creating a business plan basics math quiz

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Business Plan Math - Reading Quiz

11th - 12th grade.

10 questions

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What is the term used for a 3-5 year forecast of your income and expenses?

Financial model

Profits and losses

Spreadsheet

What is an example of a monthly, recurring expense?

Lease down payment

What is the type of pricing determined largely by what other companies in your industry are charging?

Competitors' pricing

Value-based pricing

Simple pricing

Cost-plus pricing

What is the rate at which the business grows or increases revenue from sales?

Profit margin

Monthly profit

Growth percentage

Examples of direct costs are:

Utilities and rent

Labor and material costs

Pricing your product based how a customer perceives the product is called:

Sales revenue is calculated by:

Number of sales multiplied by average customer sale dollar amount

Sales price multiplied by cost of goods sold

Number of sales multiplied by cost of goods sold

True or False: Net profit is greater than gross profit.

Starting a company in which you only spend money that is absolutely necessary at each point in time is called a:

Lean startup

Sole proprietor

Growth startup

What is the description of each axis on a breakeven chart?

Profit and volume

Sales and expenses

Direct costs and indirect costs

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• Project Managment

How to Use Math to Create a Winning Business Plan

Introduction.

Welcome to Business Plan Math Math Quiz! This quiz is designed to help you understand the basics of business planning and the math involved in the process. It will cover topics such as financial statements, budgeting, forecasting, and more. With this quiz, you will gain a better understanding of the math behind business planning and be able to make more informed decisions when it comes to your business. So let’s get started!

Creating a winning business plan requires a combination of both creative and analytical thinking. A successful business plan should include a clear vision of the company’s goals, a detailed strategy for achieving those goals, and a financial plan that outlines the resources needed to make the plan a reality. Math is an essential tool for developing a successful business plan, as it can help to quantify the potential success of the venture and provide a roadmap for achieving the desired results.

The first step in using math to create a winning business plan is to develop a clear understanding of the company’s goals. This includes defining the target market, the products or services to be offered, and the desired financial outcomes. Once these goals are established, it is important to use math to create a realistic timeline for achieving them. This timeline should include milestones and deadlines for each step of the plan, as well as a budget for each stage of the project.

The next step is to use math to develop a strategy for achieving the desired goals. This includes analyzing the competition, researching the target market, and creating a marketing plan. Math can also be used to calculate the potential return on investment (ROI) of the venture, as well as the cost of goods sold (COGS) and other expenses associated with the business.

Finally , math can be used to create a financial plan for the business. This includes creating a budget for the venture, estimating the cost of capital, and forecasting the expected cash flow. It is important to use realistic assumptions when creating the financial plan, as this will help to ensure that the business is able to meet its financial goals.

By using math to create a winning business plan , entrepreneurs can ensure that their venture is well-positioned for success. Math can provide a roadmap for achieving the desired goals, as well as a way to quantify the potential success of the venture. With a clear understanding of the company’s goals and a detailed strategy for achieving them, entrepreneurs can use math to create a winning business plan that will help them reach their desired outcomes.

The Benefits of Incorporating Math Quizzes into Business Planning

Math quizzes can be a valuable tool for businesses when it comes to planning and decision-making. Incorporating math quizzes into business planning can help to ensure that decisions are based on accurate data and that the best possible outcome is achieved. Here are some of the benefits of incorporating math quizzes into business planning:

1. Improved Decision-Making: Math quizzes can help to ensure that decisions are based on accurate data and that the best possible outcome is achieved. By incorporating math quizzes into business planning, businesses can ensure that decisions are based on sound mathematical principles and that the results are reliable.

2. Increased Efficiency: Math quizzes can help to streamline the decision-making process by providing a quick and easy way to assess the data. This can help to reduce the amount of time spent on decision-making and can help to ensure that decisions are made quickly and efficiently.

3. Improved Problem-Solving Skills: Math quizzes can help to improve problem-solving skills by providing a platform for employees to practice their math skills. This can help to ensure that employees are better equipped to solve complex problems and can help to improve overall productivity.

4. Improved Understanding of Business Concepts: Math quizzes can help to improve understanding of business concepts by providing a platform for employees to practice their math skills. This can help to ensure that employees are better equipped to understand and apply business concepts and can help to improve overall productivity.

Incorporating math quizzes into business planning can be a valuable tool for businesses. By incorporating math quizzes into business planning, businesses can ensure that decisions are based on accurate data and that the best possible outcome is achieved. This can help to improve decision-making, increase efficiency, improve problem-solving skills, and improve understanding of business concepts.

How to Use Math to Analyze Market Trends and Make Strategic Decisions

Making strategic decisions in the stock market requires a thorough understanding of the market and the ability to analyze trends. Using math to analyze market trends can help investors make informed decisions and maximize their returns.

The first step in using math to analyze market trends is to identify the key indicators that will be used to measure the performance of the market. These indicators can include the price of a stock, the volume of trading, the number of shares outstanding, and the market capitalization. Once these indicators have been identified, investors can use mathematical formulas to calculate the average price of a stock, the average volume of trading, and the market capitalization.

Once the key indicators have been identified , investors can use mathematical formulas to calculate the rate of return on their investments. This rate of return is calculated by subtracting the cost of the investment from the current market value of the stock. This calculation will provide investors with an indication of how their investments are performing.

Investors can also use mathematical formulas to calculate the volatility of the market. Volatility is a measure of how much the market is fluctuating. By calculating the volatility of the market, investors can determine whether the market is trending up or down.

Finally , investors can use mathematical formulas to calculate the correlation between different stocks. Correlation is a measure of how closely two stocks are related. By calculating the correlation between different stocks, investors can determine which stocks are likely to move in the same direction.

By using math to analyze market trends , investors can make informed decisions and maximize their returns. By understanding the key indicators of the market, calculating the rate of return on their investments, calculating the volatility of the market, and calculating the correlation between different stocks, investors can make strategic decisions that will help them maximize their returns.

