Question 1

The majority of the deals make it from the letter of intent stage to the final closing.

Accepted Answer

A) True 
 B)False  False

Question 2

A new owner of an existing business can generally introduce change and innovation almost as easily as if the company were a new business because employees and customers expect change in business practice when there is a change in ownership.

Accepted Answer

A) True 
 B)False  False

Question 3

Which of the following is a potential disadvantage of purchasing an existing business?

Accepted Answer

A) The employees inherited with the business may not be suitable. 
B) The previous owner may have created ill will among the company's customers. 
C) Equipment and facilities may be obsolete or inefficient. 
D) All of the above 
A) The employees inherited with the business may not be suitable. 
B) The previous owner may have created ill will among the company's customers. 
C) Equipment and facilities may be obsolete or inefficient. 
D) All of the above D

Question 4

What should the new owner do to avoid a bumpy transition?

Accepted Answer

The new business owner should do five th

Question 5

What is an ESOP?

Accepted Answer

An ESOP - employee stock ownership plan

Question 6

Opportunity cost is the cost of exploiting a choice.

Accepted Answer

A) True 
 B)False

Question 7

Bizbuysell.com and Bizquest are examples of Internet sites that provide access to ________.

Accepted Answer

A) business brokers 
B) franchises available for sale 
C) the hidden market of companies for sale 
D) All of the above 
A) business brokers 
B) franchises available for sale 
C) the hidden market of companies for sale 
D) All of the above

Question 8

Discounted future earnings is the most common business valuation method.

Accepted Answer

A) True 
 B)False

Question 9

A principal advantage of buying an existing business is the purchaser's ability to rely on the previous owner's experience.

Accepted Answer

A) True 
 B)False

Question 10

According to Pepperdine University research, most small to medium business purchases take less than 3 months to be completed.

Accepted Answer

A) True 
 B)False

Question 11

The ________ method considers the future income potential of the business.

Accepted Answer

A) earnings 
B) market 
C) balance sheet 
D) fixed price 
A) earnings 
B) market 
C) balance sheet 
D) fixed price

Question 12

Closing the sale of a business is a complex legal process.

Accepted Answer

A) True 
 B)False

Question 13

The due diligence process of analyzing and evaluating an existing business ________.

Accepted Answer

A) may be just as time consuming as the development of a comprehensive business plan for a start-up 
B) helps to determine if the company will generate sufficient cash to pay for itself and leave you with a suitable rate of return on your investment 
C) helps to determine what the company's potential for success is 
D) All of the above 
A) may be just as time consuming as the development of a comprehensive business plan for a start-up 
B) helps to determine if the company will generate sufficient cash to pay for itself and leave you with a suitable rate of return on your investment 
C) helps to determine what the company's potential for success is 
D) All of the above

Question 14

Your friend Susan is considering purchasing an existing business. How would you explain to her what due diligence is, why it is important, and the critical areas of it?

Accepted Answer

The due diligence process in analyzing a

Question 15

The first stage in acquiring a business is ________.

Accepted Answer

A) search 
B) due diligence 
C) valuation 
D) negotiation 
A) search 
B) due diligence 
C) valuation 
D) negotiation

Question 16

An entrepreneur who is considering purchasing a business is analyzing a company's accounts receivable. The following table summarizes her findings. Age of Accounts Amount Probability of Collection
0 - 30 days $12,000 .96
31 - 60 days $ 4,000 .87
61 - 90 days $ 2,500 .71
91 - 120 days $ 1,400 .65
121⁺ days $ 800 .24
How much should this potential buyer be willing to pay for these accounts receivable?

Accepted Answer

A) Nothing; a buyer should never purchase existing accounts receivable. 
B) $20,700 
C) $17,877 
D) Not enough information given to determine 
A) Nothing; a buyer should never purchase existing accounts receivable. 
B) $20,700 
C) $17,877 
D) Not enough information given to determine

Question 17

Which of the following is not a stage in acquiring a business?

Accepted Answer

A) due diligence 
B) negotiation 
C) valuation 
D) transition 
A) due diligence 
B) negotiation 
C) valuation 
D) transition

Question 18

A prospective buyer should evaluate the business's assets to determine their true value.

