Exam 7: The Purchase Alternative: How Do I Buy or Buy Into an Existing Business

Explain the concept of ratio analysis.Identify several key ratios and explain what they might indicate about the health of a company..

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Question 1

Correct Answer:

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Half of the marks are given for explaining that the pure numbers only have meaning within the ratios and then only when compared to industry averages.At least three ratios should be explained in terms of what they indicate about the firm.

On average, the risk of buying an existing business is

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Question 2

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A negotiating plan for purchasing a business will include values for:

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Question 3

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"Asset" methods of valuation are also known as "balance sheet" methods.

(True/False)

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Question 4

Cash skimming is a legal but misleading practice.

(True/False)

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Question 5

The critical question to ask a business seller is "what is the price?"

(True/False)

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Question 6

The "core" business refers to a firm's primary services/products and primary market segments.

(True/False)

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Question 7

The single biggest danger for the naive business buyer is:

(Multiple Choice)

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Question 8

Typically, the business valuation method showing the lowest value is:

(Multiple Choice)

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Question 9

Real estate agents often act as intermediaries for the sale of a business.

(True/False)

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Question 10

A company's financial statements are interpreted by using:

(Multiple Choice)

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Question 11

Setting a value for a business by using a "price multiplier" is:

(Multiple Choice)

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Question 12

Which of the following is an "income" method of business valuation?

(Multiple Choice)

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Question 13

"Goodwill" is classified as:

(Multiple Choice)

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Question 14

"Taking over" a company means buying more than 50% ownership.

(True/False)

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Question 15

Explain and contrast both Asset and Income methods of business valuation giving clear examples of each.Explain how these values can be used to produce a weighted average business value.

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Question 16

You must know your desired "rate of return" to use the Capitalization of Earnings method.

(True/False)

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Question 17

Which of the following is an "asset" method of business valuation?

(Multiple Choice)

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Question 18

It is relatively easy to change an existing negative image of a firm.

(True/False)

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Question 19

Buying an independent business is on average lower risk than buying a franchise.

(True/False)

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Question 20

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Explain the concept of ratio analysis.Identify several key ratios and explain what they might indicate about the health of a company..

On average, the risk of buying an existing business is

A negotiating plan for purchasing a business will include values for:

"Asset" methods of valuation are also known as "balance sheet" methods.

Cash skimming is a legal but misleading practice.

The critical question to ask a business seller is "what is the price?"

The "core" business refers to a firm's primary services/products and primary market segments.

The single biggest danger for the naive business buyer is:

Typically, the business valuation method showing the lowest value is:

Real estate agents often act as intermediaries for the sale of a business.

A company's financial statements are interpreted by using:

Setting a value for a business by using a "price multiplier" is:

Which of the following is an "income" method of business valuation?

"Goodwill" is classified as:

"Taking over" a company means buying more than 50% ownership.

Explain and contrast both Asset and Income methods of business valuation giving clear examples of each.Explain how these values can be used to produce a weighted average business value.

You must know your desired "rate of return" to use the Capitalization of Earnings method.

Which of the following is an "asset" method of business valuation?

It is relatively easy to change an existing negative image of a firm.

Buying an independent business is on average lower risk than buying a franchise.

The Concept: What Business Will I Be in

Feasibility: How Do I Know It Will Work

Marketing: How Will I Get Customers

Operations: How Will I Organize the Work

Finances: How Will I Manage the Money

The Business Plans: How Are They Important

The Franchise Alternative: How Do I Buy a Franchise

The Family Firm Alternative: How Do I Take Over My Familys Business

Managing for Growth: How Can I Expand My Business

Managing for Efficiency: How Can I Reduce My Costs and Expenses

Emerging Trends and Issues in Entrepreneurship: How Can I Prepare for the Future

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