The Role of Math in Financial Planning and Budgeting

Math plays an essential role in financial planning and budgeting. It is the foundation of any successful financial plan and budget. Without a thorough understanding of mathematics, it is impossible to accurately assess the financial situation of an individual or business.

Math is used to calculate the present value of future cash flows , which is essential for making sound financial decisions. It is also used to calculate the rate of return on investments, which helps to determine the best investment options. Math is also used to calculate the cost of borrowing money, which helps to determine the best financing options.

Math is also used to calculate the cost of goods and services , which helps to determine the best pricing strategies. Math is also used to calculate the cost of taxes, which helps to determine the best tax strategies. Math is also used to calculate the cost of insurance, which helps to determine the best insurance policies.

Math is also used to calculate the cost of living , which helps to determine the best budgeting strategies. Math is also used to calculate the cost of retirement, which helps to determine the best retirement plans.

In conclusion , math is an essential tool for financial planning and budgeting. It is used to calculate the present value of future cash flows, the rate of return on investments, the cost of borrowing money, the cost of goods and services, the cost of taxes, the cost of insurance, the cost of living, and the cost of retirement. Without a thorough understanding of mathematics, it is impossible to accurately assess the financial situation of an individual or business.

How to Use Math to Calculate Risk and Maximize Profits

Calculating risk and maximizing profits are two of the most important tasks for any business. By using mathematical formulas and calculations, businesses can make informed decisions that will help them to reduce risk and maximize profits.

The first step in using math to calculate risk and maximize profits is to identify the variables that will affect the outcome. These variables can include the cost of goods, the cost of labor, the cost of materials, the cost of marketing, and the cost of overhead. Once these variables have been identified, businesses can use mathematical formulas to calculate the expected return on investment (ROI) for each variable.

The next step is to use mathematical formulas to calculate the probability of success for each variable. This can be done by using probability theory, which is a branch of mathematics that deals with the likelihood of certain outcomes. By calculating the probability of success for each variable, businesses can determine which variables are most likely to yield a positive return on investment.

Once the probability of success has been calculated, businesses can use mathematical formulas to calculate the expected return on investment for each variable. This can be done by multiplying the probability of success by the expected return on investment for each variable. By doing this, businesses can determine which variables are most likely to yield a positive return on investment.

Finally , businesses can use mathematical formulas to calculate the expected return on investment for each variable. This can be done by subtracting the cost of goods, labor, materials, marketing, and overhead from the expected return on investment for each variable. By doing this, businesses can determine which variables are most likely to yield a positive return on investment.

By using mathematical formulas and calculations , businesses can make informed decisions that will help them to reduce risk and maximize profits. By calculating the probability of success for each variable and subtracting the cost of goods, labor, materials, marketing, and overhead from the expected return on investment for each variable, businesses can determine which variables are most likely to yield a positive return on investment. By doing this, businesses can make informed decisions that will help them to reduce risk and maximize profits.

The Benefits of Using Math to Develop a Comprehensive Business Plan

Creating a comprehensive business plan is essential for any business to succeed. Utilizing math in the development of a business plan can provide a number of benefits. Math can be used to analyze data, create projections, and develop strategies.

Analyzing data is an important part of developing a business plan. Math can be used to identify trends in the market, analyze customer behavior, and measure the success of marketing campaigns. This data can be used to make informed decisions about the direction of the business.

Projections are also an important part of a business plan. Math can be used to create financial projections, such as sales forecasts, budget projections, and cash flow projections. This information can be used to create a realistic plan for the future of the business.

Strategies are also an important part of a business plan. Math can be used to develop strategies for pricing, marketing, and product development. This information can be used to create a plan for the future of the business.

Using math to develop a comprehensive business plan can provide a number of benefits. It can be used to analyze data, create projections, and develop strategies. This information can be used to create a realistic plan for the future of the business. Utilizing math in the development of a business plan can help ensure the success of the business.

• Business Plan Math – Math Quiz questions & answers for quizzes …
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• Business Math Quiz 1B (with answers)

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20 Business Plan Quiz Questions and Answers

A business plan is a comprehensive document that outlines the goals, strategies, and financial projections of a business venture. It serves as a roadmap for entrepreneurs and stakeholders to understand the direction and viability of the business. Here’s an overview of the key components typically included in a business plan:

Executive Summary: This section provides a concise overview of the entire business plan. It highlights the company’s mission, vision, key objectives, and a summary of the proposed business model.

Company Description: Here, you’ll provide a detailed explanation of your business concept. Include the type of business, its legal structure, location, target market, and any unique selling propositions that set your business apart.

Market Analysis: Conduct thorough market research to understand your industry, target market, and competitors. Identify trends, potential opportunities, and challenges. Explain how your product or service will meet the needs of your target audience better than existing solutions.

Organization and Management: Describe the organizational structure of your business, including key team members, their roles, and relevant experience. Investors want to know that you have a capable team driving the venture.

Article overview

Part 1: 30 business plan quiz questions & answers.

1. Question: What is the primary purpose of a business plan? a) Secure funding b) Improve employee morale c) Enhance customer service d) Increase market competition Answer: a) Secure funding

2. Question: Which section of a business plan outlines the company’s mission and vision? a) Marketing strategy b) Financial projections c) Executive summary d) Company overview Answer: d) Company overview

3. Question: Which of the following is NOT a common business plan component? a) Competitive analysis b) SWOT analysis c) Cash flow statement d) Social media strategy Answer: d) Social media strategy

4. Question: What is the purpose of conducting a market analysis in a business plan? a) Determine the company’s competitors b) Develop financial projections c) Define the company’s mission d) Set employee goals Answer: a) Determine the company’s competitors

5. Question: Which section of a business plan highlights the company’s unique selling proposition (USP)? a) Marketing strategy b) Company description c) Competitive analysis d) Financial projections Answer: a) Marketing strategy

6. Question: What financial document shows a company’s revenues and expenses over a specific period? a) Balance sheet b) Cash flow statement c) Income statement d) Profit and loss statement Answer: c) Income statement

