Which of the following should be included in a firm's business model?

• A. The firm's value proposition and how it delivers value to customers
• B. The revenue streams and cost structure of the business
• C. The tax rates applicable to the industry
• D. The personal financial statements of the firm's owners

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of a business model. A business model outlines how a company creates, delivers, and captures value. It is a strategic framework that includes key elements such as the firm's value proposition, revenue streams, cost structure, and customer delivery mechanisms.
2. Step 2: Identify the components that are essential to a firm's business model. These include the firm's value proposition (what makes the business unique and valuable to customers) and how it delivers value to customers (the processes, resources, and strategies used).
3. Step 3: Recognize the importance of financial elements in a business model. Revenue streams (sources of income) and cost structure (expenses incurred to operate the business) are critical components that help assess the financial viability of the business.
4. Step 4: Evaluate the relevance of tax rates and personal financial statements. Tax rates applicable to the industry are external factors that impact financial planning but are not part of the business model itself. Similarly, personal financial statements of the firm's owners are private documents and not included in the firm's business model.
5. Step 5: Conclude that the firm's business model should include its value proposition, how it delivers value to customers, revenue streams, and cost structure, as these are integral to understanding and operating the business effectively.