Question 1

The market approach uses the price/earnings ratios of similarly traded businesses to estimate the value of a company.

Accepted Answer

A) True 
 B)False

Question 2

Value is determined in the market, not on a balance sheet.

Accepted Answer

A) True 
 B)False

Question 3

With an existing business, the new owner can depend on employees to help him make money while he is learning the business.

Accepted Answer

A) True 
 B)False

Question 4

When buying a business, an entrepreneur can usually purchase equipment and fixtures at prices well below their book value.

Accepted Answer

A) True 
 B)False

Question 5

Transition is the final step in acquiring a business.

Accepted Answer

A) True 
 B)False

Question 6

The letter of intent is a ________ document.

Accepted Answer

A) binding 
B) nonbinding 
C) transferable 
D) final 
A) binding 
B) nonbinding 
C) transferable 
D) final

Question 7

The ________ market consists of low-profile companies that might be for sale but are not advertised as such.

Accepted Answer

A) venture capitalist 
B) franchise 
C) hidden 
D) broker 
A) venture capitalist 
B) franchise 
C) hidden 
D) broker

Question 8

The structure of the deal refers to the ________.

Accepted Answer

A) price paid 
B) method of payment 
C) terms and conditions of payment 
D) legality of the process 
A) price paid 
B) method of payment 
C) terms and conditions of payment 
D) legality of the process

Question 9

What is the market approach to business valuation?

Accepted Answer

The market approach uses the price/earni

Question 10

The ________ of the deal is more important than the price the seller agrees to pay.

Accepted Answer

A) structure 
B) art 
C) value 
D) speed 
A) structure 
B) art 
C) value 
D) speed

Question 11

The goal of the due diligence process is to discover exactly what the buyer is purchasing and avoid any unpleasant surprises ________ the deal is closed.

Accepted Answer

A) before 
B) after 
C) during 
D) while 
A) before 
B) after 
C) during 
D) while

Question 12

The negotiation zone is the area within which the two parties can reach agreement.

Accepted Answer

A) True 
 B)False

Question 13

Negotiation take place ________.

Accepted Answer

A) throughout the five stages in acquiring a business 
B) in the due diligence stage 
C) in the valuation stage 
D) in the transition stage 
A) throughout the five stages in acquiring a business 
B) in the due diligence stage 
C) in the valuation stage 
D) in the transition stage

Question 14

The process of investigating the details of a company that is for sale to determine the strengths, weaknesses, opportunities and threats facing it is known as the ________ process.

Accepted Answer

A) hidden market 
B) due diligence 
C) skimming 
D) business assessment 
A) hidden market 
B) due diligence 
C) skimming 
D) business assessment

Question 15

Goodwill is the difference between an established, successful business and one that has yet to prove itself.

Accepted Answer

A) True 
 B)False

Question 16

________ involves the process of studying, reviewing, and verifying all the relevant information concerning an acquisition.

Accepted Answer

A) Negotiation 
B) Due diligence 
C) Valuation 
D) Opportunity identification 
A) Negotiation 
B) Due diligence 
C) Valuation 
D) Opportunity identification

Question 17

The last step in acquiring a business is closing the deal.

Accepted Answer

A) True 
 B)False

Question 18

Value is what a business is actually worth.

Accepted Answer

A) True 
 B)False

Question 19

When acquiring a business, the buyer should ________.

Accepted Answer

A) conduct a self-analysis of skills, abilities, and interests 
B) develop a list of criteria that define the "ideal business" for the buyer 
C) prepare a list of potential candidates that meet the criteria 
D) All of the above 
A) conduct a self-analysis of skills, abilities, and interests 
B) develop a list of criteria that define the "ideal business" for the buyer 
C) prepare a list of potential candidates that meet the criteria 
D) All of the above

Question 20

A typical letter of intent addresses terms such as price and terms of payment.

Accepted Answer

A) True 
 B)False

The market approach uses the price/earnings ratios of similarly traded businesses to estimate the value of a company.

Value is determined in the market, not on a balance sheet.

With an existing business, the new owner can depend on employees to help him make money while he is learning the business.

When buying a business, an entrepreneur can usually purchase equipment and fixtures at prices well below their book value.

Transition is the final step in acquiring a business.

The letter of intent is a ________ document.

The ________ market consists of low-profile companies that might be for sale but are not advertised as such.

The structure of the deal refers to the ________.

What is the market approach to business valuation?

The ________ of the deal is more important than the price the seller agrees to pay.

The goal of the due diligence process is to discover exactly what the buyer is purchasing and avoid any unpleasant surprises ________ the deal is closed.

The negotiation zone is the area within which the two parties can reach agreement.

Negotiation take place ________.

The process of investigating the details of a company that is for sale to determine the strengths, weaknesses, opportunities and threats facing it is known as the ________ process.

Goodwill is the difference between an established, successful business and one that has yet to prove itself.

________ involves the process of studying, reviewing, and verifying all the relevant information concerning an acquisition.

The last step in acquiring a business is closing the deal.

Value is what a business is actually worth.

When acquiring a business, the buyer should ________.

A typical letter of intent addresses terms such as price and terms of payment.

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 market approach uses the price/earnings ratios of similarly traded businesses to estimate the value of a company.

Value is determined in the market, not on a balance sheet.

With an existing business, the new owner can depend on employees to help him make money while he is learning the business.

When buying a business, an entrepreneur can usually purchase equipment and fixtures at prices well below their book value.

Transition is the final step in acquiring a business.

The letter of intent is a ________ document.

The ________ market consists of low-profile companies that might be for sale but are not advertised as such.

The structure of the deal refers to the ________.

What is the market approach to business valuation?

The ________ of the deal is more important than the price the seller agrees to pay.

The goal of the due diligence process is to discover exactly what the buyer is purchasing and avoid any unpleasant surprises ________ the deal is closed.

The negotiation zone is the area within which the two parties can reach agreement.

Negotiation take place ________.

The process of investigating the details of a company that is for sale to determine the strengths, weaknesses, opportunities and threats facing it is known as the ________ process.

Goodwill is the difference between an established, successful business and one that has yet to prove itself.

________ involves the process of studying, reviewing, and verifying all the relevant information concerning an acquisition.

The last step in acquiring a business is closing the deal.

Value is what a business is actually worth.

When acquiring a business, the buyer should ________.

A typical letter of intent addresses terms such as price and terms of payment.

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