7. Question: In a business plan, what does ROI stand for? a) Return on Investment b) Revenue on Investment c) Risk of Inflation d) Rate of Interest Answer: a) Return on Investment

8. Question: Which business plan section outlines the marketing tactics to promote a product or service? a) Financial projections b) Market analysis c) Marketing strategy d) Company overview Answer: c) Marketing strategy

9. Question: What is a break-even analysis used for in a business plan? a) Identifying potential customers b) Calculating potential profits c) Determining the point of profitability d) Analyzing competitor strategies Answer: c) Determining the point of profitability

10. Question: In a business plan, what does the term “SWOT” stand for? a) Strengths, Weaknesses, Opportunities, Threats b) Sales, Workforce, Objectives, Technology c) Strategies, Workflow, Operations, Targets d) Success, Wealth, Objectives, Tactics Answer: a) Strengths, Weaknesses, Opportunities, Threats

11. Question: What is the purpose of an executive summary in a business plan? a) Provide an overview of the company’s history b) Detail the company’s long-term objectives c) Summarize the key points of the entire plan d) Highlight the company’s competitive advantages Answer: c) Summarize the key points of the entire plan

12. Question: Which financing option involves giving up ownership shares of a company in exchange for capital? a) Debt financing b) Equity financing c) Venture capital d) Angel investing Answer: b) Equity financing

13. Question: What does the term “KPI” mean in a business context? a) Key Performance Indicator b) Key Profit Increment c) Key Planning and Implementation d) Key Personnel Improvement Answer: a) Key Performance Indicator

14. Question: What section of a business plan should discuss the company’s organizational structure and management team? a) Market analysis b) Financial projections c) Company overview d) Marketing strategy Answer: c) Company overview

15. Question: What type of business plan primarily targets internal decision-making and planning? a) Startup business plan b) Strategic business plan c) Operational business plan d) Feasibility business plan Answer: c) Operational business plan

Part 2: Download business plan questions & answers for free

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16. Question: What external factor analysis tool helps identify the political, economic, social, and technological influences on a business? a) PEST analysis b) SWOT analysis c) BCG matrix d) Porter’s Five Forces Answer: a) PEST analysis

17. Question: Which statement best describes a vision statement in a business plan? a) Outlines the short-term goals of the company b) Identifies potential risks and challenges c) Describes the company’s future aspirations d) Analyzes the company’s target market Answer: c) Describes the company’s future aspirations

18. Question: What is the purpose of conducting a competitive analysis in a business plan? a) Identify potential partners b) Analyze customer feedback c) Evaluate strengths and weaknesses of competitors d) Forecast financial performance Answer: c) Evaluate strengths and weaknesses of competitors

19. Question: Which financing option involves borrowing money that must be repaid with interest over time? a) Debt financing b) Equity financing c) Venture capital d) Angel investing Answer: a) Debt financing

20. Question: What does the term “ROI” stand for in the context of financial analysis? a) Revenue on Investment b) Return on Innovation c) Risk of Inflation d) Return on Investment Answer: d) Return on Investment

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Business Math Test

For jobseekers.

Practice your skills and earn a certificate of achievement when you score in the top 25%.

For Companies

Test candidates with real-world problems and interview the best ones.

About the test

The Business Math test assesses the use of mathematics to record and manage business operations through a series of numerical calculation and multiple-choice questions.

The assessment includes solving work-sample tasks, such as:

• Creating new budgets, tracking expenses, and comparing budgets against actual figures.
• Evaluating the impact of different types of interest rates for both borrowing and investing.
• Calculating procurement costs and determining sales prices.

Good operations managers, department managers, and executives all need a solid understanding of business math to make responsible monetary decisions and successfully manage business operations.

Sample public questions

You have $50,000 for a down payment on the purchase of a new office building, but your accountant recommends you put this money into a term deposit until you are ready to purchase next year. Your bank is offering 12-month fixed term deposits with an annual interest rate of 3.0%, paid at maturity.

How much will you have for your down payment if you cash in your term deposit at maturity?

As a manager, it is your responsibility to review the quarterly expense reports submitted by members of your team. Each member of the team is allowed to expense $20,000 annually for work-related travel expenses.

It is now the halfway point in the year, and you need to review the travel expenses claimed so far:

If each employee's costs continue at their current rate, which employees, if any, will go over budget with their travel expenses in the second half of the year?

At your local office supply store, you see a group of chairs that all look almost exactly like your broken desk chair:

• The BenzerCo chair is offered at 25% off its list price of $200.
• The Lilijet chair sells for $220 but has a promotional rebate of $60.
• The Torpa chair is on clearance, so it comes with a 40% discount off its regular price of $245.

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9 more premium Business Math questions

Quarterly Results , Faded Receipt , Concertgoers , Quarterly Sales , Conservative Approach , Trendy Sofa , Savings Account , Whizbang Blender , Hiring Florian .

Skills and topics tested

• Business Math
• Linear Equations
• Purchasing and Inventory
• Revenue and Costs
• Variable Costs
• Projections
• Compound Interest
• Loans and Credit
• Savings and Investments
• Simple Interest
• Percentages
• Progressive Rates

For job roles

• Cost Accountant
• Operations Manager

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Creating a Business Plan - Basics Math Quiz QUESTION 6 of 10: Your plan projects revenue of $5,000, $8,000, and $10,000 in years 1 through 3. Expenses are projected to be $9,000 for each of years 1 through 3. If your only funding need is the gap between revenue and expenses, which is the best estimate of your maximum cumulative funding need? a) $O b) $1,000 c) $4,000 d) $50,000 Submit @2024 Knowledge Matters, Inc

Expert verified solution.

Business Math Lessons, Problems and Exercises

Teach and learn the basic concepts and usage of basic business math, consumer math, and practical applied math.  These lesson plans, lessons, interactive material, and worksheets will introduce your students to these math topics.

