EEE 457 MIDTERM EXAM QUESTIONS
WITH CORRECT ANSWERS
Essential Qualities of a Good Opportunity - Answer-Attractive — real market demand;
Durable — window of opportunity long enough; Achievable — feasible with current
technology; Creates Value — benefits exceed costs.
Opportunity Discovery (Lumpkin Model) - Answer-Preparation — prior knowledge,
experience; Incubation — subconscious 'simmering'; Insight — 'Aha!' moment.
Opportunity Formation - Answer-Evaluating feasibility, shaping insights into viable
ventures, planning, reducing uncertainty.
Window of Opportunity - Answer-A short period during which an opportunity must be
acted upon or missed.
Business Model - Answer-How a company creates, delivers, and captures value.
Business Model Canvas (BMC) Components - Answer-Value Proposition — what you're
building and for whom; Customer Segments — distinct groups you serve; Channels —
how you reach customers; Customer Relationships — how you interact; Revenue
Streams — how you make money; Key Resources — assets required; Key Activities —
what you must do; Key Partners — who helps you; Cost Structure — major costs.
Viable Business Model Requirements - Answer-Match opportunity to concept,
differentiate, charge more than expenses, be sustainable, provide value, and generate
acceptable ROI.
Five Competitive Forces - Answer-Threat of New Entrants; Bargaining Power of
Suppliers; Bargaining Power of Buyers; Threat of Substitutes; Rivalry Among Existing
Competitors.
Barriers to Entry - Answer-Economies of scale, demand-side benefits, capital
requirements, switching costs, distribution access, incumbency advantages, regulation.
NAICS Code - Answer-A classification system identifying industries by sector,
subsector, group, and specific industry.
Fixed Costs - Answer-Costs that do not vary with sales (rent, salaries, insurance).
Variable Costs - Answer-Costs that vary with sales (materials, packaging,
commissions).
, Operating Leverage (O/L) - Answer-Operating Leverage=Fixed Costs/Total Costs.
Contribution Margin - Answer-Contribution Margin=Selling Price−Variable Cost.
Breakeven Point (Units) - Answer-BEP=Total Fixed Costs/Contribution Margin per Unit.
Breakeven Point (Dollars) - Answer-BEP=Total Fixed Costs/Contribution Margin Ratio.
Balance Sheet - Answer-A snapshot of assets, liabilities, and equity at a point in time.
Income Statement - Answer-Shows revenues, expenses, and profit over a period
('video').
Statement of Cash Flows - Answer-Tracks cash from operating activities, investing
activities, and financing activities.
Current Ratio - Answer-Current Ratio=Current Assets/Current Liabilities.
Quick Ratio - Answer-Quick Ratio=Current Assets−Inventory/Current Liabilities.
Return on Investment (ROI) - Answer-ROI=Net Income/Owner's Equity.
Authorized Shares - Answer-Maximum shares a company can issue.
Outstanding Shares - Answer-Shares issued and held by owners.
Treasury Shares - Answer-Authorized but unissued shares held for future use.
Risk Equation - Answer-Risk=Magnitude of Loss×Probability of Loss.
Sinking Boat Risk - Answer-Risk of pursuing and failing.
Missing Boat Risk - Answer-Risk of waiting too long and missing the opportunity.
Why does entrepreneurship matter? - Answer-It drives economic and social progress.
What are the economic contributions of entrepreneurship? - Answer-Entrepreneurs
introduce new products, services, technologies, and processes, disrupt old industries,
and create competition.
What is the core definition of entrepreneurship? - Answer-The process of creating value
by bringing together a unique combination of resources to exploit an opportunity.
What are the key components of entrepreneurship? - Answer-Process, creating value,
unique combination of resources, and opportunity.
WITH CORRECT ANSWERS
Essential Qualities of a Good Opportunity - Answer-Attractive — real market demand;
Durable — window of opportunity long enough; Achievable — feasible with current
technology; Creates Value — benefits exceed costs.
Opportunity Discovery (Lumpkin Model) - Answer-Preparation — prior knowledge,
experience; Incubation — subconscious 'simmering'; Insight — 'Aha!' moment.
Opportunity Formation - Answer-Evaluating feasibility, shaping insights into viable
ventures, planning, reducing uncertainty.
Window of Opportunity - Answer-A short period during which an opportunity must be
acted upon or missed.
Business Model - Answer-How a company creates, delivers, and captures value.
Business Model Canvas (BMC) Components - Answer-Value Proposition — what you're
building and for whom; Customer Segments — distinct groups you serve; Channels —
how you reach customers; Customer Relationships — how you interact; Revenue
Streams — how you make money; Key Resources — assets required; Key Activities —
what you must do; Key Partners — who helps you; Cost Structure — major costs.
Viable Business Model Requirements - Answer-Match opportunity to concept,
differentiate, charge more than expenses, be sustainable, provide value, and generate
acceptable ROI.
Five Competitive Forces - Answer-Threat of New Entrants; Bargaining Power of
Suppliers; Bargaining Power of Buyers; Threat of Substitutes; Rivalry Among Existing
Competitors.
Barriers to Entry - Answer-Economies of scale, demand-side benefits, capital
requirements, switching costs, distribution access, incumbency advantages, regulation.
NAICS Code - Answer-A classification system identifying industries by sector,
subsector, group, and specific industry.
Fixed Costs - Answer-Costs that do not vary with sales (rent, salaries, insurance).
Variable Costs - Answer-Costs that vary with sales (materials, packaging,
commissions).
, Operating Leverage (O/L) - Answer-Operating Leverage=Fixed Costs/Total Costs.
Contribution Margin - Answer-Contribution Margin=Selling Price−Variable Cost.
Breakeven Point (Units) - Answer-BEP=Total Fixed Costs/Contribution Margin per Unit.
Breakeven Point (Dollars) - Answer-BEP=Total Fixed Costs/Contribution Margin Ratio.
Balance Sheet - Answer-A snapshot of assets, liabilities, and equity at a point in time.
Income Statement - Answer-Shows revenues, expenses, and profit over a period
('video').
Statement of Cash Flows - Answer-Tracks cash from operating activities, investing
activities, and financing activities.
Current Ratio - Answer-Current Ratio=Current Assets/Current Liabilities.
Quick Ratio - Answer-Quick Ratio=Current Assets−Inventory/Current Liabilities.
Return on Investment (ROI) - Answer-ROI=Net Income/Owner's Equity.
Authorized Shares - Answer-Maximum shares a company can issue.
Outstanding Shares - Answer-Shares issued and held by owners.
Treasury Shares - Answer-Authorized but unissued shares held for future use.
Risk Equation - Answer-Risk=Magnitude of Loss×Probability of Loss.
Sinking Boat Risk - Answer-Risk of pursuing and failing.
Missing Boat Risk - Answer-Risk of waiting too long and missing the opportunity.
Why does entrepreneurship matter? - Answer-It drives economic and social progress.
What are the economic contributions of entrepreneurship? - Answer-Entrepreneurs
introduce new products, services, technologies, and processes, disrupt old industries,
and create competition.
What is the core definition of entrepreneurship? - Answer-The process of creating value
by bringing together a unique combination of resources to exploit an opportunity.
What are the key components of entrepreneurship? - Answer-Process, creating value,
unique combination of resources, and opportunity.
