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Entrepreneurship Finance Fundamentals

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Questions and Answers

What is the main difference between fixed costs and variable costs?

Fixed costs are only applicable to large businesses, while variable costs are applicable to small businesses
Fixed costs stay consistent from month to month, while variable costs fluctuate based on units of production (correct)
Fixed costs are always higher than variable costs
Fixed costs are paid annually, while variable costs are paid quarterly

What does working capital represent in a company?

The company's market value
The company's cash reserves
The company's credit score
The company's ability to pay its current liabilities with its current assets (correct)

What is the primary advantage of crowdfunding as a funding source?

It provides access to a large amount of capital at once
It is a type of debt financing with low interest rates
It relies on receiving small contributions from many supporters (correct)
It allows entrepreneurs to maintain full ownership and control

What is the main difference between debt financing and equity financing?

Debt financing requires repayment with interest, while equity financing does not (B) Signup and view all the answers

What is the purpose of a small business loan?

To give entrepreneurs access to capital for various business purposes (A) Signup and view all the answers

What is the profit formula?

Revenue - Cost = Profit (A) Signup and view all the answers

What is the primary purpose of a profit and loss statement?

To summarize the revenues, costs, and expenses incurred during a specified period (B) Signup and view all the answers

What is the main goal of creating a financial statement?

To forecast sales and budget for a business (B) Signup and view all the answers

What is the primary purpose of the Lean Canvas model?

To identify the revenue streams of a business (A) Signup and view all the answers

What is the main goal of bootstrapping?

To use personal finances or operating revenue to fund a business (A) Signup and view all the answers

What is the purpose of pitching in the fundraising process?

To seek funding from external sources (A) Signup and view all the answers

What is the main purpose of a balance sheet?

To cover revenue and expenses for a period of time (A) Signup and view all the answers

What is the primary focus of demographic market segmentation?

Personal characteristics such as age, gender, and income level (D) Signup and view all the answers

Which of the following is NOT a component of the Lean Canvas model?

Marketing Strategies (A) Signup and view all the answers

What is the primary purpose of market research in entrepreneurship?

To understand customer needs and preferences (C) Signup and view all the answers

What type of market segmentation involves grouping people based on their lifestyles and shared attitudes?

Psychographic segmentation (D) Signup and view all the answers

Why is it important for entrepreneurs to have a strong online presence?

To increase brand visibility (B) Signup and view all the answers

What is the primary focus of financial planning in entrepreneurship?

Making business decisions using financial concepts and tools (C) Signup and view all the answers

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