Here we highlight our material that fits into a traditional business math curriculum.  It begins with more simple money math including decimals, place value, addition, subtraction, and percentages. It continues with earning money, income and wages, taxes, checking accounts, bank savings accounts, investments, and more consumer math skills.

Main Business Math Categories

Basic math review. Practice money math problems and exercises in addition, subtraction, multiplication, division, percents and percentages, fractions, decimals, estimation, and rounding. Also practice with coins.

EARNING MONEY - INCOME AND WAGES

Teach and learn about earning and making money. Learn about different ways that people make money. Practice reading and understanding earnings statements, time card sheets, income, health insurance, deductions and other lessons related to earning and making money.

PAYING TAXES

These worksheets and lessons may be used to help teach your students tax basics. Learn what are taxes, why do we pay taxes, and what taxes are used for, while reinforcing basic math and reading comprehension. Includes basics such as sales taxes, and paying income taxes.

CHECKING ACCOUNTS

Learn how to write a check, make checking account deposits and withdrawals, manage and balance your checkbook, and checkbook reconciliation.

SAVINGS ACCOUNTS

A basic understanding of banking and interest rates is a fundamental money skill. Learn about bank savings accounts, banks, and interest rates.

SPENDING MONEY - CONSUMER MATH

Worksheets and lessons on spending money and consumer math.  Includes discounts, needs and wants, receipts, tipping, estimation, comparison shopping, invoices, and more.

All about investing money and money management. Learn basic investing and financial concepts. Including stocks, the stock market, interest, income statements. Buying stocks, calculating shares purchased, percentage change in share price, how to read a stock table. Security pricing.

Use these worksheets to teach basic budget concepts. Use these printable budget worksheets and budgeting lessons to teach real life basic budget concepts. Budget lesson plans and worksheets for teaching household budgeting.

Additional Business Math Lessons

Money Exchange

Students learn about money exchange from US to foreign.

Money Exchange from Foreign to US

Students learn about money exchange from foreign to US.

Exchange Rates

The rate at which one currency is converted into another currency is the foreign exchange rate. Use this lesson as an introduction to converting currencies.

Profit and Loss Statement

Teach and learn about a P&L or profit and loss statement, a basic worksheet of a businesses' profitability.

Using Algebra to Make Business Decisions

Students use basic algebra to help make business decisions.

Back to more Lesson Categories

© Copyright 2002-2024 Money Instructor. All Rights Reserved.

Total Instructional Time

The instructional time for ENTREPRENEURSHIP ranges from 26 hours (simulation exercises only) to 36 hours (simulation exercises, reading assignments , reading quizzes, and math quizzes) . You can configure your course to include or exclude reading assignments (3.3 hours) , reading quizzes (1.7 hours) and math quizzes (5 hours) . For instructions on how to configure your course, click here to access a series of videos to help you get your classroom up and running with Virtual Business.

Prior to beginning work with ENTREPRENEURSHIP , students should sign in to their account at vb.KnowledgeMatters.com and go through the Tutorial.

Lesson: Spotting the Opportunity

Description.

In this simulation exercise, students find themselves in an expansive city. They are considering opening a new business and have 5 different businesses in mind.  Students browse over the city and see many competitors in different locations. They then do a survey to determine where most potential customers live.  Next, they do a Google maps-like search on businesses of the types they are considering. For each, they note the number and location of competitors as well as their hours, breadth of product offerings and customer ratings.  From this they identify an opportunity and prepare to start a business.  As a final check, they research the local labor supply in their city to make sure they can hire employees. Students form the business which is auto-run for them. They learn how to find its income statement and run time forward to observe operations.  Students meet the goal when their business generates a target weekly profit.

LEARNING OBJECTIVES

• Explore different types of businesses
• Spot opportunity geographically
• Spot opportunity by industry
• Assess competition in evaluating an opportunity

Lesson: Market Research

In this simulation exercise, students dig deeper into evaluating an opportunity by employing market research techniques. Students hope to open a trampoline park in their city. Students run a survey to determine the current demographics of their city, then run the simulation in a hyper-speed mode to watch their city grow and track changes in the city’s demographics. They then resurvey their population to spot trends in demographics and income. With positive trends for a second trampoline park in the city, students look at the competitor’s prices and offerings. They then open a trampoline park in a specific location and try to set prices to achieve a profit goal.

• Understand trends in physical development and the opportunities they present
• Understand trends in demographics and the opportunities they present
• Use surveys as part of a market research effort
• Examine longitudinal survey data over time to spot trends
• Find competitor data and use it in good pricing decisions

Lesson: Creating a Business Plan

In this simulation exercise, students open a hair salon in a growing city. By using tools in the simulation environment, they are guided through answering key questions that a business plan must address. As they answer successive questions, a written business plan is progressively filled in until they have a complete plan. Students then use the plan as a prescription for how to run their business.  They operate the business controlling almost all functions and try to manage their salon to a profit goal. This lesson gives students a taste of the decisions they’ll make in the comprehensive projects but leads them through it by giving them a specific written plan to follow.

In this simulation exercise, students focus specifically on how to create financial projections for a business plan.   They estimate both capital expenses they’ll need to acquire equipment and operating losses they can expect as they build a customer base and move towards profitability. As a final step, they are challenged to do the financial projections for a large salon.  Based on their projections, they request funding and must meet an ROI goal of profit over investment.

• Read and understand a business plan outline
• Understand how to find the information needed to complete a business plan
• Project how much cash a business will need
• Read and analyze completed business plans

Lesson: The Elevator Pitch

In this lesson, students see and read “elevator pitches” describing “can’t-miss” business opportunities in their city. Students begin by reading a pitch and then going through a series of steps to determine whether the claims made in the pitch match economic realities in their city. They discover that for this pitch most of the claims are true. They invest in the business, watch the business operate and see the value of their investment grow. Students then must evaluate four other elevator pitches.  All claim to be great business opportunities, but the students can use information and tools in the simulation to discover which truly are.  They then invest in those, operate the businesses and try to reach a net worth goal based on their equity positions in the companies.

