Question 1

When evaluating the worth of the inventory for purchasing purposes, the primary concern should be ______.

Accepted Answer

A)  whether enough inventory is currently stocked 
B)  good supplier relationships 
C)  no "dead stock" that is listed at its original value 
D)  fresh inventory 
A)  whether enough inventory is currently stocked 
B)  good supplier relationships 
C)  no "dead stock" that is listed at its original value 
D)  fresh inventory C

Question 2

Before serious bargaining can begin, it is necessary to determine the value of several key physical assets. List at least three of these assets.

Accepted Answer

inventory
equipment minus depreciation
supplies
accounts receivable
market value of the building

Question 3

A unique factor in a family business that makes it different from all other businesses is ______.

Accepted Answer

A)  the profit margin 
B)  the asset ownership 
C)  the sales potential 
D)  the intricate succession planning needed 
A)  the profit margin 
B)  the asset ownership 
C)  the sales potential 
D)  the intricate succession planning needed D

Question 4

Samantha was in the final stages of selling her existing business, but she backed out of the deal at the last minute because the buyer asked her to sign a contract stating that she would not enter into a similar business within the state for at least 15 years. This is an example of ______.

Accepted Answer

A)  a reasonable intellectual property contract 
B)  an unreasonable intellectual property contract 
C)  a reasonable noncompete clause 
D)  an unreasonable noncompete clause 
A)  a reasonable intellectual property contract 
B)  an unreasonable intellectual property contract 
C)  a reasonable noncompete clause 
D)  an unreasonable noncompete clause

Question 5

The value of a business's intangible assets is easy to determine.

Accepted Answer

A) True 
 B)False

Question 6

The fact that a business's image is difficult to change is a distinct advantage when taking over an existing business.

Accepted Answer

A) True 
 B)False

Question 7

Inventory is an example of a tangible asset.

Accepted Answer

A) True 
 B)False

Question 8

A settlement attorney during a closing represents ______.

Accepted Answer

A)  the buyer 
B)  the seller 
C)  the buyer and the seller 
D)  neither--the lawyer is a neutral third party 
A)  the buyer 
B)  the seller 
C)  the buyer and the seller 
D)  neither--the lawyer is a neutral third party

Question 9

Financial information can be sensitive information. In order to allay the fears of the seller, a potential buyer could ______.

Accepted Answer

A)  not ask to see financial information 
B)  only show the information to an accountant 
C)  only show the information to a banker 
D)  write a letter of confidentiality 
A)  not ask to see financial information 
B)  only show the information to an accountant 
C)  only show the information to a banker 
D)  write a letter of confidentiality

Question 10

To effectively use operating ratios, a prospective buyer should ______.

Accepted Answer

A)  compare them to industry standards 
B)  use them to identify problems that exist and make changes 
C)  use them as a basis for valuing the business 
D)  compare them to the closest competitor 
A)  compare them to industry standards 
B)  use them to identify problems that exist and make changes 
C)  use them as a basis for valuing the business 
D)  compare them to the closest competitor

Question 11

Expense ratios are useful because they are ______.

Accepted Answer

A)  standards or guides 
B)  absolute measures of profitability 
C)  significant in the number that is computed 
D)  error free 
A)  standards or guides 
B)  absolute measures of profitability 
C)  significant in the number that is computed 
D)  error free

Question 12

According to the text, there are ______ thousands of small businesses for sale at any given time.

Accepted Answer

A)  tens of 
B)  hundreds of 
C)  thousands of 
D)  a few 
A)  tens of 
B)  hundreds of 
C)  thousands of 
D)  a few

Question 13

Intellectual property is a valuable ______.

Accepted Answer

A)  intangible asset 
B)  tangible asset 
C)  goodwill asset 
D)  current asset 
A)  intangible asset 
B)  tangible asset 
C)  goodwill asset 
D)  current asset

Question 14

Due diligence is the process of fact finding to determine the total condition of a business being considered for purchase.

Accepted Answer

A) True 
 B)False

Question 15

When running a family business, there are four overlapping perspectives on its operations: family, management, ownership, and sales.

Accepted Answer

A) True 
 B)False

Question 16

Real estate brokers may be a good source of potential businesses for sale since their listings may include business real estate.

Accepted Answer

A) True 
 B)False

Question 17

The capitalization rate when figuring goodwill should be a figure assigned to show ______.

Accepted Answer

A)  risk and expected growth rate of future earnings 
B)  risk and profit minus taxes 
C)  expected growth rate and profit 
D)  expected growth rate and the value of tangible assets 
A)  risk and expected growth rate of future earnings 
B)  risk and profit minus taxes 
C)  expected growth rate and profit 
D)  expected growth rate and the value of tangible assets

Question 18

To determine the financial condition of an existing business, it is necessary to compare ______ with ______ to identify where costs can be reduced or more money is needed.

