briefly explain the difference between operational leverage and financial leverage, and the ways they are measured.
What is combined leverage? And what would it measure?
What is the difference between an accountant's profit and an economist's profit?
What is the difference between profit margin and markup?
Is the markup a percent out of the retailer's cost or the retail price? Illustrate your answers with a numerical example.
List at least four examples of each of the firm's cash inflow and its cash outflow.
What is profitability, and what is earning power? Prove mathematically that they are equal.
What is cost–volume–profit analysis? And how would it help the firm to figure out when it would start collecting profits?
Define both the break-even quantity and the break-even revenue and provide their formulas.
What is the break-even point? Define it conceptually, mathematically, and graphically.
Can an entrepreneur set his desired profit? And how would he do that technically?
How could the non-cash cost such as the depreciation be considered if you want to find out the break-even point? Explain that with a numerical example.
How are the entries in the pro forma statement obtained?
Briefly explain the way by which a firm would know if it needs new financing.
What is the financial forecasting, and why do we need it?
What are the major models of forecasting, and how different are they from each other?
What is market research and how can it be used to forecast sales, for example?
List and briefly explain the different types of the time series data variations.
List and briefly explain the methods by which the data seasonality can be adjusted.
What does the constant x, and (1 – x) signify? Where, and how are they used?
What is the barometric forecasting, and how is it different from other models of forecasting?
Define working capital with an example.
What is gross working capital? And what is net working capital?
What is the difference between permanent and temporary working capital?
What can a firm do to manipulate its risk versus its profits?
What would happen to the profit and risk if a firm shifts some capital from its current assets to its fixed assets?

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