• Learn what an elevator pitch is
• Learn why elevator pitches are considered important for entrepreneurs
• Be able to critically analyze an elevator pitch
• Describe how an elevator pitch differs from a business plan

Lesson: Making the Plunge

Name, location, form of business.

In this simulation exercise, students start a trampoline business as a sole proprietorship. Unfortunately, an accident causes them to be sued and much of their personal wealth is lost. Undeterred, they next form a plumbing business and learn to name it. (The name does not affect their success in the simulation.) Next, they are guided through choosing a form of business (sole proprietor, partnership, corporation) and then explore suitable locations. They discover that rents vary widely for their main facility. They analyze the tradeoff between high rents and longer, more expensive driving times. They finally choose a location and observe as the business auto-runs. As a last challenge, they start and locate an electrical business trying to achieve a specific weekly profit.  They can move their business if their first choice of location doesn’t work out.

Form of Business & Taxes

In this simulation exercise, students start three different pizza businesses -- one as a sole proprietorship, one as a partnership, one as a corporation. They run the business for a period of time and do calculations to see the tax rates on each.  Students then try transferring money out of the business and see which transfers are taxed at that time. Finally, those businesses are automatically closed and students are free to open pizza shops using their chosen form of business.  Their goal is to have the businesses generate after-tax profits and then transfer those profits to a personal savings account to meet a wealth target .

• Understand the major forms of business (FOB) available to entrepreneurs
• Explain how the FOB affects access to capital
• Explain how the FOB affects liability/risk
• Explain how the FOB affects taxes
• Understand strategies for naming a business
• Perform detailed analyses of location choices

Lesson: Raising Money & Financials

Savings & bank loans.

In this simulation exercise, students begin by taking a quick look at funding a venture through savings and learn that it’s the simplest method but often inadequate.  They look at an automobile repair shop that has taken out a small loan and see how interest payments flow through the income statement. They also review a credit report and discover how credit ratings affect the interest rate on a loan and the amount of the loan they can get. Finally, students go ahead and get a bank loan to acquire more equipment for the autoshop.  This equipment is put to use as the auto shop tries to turn its new capital into ongoing profits.

Selling Shares/Venture Capital

In this simulation exercise, students seek to start a very capital intensive business, a bowling alley with up to 18 lanes.  Students do not have enough savings on their own to start such a business and the bank won’t give them a loan. Students then must consider stock sales as a means of financing their business. They learn about the “valuation” of a company and how that affects how many shares (what percent of) their company they need to sell to raise a given amount of money. Students also learn how money eventually gets returned to shareholders as dividends. Finally, students use the increasing valuation of their business to sell more stock at a better price to buy more lanes for their alley and eventually meet a weekly profit goal..

• Understand common sources of financing, including savings and family & friends
• Know how bank loans work and critical factors for getting a loan
• Be able to discuss the pluses and minuses of selling stock to raise money
• Explain how different financing methods might be best suited for different businesses

Lesson: Building a Team

In this simulation exercise, students learn about every business’s most important asset: its people. Students are planning to start a new physical therapy business. But to do this, they need licensed and unlicensed personnel and people with the experience to deliver quality therapy to their customers. Furthermore, students are in a somewhat tight labor market, and they must staff the business by paying sustainable wages to quality employees without breaking the bank. The lesson steps guide students through an employee search-and-hire process for one position. Students discover that in the simulation more educated and experienced workers keep their customers happier and work faster. Students also learn that employees can quit and positions may need to be refilled. Students are then challenged to effectively fill the remaining four roles. If they succeed, they can make the profit goal for their new business.

• Understand the importance of personnel to a new business
• Evaluate experience and educational qualifications
• Explain the difference between licensed and unlicensed positions
• Staff a business economically to allow the business to make a profit

Lesson: Acquiring Resources

This simulation exercise picks up where the lesson on raising money left off.   Students are budding auto repair shop owners. They have little money and know that auto repair equipment can be expensive. By first purchasing less expensive equipment and delivering good service, they generate cash to reinvest in upgraded resources—more expensive equipment that will let them do more lucrative jobs. Lesson steps guide the student through the first cycle of buying equipment and delivering service to make profits. Students are then challenged to use this “bootstrap” method to generate a thriving auto shop with all the best equipment.

• Sort out what resources you can afford and not afford
• Get a business started with less-than-optimal resources/equipment
• Use the business to generate cash to upgrade and expand the resources
• Understand terms like “bootstrap” and “self-funded“

Lesson: Going to Market

In this simulation exercise, students start an online business selling high-quality gift baskets. The capital needs of this business are low, but marketing could be expensive because of the many competitors. Students review a few local competitors’ offerings before setting their own prices. They then use social media (like Facebook and Instagram) to create ads for their products. Lesson steps show students how to evaluate the responses to their social media ads and assess effectiveness. They are then challenged to adjust prices and make marketing buys to achieve a profit goal for their business.

In this simulation exercise, students are the proud owners of a successful smoothie shop. However, they discover that its revenue potential is limited because customers will only travel so far for a smoothie. To grow, they need to replicate their success in multiple physical locations, similar to how restaurant chains often franchise as a strategy to grow. Students pick new locations for additional shops and set those shops up with an eye on replicating successful practices of their first store. They are then challenged to expand in this manner until they reach a total assets goal based on the value of their empire of smoothie shops.

• Understand key pricing considerations
• Understand different types of social media advertising
• Evaluate the success of marketing efforts
• Manage a marketing budget effectively

Lesson: Operations & Feedback

Work flow & feedback.

In this simulation exercise, students have inherited their family business of three pizza restaurants.  Unfortunately, the once successful chain has fallen on hard times.  Lesson steps guide the students through fixing operational problems at their first two stores. Students learn how to find customer and employee feedback as well as how to read financial statements to assess the health of operations. Finally, students are challenged to diagnose and fix the problems at their third restaurant. To meet their goal, they must achieve a specific weekly profit at the third restaurant.