Accepted Answer

A)  operating ratios; fiscal averages 
B)  operating ratios; industry averages 
C)  expense ratios; fiscal averages 
D)  expense ratios; industry averages 
A)  operating ratios; fiscal averages 
B)  operating ratios; industry averages 
C)  expense ratios; fiscal averages 
D)  expense ratios; industry averages

Question 19

When the buyer and the seller have agreed on the terms of the sale, the closing can be handled by ______.

Accepted Answer

A)  an accountant 
B)  the buyer and seller themselves 
C)  escrow settlement 
D)  a nonpartial third party 
A)  an accountant 
B)  the buyer and seller themselves 
C)  escrow settlement 
D)  a nonpartial third party

Question 20

The worth of tangible assets is determined using which of the following methods?

Accepted Answer

A)  balance sheet method of business valuation 
B)  asset method of business valuation 
C)  income statement method of valuation 
D)  cash-flow method of valuation 
A)  balance sheet method of business valuation 
B)  asset method of business valuation 
C)  income statement method of valuation 
D)  cash-flow method of valuation

When evaluating the worth of the inventory for purchasing purposes, the primary concern should be ______.

Before serious bargaining can begin, it is necessary to determine the value of several key physical assets. List at least three of these assets.

A unique factor in a family business that makes it different from all other businesses is ______.

Samantha was in the final stages of selling her existing business, but she backed out of the deal at the last minute because the buyer asked her to sign a contract stating that she would not enter into a similar business within the state for at least 15 years. This is an example of ______.

The value of a business's intangible assets is easy to determine.

The fact that a business's image is difficult to change is a distinct advantage when taking over an existing business.

Inventory is an example of a tangible asset.

A settlement attorney during a closing represents ______.

Financial information can be sensitive information. In order to allay the fears of the seller, a potential buyer could ______.

To effectively use operating ratios, a prospective buyer should ______.

Expense ratios are useful because they are ______.

According to the text, there are ______ thousands of small businesses for sale at any given time.

Intellectual property is a valuable ______.

Due diligence is the process of fact finding to determine the total condition of a business being considered for purchase.

When running a family business, there are four overlapping perspectives on its operations: family, management, ownership, and sales.

Real estate brokers may be a good source of potential businesses for sale since their listings may include business real estate.

The capitalization rate when figuring goodwill should be a figure assigned to show ______.

To determine the financial condition of an existing business, it is necessary to compare with to identify where costs can be reduced or more money is needed.

When the buyer and the seller have agreed on the terms of the sale, the closing can be handled by ______.

The worth of tangible assets is determined using which of the following methods?

Small Business: an Overview

Small Business Management and Entrepreneurship

Social Entrepreneurs, Ethics, and Strategic Planning

The Business Plan

Franchising

Starting a New Business

Accounting Records and Financial Statements

Small Business Finance

The Legal Environment

Small Business Marketing: Strategy and Research

Small Business Marketing: Location

Small Business Marketing: Price and Promotion

Professional Small Business Management

Human Resource Management

Operations Management

Filters

Exam 6: Taking Over an Existing Business

When evaluating the worth of the inventory for purchasing purposes, the primary concern should be ______.

Before serious bargaining can begin, it is necessary to determine the value of several key physical assets. List at least three of these assets.

A unique factor in a family business that makes it different from all other businesses is ______.

Samantha was in the final stages of selling her existing business, but she backed out of the deal at the last minute because the buyer asked her to sign a contract stating that she would not enter into a similar business within the state for at least 15 years. This is an example of ______.

The value of a business's intangible assets is easy to determine.

The fact that a business's image is difficult to change is a distinct advantage when taking over an existing business.

Inventory is an example of a tangible asset.

A settlement attorney during a closing represents ______.

Financial information can be sensitive information. In order to allay the fears of the seller, a potential buyer could ______.

To effectively use operating ratios, a prospective buyer should ______.

Expense ratios are useful because they are ______.

According to the text, there are ______ thousands of small businesses for sale at any given time.

Intellectual property is a valuable ______.

Due diligence is the process of fact finding to determine the total condition of a business being considered for purchase.

When running a family business, there are four overlapping perspectives on its operations: family, management, ownership, and sales.

Real estate brokers may be a good source of potential businesses for sale since their listings may include business real estate.

The capitalization rate when figuring goodwill should be a figure assigned to show ______.

To determine the financial condition of an existing business, it is necessary to compare ______ with ______ to identify where costs can be reduced or more money is needed.

When the buyer and the seller have agreed on the terms of the sale, the closing can be handled by ______.

The worth of tangible assets is determined using which of the following methods?

Small Business: an Overview

Small Business Management and Entrepreneurship

Social Entrepreneurs, Ethics, and Strategic Planning

The Business Plan

Franchising

Starting a New Business

Accounting Records and Financial Statements

Small Business Finance

The Legal Environment

Small Business Marketing: Strategy and Research

Small Business Marketing: Location

Small Business Marketing: Price and Promotion

Professional Small Business Management

Human Resource Management

Operations Management

Filters

To determine the financial condition of an existing business, it is necessary to compare with to identify where costs can be reduced or more money is needed.