Accepted Answer

A) True 
 B)False

Question 19

An entrepreneur should never purchase a business that is losing money.

Accepted Answer

A) True 
 B)False

Question 20

The letter of intent is a nonbinding document.

Accepted Answer

A) True 
 B)False

The majority of the deals make it from the letter of intent stage to the final closing.

A new owner of an existing business can generally introduce change and innovation almost as easily as if the company were a new business because employees and customers expect change in business practice when there is a change in ownership.

Which of the following is a potential disadvantage of purchasing an existing business?

What should the new owner do to avoid a bumpy transition?

What is an ESOP?

Opportunity cost is the cost of exploiting a choice.

Bizbuysell.com and Bizquest are examples of Internet sites that provide access to ________.

Discounted future earnings is the most common business valuation method.

A principal advantage of buying an existing business is the purchaser's ability to rely on the previous owner's experience.

According to Pepperdine University research, most small to medium business purchases take less than 3 months to be completed.

The ________ method considers the future income potential of the business.

Closing the sale of a business is a complex legal process.

The due diligence process of analyzing and evaluating an existing business ________.

Your friend Susan is considering purchasing an existing business. How would you explain to her what due diligence is, why it is important, and the critical areas of it?

The first stage in acquiring a business is ________.

Which of the following is not a stage in acquiring a business?

A prospective buyer should evaluate the business's assets to determine their true value.

An entrepreneur should never purchase a business that is losing money.

The letter of intent is a nonbinding document.

The Foundations of Entrepreneurship

Ethics and Social Responsibility: Doing the Right Thing

Creativity and Innovation: Keys to Entrepreneurial Success

Conducting a Feasibility Analysis and Designing a Business Model

Crafting a Business Plan and Building a Solid Strategic Plan

Forms of Business Ownership

Franchising and the Entrepreneur

Building a Powerful Bootstrap Marketing Plan

E-Commerce and the Entrepreneur

Pricing and Credit Strategies

Creating a Successful Financial Plan

Managing Cash Flow

Choosing the Right Location and Layout

Sources of Financing: Equity and Debt

Global Aspects of Entrepreneurship

Building a New Venture Team and Planning for the Next Generation

Filters

Exam 7: Buying an Existing Business

The majority of the deals make it from the letter of intent stage to the final closing.

A new owner of an existing business can generally introduce change and innovation almost as easily as if the company were a new business because employees and customers expect change in business practice when there is a change in ownership.

Which of the following is a potential disadvantage of purchasing an existing business?

What should the new owner do to avoid a bumpy transition?

What is an ESOP?

Opportunity cost is the cost of exploiting a choice.

Bizbuysell.com and Bizquest are examples of Internet sites that provide access to ________.

Discounted future earnings is the most common business valuation method.

A principal advantage of buying an existing business is the purchaser's ability to rely on the previous owner's experience.

According to Pepperdine University research, most small to medium business purchases take less than 3 months to be completed.

The ________ method considers the future income potential of the business.

Closing the sale of a business is a complex legal process.

The due diligence process of analyzing and evaluating an existing business ________.

Your friend Susan is considering purchasing an existing business. How would you explain to her what due diligence is, why it is important, and the critical areas of it?

The first stage in acquiring a business is ________.

Which of the following is not a stage in acquiring a business?

A prospective buyer should evaluate the business's assets to determine their true value.

An entrepreneur should never purchase a business that is losing money.

The letter of intent is a nonbinding document.

The Foundations of Entrepreneurship

Ethics and Social Responsibility: Doing the Right Thing

Creativity and Innovation: Keys to Entrepreneurial Success

Conducting a Feasibility Analysis and Designing a Business Model

Crafting a Business Plan and Building a Solid Strategic Plan

Forms of Business Ownership

Franchising and the Entrepreneur

Building a Powerful Bootstrap Marketing Plan

E-Commerce and the Entrepreneur

Pricing and Credit Strategies

Creating a Successful Financial Plan

Managing Cash Flow

Choosing the Right Location and Layout

Sources of Financing: Equity and Debt

Global Aspects of Entrepreneurship

Building a New Venture Team and Planning for the Next Generation

Filters