Risk Management

All entrepreneurship is risky, but good founders find ways to reduce risk where possible. In this simulation exercise, students learn how to use insurance to insulate themselves from large financial losses. They learn about basic elements of policies including coverage amounts, deductibles, and premiums.  Students then learn about some risks that are out of their control, such as a widespread economic downturn. Techniques are shown that help small companies get through tough times so they can thrive during a subsequent recover.  Students work through an economic cycle and then try to make a profit goal upon the recovery.

• Respond effectively to complex operational challenges
• Learn to multitask
• Respond to surprises
• Use insurance effectively
• Understand economic cycles
• Assess an income statement and use it to manage the business

Lesson: Business Plan Project - Unique City Per Class

In this project, students are free to start any one of 20 possible businesses. They begin by preparing a business plan based on a provided business plan template . They can conduct customer and competitor research within the simulation before writing the plan, and they can form their business but not locate it. Plans are submitted to the instructor, who assigns a grade. When assigning the grade, the instructor sees information about which businesses offer the most opportunity within the city; this is provided to help in assigning the grade. You, the instructor, also set the amount and interest rate on the student’s loan. Based on the business plan outline, the student should have requested a specific amount. In general, the better the grade, the more likely you should be to grant the requested amount.   The interest rate you set can vary from 5% to 25%. Give lower rates to students with better plans. Specific suggestions are given on the grading page you will use.  A sample well-written business plan is included in the Answer Key for this project under Instructor Resources. This may be especially helpful if you are having students submit drafts of their plans and want to give them suggestions for improvements.

Watch the Business Plan Project "How To" Video

The student’s business plan grade is also factored into their project grade. Students then start and run their business, attempting to reach a total assets goal based on the valuation of business(es). Students may start multiple businesses of the same type as their original business to satisfy demand and build valuations.  If a student struggles with operating their business and the business fails and is forced to close, the student will automatically be reset to the start of the goal step with their original business formed and their initial funding restored.

By default, all students see the same city.  This helps you, the instructor, gauge relative performance and use the answer key provided as a solution.  There are two variants of the project available for inclusion in your course. The first provides a unique, random city for your class ; this is helpful if students are searching for project hints on the Internet or if you want to use the project as an assessment .  The second provides a unique, random city for each student ; this is helpful if students tend to share too much information among each other or if you want to give them additional opportunities to explore  and learn in a unique environment. To use these other variants, click Change Course Settings on your home page and look for Change Order of Assignments & Enable Teams or Competition Scoreboard.

This project can be set up for students to work in teams.

STEP-BY-STEP TEACHER INSTRUCTIONS

• Have students open the exercise normally and proceed through the steps to research opportunities, write a business plan (in the format or file type of your choosing), submit the plan to you in a manner of your choosing, and finally form their business using Actions>>Form Business . Confirm that all students have submitted business plans and formed their businesses.
• Log in to your instructor account and click the View Student Progress  button for your Entrepreneurship Course.
• In the grade matrix, find the Business Plan Project lesson and click on each student’s NC  grade hyperlink.
• In the Student Sim Work History dialog window that comes up, click on the first Review Student’s Sim   link that appears in the table.
• When the sim loads, assign a Grade, Loan Amount, and Interest Rate, and then click the Finalize Grade and Financing  button. Grading guidance is shown in the window.
• Click Yes  in the confirmation dialog window, then click OK  to close the Saved dialog window.
• Repeat steps 3 through 6 for each student.
• Tell all students that the business plan grades and loans have been finalized and that they can continue their sims running their new businesses with loan money. Students can see their business plan grade by clicking the Working on Goal  link at the bottom of the left-side text under the last step in the project.
• Understand the components of a business plan
• Do the research necessary to prepare a business plan
• Write a business plan
• Understand the relationship between business plans and funding
• Operate a business successfully with the aid of a plan

Lesson: Shark Project

In this project, students can choose to start any of the 20 businesses available. They can also enter their city to do research.  They can form their business but not locate it or operate it until they get funding.  Based on the research, students spot an opportunity and develop a short elevator pitch that should include supporting evidence from their research. In turn, each student gives his/her pitch to the class. It may be advisable to set this project up in teams to make the number of pitches more manageable for class time and attention. Students make notes on the most compelling pitches. Students then use an online interface to offer a certain dollar amount for a certain percentage of each company.  

Watch the Shark Project "How To" Video

You then run a computer automated “auction” that optimally matches investors with investees. If any students don’t get sufficient investor interest, their shares are sold to a “venture capitalist” at a low price, but one that is sufficient to let them continue the assignment. With the money raised, students are then free to start their businesses.  Students can look at a personal financial summary that shows the value of all their investments in classmates’ businesses. The student’s final grade is based on the value of the business they created (only the portion they still own) and the value of all the investments they made.  Students may start multiple businesses of the same type as their original business to satisfy demand and build valuations.

By default, each student sees a unique, random city .  This is done so that students can’t copy the pitch they have heard from students going before them. It also prevents students from searching the Internet for project hints.  There are two variants of the project available for inclusion in your course. The first provides a standard city that is the same for all students, and has a layout and demographics that match an answer key provided for you; this can be helpful if students are overwhelmed by the variety in cities.  The second provides a unique, random city just for your class; this is helpful if students search for project hints on the Internet. To use these other variants, click Change Course Settings on your home page and look for Change Order of Assignments & Enable Teams or Competition Scoreboard.

• Have students (or teams) open the exercise normally and proceed through the steps to research opportunities, prepare their elevator pitches, and form their business using Actions>>Form Business . Confirm that all students have prepared pitches and form their businesses.
• Have students (or teams) present their pitches to each other.
• Have students re-enter the sim exercise and complete their bidding for shares in other students’ businesses using Actions>>Investing . Confirm that all student bidding is done prior to running the share auction.
• To run the share auction, log in to your instructor account and click the Go to Assignments button.
• Navigate to the Shark Project lesson and click the  Run Sim  link.
• When the sim loads, review the current bids and if they appear complete, then click the Finalize Auction  button. (If the bids do not appear complete, close the sim, ask the students to log in and make corrections, then go back to step 3 and try again.)
• Click OK  to close the saved dialog window
• Tell students that the auction has been finalized and that they can continue their sims running their new businesses with loan money. Students can see the value of their business and all their investments in classmates businesses by clicking Reports>>Personal Financial Summary .

