Financing and Market Feasibility Analysis

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Questions and Answers

What is a key criterion for evaluating the feasibility of a business idea?

Financial feasibility (correct)

Marketing strategies

Product design

Customer testimonials

Which of the following is NOT a source of market information for assessing business ideas?

Social media analysis (correct)

Negotiations with prospective customers

Actual polls of customers

Prior studies by agencies

What aspect does competitive strength NOT determine when evaluating a business idea's market feasibility?

Target audience (correct)

Promotion methods

Product offerings

Price

How can a business effectively gauge stable and sufficient demand?

Conducting polls of population samples Signup and view all the answers

Which method is NOT mentioned as a means to gather market information?

Focus groups Signup and view all the answers

When assessing technical feasibility, which of the following is a potential concern?

Fluctuating power supply Signup and view all the answers

What is crucial for a business idea in terms of competitive strength?

Understanding competitors' strengths Signup and view all the answers

Which of the following best describes the relationship between demand and investment for a business idea?

Demand must justify the required investments. Signup and view all the answers

Which of the following is NOT a source of financing for a proposed business venture?

Selling advertising space Signup and view all the answers

What does good credit standing in the community indicate for a proposed business owner?

The owner can secure loans more easily. Signup and view all the answers

Which of the following statements about projected financial statements is true?

They predict future financial performance. Signup and view all the answers

What is a projected income statement primarily used for?

Summarizing expected revenues and expenses. Signup and view all the answers

Which of the following scenarios describes 'zero listing' during the final selection of business ideas?

No ideas meet the adapted criteria. Signup and view all the answers

Which of the following would be least likely considered a financing source?

Revenue generated from initial sales Signup and view all the answers

What is the main purpose of analyzing financial ratios derived from projected financial statements?

To evaluate financial performance and feasibility. Signup and view all the answers

Which of the following sounds like a primary benefit of using projected financial statements?

They help in the decision-making process concerning financing. Signup and view all the answers

What is a potential disadvantage of using unanticipated means for idea generation?

It is challenging to determine when ideas will emerge. Signup and view all the answers

What is a primary purpose of search questions in business idea generation?

To draw out specific answers that lead to viable ideas. Signup and view all the answers

Which of the following is NOT part of the screening process for generated business ideas?

Personal preference analysis Signup and view all the answers

What might idea prompting be driven by?

A casual remark about a common problem. Signup and view all the answers

Which example of a search question seeks to understand consumer motivation?

What will motivate consumers to buy my product? Signup and view all the answers

Why is a deliberate search for ideas conducted?

To establish a clear plan for potential ideas. Signup and view all the answers

What is the first step taken in the search for a business idea?

Preparation of a list of ideas. Signup and view all the answers

What factor is NOT considered essential before selecting a business idea?

Profit potential Signup and view all the answers

Study Notes

Financing Feasibility

There are three common sources of financing for a new venture: owner's savings, relatives and friends, and financial institutions like banks.
Financial Feasibility is determined by analyzing the financial prospects of a business idea.
This analysis involves two steps:
- Preparing projected financial statements:
  - Income statement
  - Balance sheet statement
  - Cash flow statement
- Deriving and analyzing financial ratios from the projected statements.

Market Feasibility

A business idea must demonstrate market feasibility, meaning there is:
- Stable and sufficient demand for the product or service.
- Potential for the venture to compete effectively with existing or potential competitors.
Demand must remain constant or grow over time to justify investment.

Sources of Market Information

Prior market studies by other companies, government agencies, and entrepreneurs.
Actual polls of customer samples:
- Mail questionnaires
- Advertisements with feedback mechanisms
- Phone interviews
- Personal interviews
Negotiations with prospective customers to gauge their willingness to buy.

Technical Feasibility

Technical feasibility assesses whether the business idea is practical from a technical standpoint.
It considers potential challenges in:
- Assembling resources
- Procurement of materials and manpower
- Production difficulties like unstable supply of materials, unpredictable power supply.

Idea Generation

Ideas can result from chance encounters or deliberate searches.
Chance Encounters: a casual conversation, observation of a problem, or a personal experience can spark an idea.
Deliberate Search: A more structured approach:
- Using search questions:
  - Focuses on specific needs and seeks answers.
  - Examples: "How can this product be made differently?" or "What will motivate consumers to buy my product instead of a competitor’s?"
- Idea prompting:
  - Utilizes cues or hints from events, customer requests, or conversations.
  - For example, a customer complaint could lead to a new business idea.

Screening Business Ideas

Screening ensures only the most promising ideas are selected and developed.
Criteria for screening business ideas:
- Market feasibility
- Technical feasibility
- Financing feasibility
- Financial feasibility

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Description

This quiz explores the essential concepts of financial and market feasibility for new ventures. You'll learn about common sources of financing, the steps involved in financial analysis, and what makes a business idea viable in the market. Test your knowledge on preparing financial statements and understanding market demand!