A Business Plan

question 14

Multiple Choice

A business plan:

• A)is developed through an intuitive process by which the entrepreneur records his/her plans for the business in the future.
• B)focuses on the internal elements of the business.
• C)forces an entrepreneur to think a business idea through,considering both its positive and its negative aspects.
• D)is a strategic plan for a business that must be supplemented by operational plans once financing is secured.

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Definitions:

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to analyze the profitability of an investment.

Profitability Index

A financial tool used to evaluate the desirability of an investment, calculated as the present value of future cash flows divided by the initial investment.

Net Cash Flow

The variance between the cash coming into and going out of a business within a given timeframe.

Discount Rate

The interest rate used to discount future cash flows to their present value, enabling comparison of the value of investments made at different times.