Some instructors may want to run this project more than once. This can be done by setting up a second course and using Change Course Settings  to include only the Shark Project.

• Be able to pitch your idea effectively
• Understand how much money is needed and how much of your company you are willing to give away
• Evaluate other pitches
• Allocate your investment across potential options
• Value a portfolio of your own business and outside investments.

Lesson: Mega Mogul Project - Unique City Per Class

In this project, students are challenged to become the ultimate “serial entrepreneurs,” starting many businesses and becoming the economic kings and queens of their city.  They raise money to start their first business and then use that business to generate cash to grow their empire.  The number of businesses they can start is only limited by the processing power of their computer.  To keep them on their toes, students will experience surprises while running their far flung empires.  Although students are given a specific total assets goal for grading purposes, students are able to continue running their simulation after the goal is met. The purpose of this is to let students explore freely in the world of entrepreneurship. As a "stretch" goal, dare your most advanced students to reach double the goal!

By default, all students see the same city.  This helps you, the instructor, gauge relative performance and use the answer key provided as a solution.  There are two variants of the project available for inclusion in your course. The first provides a unique, random city for your class ; this is helpful if students are searching for project hints on the Internet, or if you want to use the project as an assessment .  The second provides a unique, random city for each student ; this is helpful if students tend to share too much information among each other, or if you want to give them additional opportunities to explore  and learn in a unique environment. To use these other variants, click Change Course Settings on your home page and look for Change Order of Assignments & Enable Teams or Competition Scoreboard.

There are no actions required of the instructor for this project.

• Understand the breadth of business start-up possibilities
• Be able to “bootstrap” an empire and create a fortune
• Read a personal financial summary detailing the elements of net worth
• React to surprises such as those faced by real world entrepreneurs
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Strategy Studies

Business plan math: the numbers you need to grow.

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My 26 Sep 2013 blog  outlined my views on the importance of “doing the math” on any kind of deal, and especially in sizing up a plan or proposal for a new business venture, product addition, or expansion.  I’m now accustomed to looking at four sets of numbers in a business plan: [1] the $ that go “IN” (investment) [2] the profit and cash that come “OUT” [3] the timetable for each of these, and [4] the decisions that drive the numbers.   These are not mutually exclusive as each is influenced by the others.  For today, here are my views on $ IN.

My experience is that most business plans are done with fingers crossed.  The costly stuff (investment and time) are underestimated, and the fun stuff (profit and cash flow) are overestimated.  Here’s what we typically see:

• Investment: 1/3 to 1/2 of what is realistically needed
• Results: 2X the profit and cash flow in about 1/2 the time required

This is not a bad place to be in to start with.  It is human nature – and the strength of the entrepreneurial spirit – to see the rose among the thorns.  That is what the pros (advisors, VCs, professional investors, etc.) are there for: to apply their experience and know-how to more accurately see what the real picture is likely to resemble.

In my experience, there are two reasons business plans are over-optimistic: inadequate facts and benevolent assumptions

• how the favorable facts make the going easy
• how the potential impact of the unfavorable facts can be mitigated held at bay
• Benevolent assumptions are akin to our own body image.  With few exceptions, we tend to see ourselves closer to college weight than our real weight.  Dress sizes for women, and waist sizes on men’s pants have in fact not shrunk over the past 20 years.  We like to see the glass half full.  I often see that in the face of not finding hard evidence – or, worse, finding unpleasant evidence and sweeping it under a carpet – opt for framing an assumption that is often 4 to 6 inches slimmer than the waist it must fit.

The good news is that there are two principles which, when conscientiously applied, result in business plans that are much closer to reality and, as a result, more attractive to potential investors.

• Margin of safety :   Simply put, none of us can predict future events with much certainty – especially not complex business events.  One of  Warren Buffet’s firmly held investment principles is the margin of safety  – he is not infallible and must allow for error, so he builds in a cushion.  Drawing assumptions that are conservative – rather that reflect best imaginable conditions – are a sure way to avoid over-optimism.
• Devil’s advocacy:   A few episodes of  Shark Tank  will give anyone a sense of how unpleasant it can be to have pros tear apart a business plan for heaving a weak foundation.  Short of appearing on the show, there is an alternative.  Identify someone you know, whose opinion you respect, and whom you consider tough.  Ask them to review your plan and do two things: [1] find solid yet unfavorable facts, and [2] tear apart your assumptions.  The more difficult time they have doing this, the more likely your plan is on a solid footing.  You may need 2 to 3 iterations (yes, these can be painful) to get there.

Two things are certain about the time to achieve profitability (of a venture, product introduction, market expansion) and positive cash flow.  The longer it takes to achieve them (in my experience it ends up being longer than 95% of Rev 1 plans predict) the harder it is to attract capital in the beginning, and keep investor confidence along the way.    Anyone who has been in the position of having to explain to investors why a few more pages of the calendar must be flipped over before the light turns “green” knows what I mean.  It is painful, and can be debilitating.

In my experience, two principles tend to hold true  – not guaranteed, but generally typical – to avoid such pain:

• Under-promise and over-deliver:  That is a big reason for the advice regarding $ IN, i.e. build a margin of safety and have a tightwad scrutinize your facts, numbers and assumptions.  I cannot recall an investor being upset with being ahead of plan (unless the plan was so conservative as to miss opportunity’s low-hanging fruit – a story for another day).
• Connect the dots between $ IN and $ OUT:  The latter is a function of the former.  When a business plan is converted to a spreadsheet it is easy to lose sight of the forest for the trees.  A faithful, explainable and reconcilable relationship between input and output – and the time lag between them – is critical to ensuring that a plan has legs.  My advice: if your devil’s advocate from the first go-around did his/her job and held you to account for your facts and assumptions, give that same person your spreadsheet and ask them to do the same thing.  Don’t, however, provide them with a list of the underlying decisions that drove the numbers and the schedule.  If they are dong their job, their doubts and questions will speak to the underlying decisions.

This is pretty simple.  If you have taken care to follow the advice given regarding Investment $ IN and profit and positive cash flow $ OUT, you will have had no choice but to forecast the results against a dimension of time.  Such is the beauty of spreadsheets.

In doing so, the question becomes: what are the appropriate intervals of time – and long term horizon – to use?

My answer: that depends on the length of the selling cycle.  Unless you are selling aircraft or nuclear reactors, quarterly intervals are pretty much useless.  Annual intervals are useless.   They hide too much.  Typically, the shorter the time interval, the easier it is to scrutinize the inputs, outputs and decisions of a plan … and the more challenging it becomes to defend them.  But that is the whole point – soft testing with the jury of expert opinion rather than with precious capital.

• 60 – 180 days, use months
• less than 60 days, use weeks
• When in doubt or as a test of the soundness of your plan – use weeks.  Converting monthly intervals to weekly intervals is much more than adding 4X the number of columns.  Assessing your plan on weekly expenditures and returns will force a high level of scrutiny of the relationship between input and output.

It is not the numbers that drive a business plan.  It’s the decisions – production, marketing, sales, financing and operating decisions – that drive a plan.  A spreadsheet most certainly does not drive a  business plan – it merely models the interplay of the decisions.  Gauging the impact of changes to decision inputs (i.e. “what if we did more of this, or less of that?”) is easily done via spreadsheets.  It is easy to fall in love with a neatly organized and extensive spreadsheet – especially if revenue and margin exceed expenses, and leave a healthy profit.  The adage holds true, however: garbage in; garbage out.

A couple of years back I reviewed a 60-page business plan written by four MBA students from a prestigious business school to satisfy the requirements for completing their degree.  They prepared it for a small offshore software firm that, after 8 years in business, had yet to achieve $1 million revenue in its home market, and was seeking to enter the US.  And what a glorious plan it was!  In return for injecting $7.5 million in capital, within 5 years the firm would be cash positive within 24 months, achieve $55 million in revenue, and earn profits of 22% on revenue.

The plan was very detailed, with all the usual goodies in place – pricing, quota ramp for sales people, and all the typical spreadsheet entries one would expect.  Yet, there was one major problem with it.  It was very difficult – and in cases impossible – to connect the dots between the assumptions and facts the students had respectively made and collected, and the outputs that resulted from the decisions modeled in the spreadsheets.  This airplane was largely flying on faith, not fuel.

It took no more than a few weeks of market testing to determine that the plan was neither realistic nor feasible.   However, the company’s investors had all purchased first class tickets on that airplane, and they did not want to hear that vacation plans might have to be curtailed.  Such is the problem when is sold on the bottom row that appears in a spreadsheet.

What would have made for a better plan?  What would have enabled the underpinnings of the plan to be better scrutinized?  Three things:

• A clear and separate articulation of the major decisions (those that drive revenue, cost, expense and productivity) and the underlying basis (research, facts and assumptions) for making those decisions.
• A quantitative modeling of each decision, i.e. the relationship between input (typically a cost item), output (typically revenue or productivity) and timeframe (the rate at which the output responds to a change in input)
• A clear listing of interdependencies, e.g. the impact of specific marketing activities on sales productivity.

In my experience, there are rarely more than a handful of “key” decisions – those that really make a difference.  It is easier – and safer – to visualize them collectively on a single page than to start pulling together lengthy spreadsheets.  A simple table does the trick.

• List each key decision in the left-hand column
• “Why” – list the evidence supporting the decision
• “How” – specify how the decision will be implemented and put in motion
• “How much” – quantitatively describe the expected impact – or range – on outputs and results
• “When” – similarly list the corresponding timeframe(s) to see those effects
• “Dependencies” – list any other decisions or assumption which, if altered, will appreciably affect anything appearing in the previous four columns

Just attempting to complete the table is a task in itself as anything “shaky” usually becomes apparent.  It’s a pretty good test.  If you can get things to work and make sense at this level, you’ll not only be able to build a spreadsheet, but you – and others – will know exactly what has gone into the mix.

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Michael Douglas has held senior positions in sales, marketing and general management since 1980, and spent 20 years at Sun Microsystems, most recently as VP, Global Marketing. His experience includes start-ups, mid-market and enterprises. He's currently VP Enterprise Go-to-Market for NVIDIA.

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The Ultimate Business Math Test Quiz #5

Test your financial literacy in calculating basic business calculations

You buy an article for R114.00 including VAT at 14%.What did it cost you exclusive of VAT ?

I don't know

Rate this question:

Your revenue grew from R5m per annum to R5.2m.What was your revenue growth ?

You sell your product for r20.00 which cost you r15,40what is your markup  , your salaries budget was r500,000.00you landed up spending r520,000.00what was the actual versus budget variance  .

A R20,000 Unfavourable overrun against budget

A R20,000 Favourable overrun against budget

A R20,000 Favourable saving against budget

What is 20% of R100.00 ?

You sold your product for r80.00 which normally sold for r98.20what was your discount .

R18.00 discount at 19.85%

R17.53 discount at 16.88%

R18.20 discount at 18.53%

Your Business's Assets are R500,000 Your Business's Liabilities are R200,000What is the net worth of your business ?

Last year you paid r120.00 for a product and this year it cost you r131.20what is the rate of inflation , your current assets are r250,000 compared to r180,00 in current liabilities.what is your the ratio of current assets to current liabilities , you generated r500,000 in revenue.your cost of sales was r300,000.what is your gross profit margin .

Quiz Review Timeline +

Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

• Current Version
• Apr 14, 2023 Quiz Edited by ProProfs Editorial Team
• Oct 30, 2015 Quiz Created by Arno

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