Question 1

Communicating with employees helps smoothen the transition.

Accepted Answer

A) True 
 B)False

Question 2

When evaluating the assets of an existing business, the inventory ________.

Accepted Answer

A) is always current and salable 
B) usually appreciates over time, making the business a bargain 
C) should be judged on the basis of its market value, not its book value 
D) is usually stated honestly and does not need an independent audit 
A) is always current and salable 
B) usually appreciates over time, making the business a bargain 
C) should be judged on the basis of its market value, not its book value 
D) is usually stated honestly and does not need an independent audit

Question 3

The first step an entrepreneur should take when buying an existing business is to ________.

Accepted Answer

A) explore financing options 
B) prepare a list of potential candidates 
C) analyze his or her skills, abilities, and interests in an honest self-audit 
D) contact existing business owners in the area and ask if their companies are for sale 
A) explore financing options 
B) prepare a list of potential candidates 
C) analyze his or her skills, abilities, and interests in an honest self-audit 
D) contact existing business owners in the area and ask if their companies are for sale

Question 4

One of the closing documents required is the non-disclosure agreement (NDA).

Accepted Answer

A) True 
 B)False

Question 5

A letter of intent is a firm commitment by both sides that they are ready to move toward closing the sale of the business.

Accepted Answer

A) True 
 B)False

Question 6

The most common reason for an owner to sell his or her business is planned retirement.

Accepted Answer

A) True 
 B)False

Question 7

To avoid a bumpy transition, it is important to not ask the seller to remain as a consultant.

Accepted Answer

A) True 
 B)False

Question 8

The primary focus of the self-audit is to identify the type of business that you will be happiest and most successful owning.

Accepted Answer

A) True 
 B)False

Question 9

Book value is the same as market value.

Accepted Answer

A) True 
 B)False

Question 10

Paige Dominick is considering purchasing an existing business. She has asked you to advise her on her purchase. How would you explain to her what a letter of intent is and why it is important?

Accepted Answer

The letter of intent is a nonbinding doc

Question 11

Asset valuation is an important part of the due diligence process. Why?

Accepted Answer

A prospective buyer should evaluate the

Question 12

When done correctly, the due diligence process will ________.

Accepted Answer

A) reveal both the positive and negative aspects of an existing business 
B) be time consuming and expensive 
C) most often result in the purchase of the business 
D) rarely prove to be beneficial 
A) reveal both the positive and negative aspects of an existing business 
B) be time consuming and expensive 
C) most often result in the purchase of the business 
D) rarely prove to be beneficial

Question 13

Advantages to buying an existing business that you do not have with a startup include ________.

Accepted Answer

A) greater access to venture capital 
B) the opportunity to participate in a national advertising campaign 
C) inventory is in place and trade credit is established 
D) easy implementation of innovations and changes from past policies 
A) greater access to venture capital 
B) the opportunity to participate in a national advertising campaign 
C) inventory is in place and trade credit is established 
D) easy implementation of innovations and changes from past policies

Question 14

Once the deal stage is complete, the transition stage begins with the actual closing of the purchase.

Accepted Answer

A) True 
 B)False

Question 15

A non-compete is usually one of the documents required for closing.

Accepted Answer

A) True 
 B)False

Question 16

Briefly describe the advantages and the disadvantages of buying an existing business.

Accepted Answer

Advantages of buying an existing busines

Question 17

The nondisclosure agreement is a nonbinding document.

Accepted Answer

A) True 
 B)False

Question 18

Earn-out is when the seller agrees to accept a percentage of the sales price and stays on to manage the business for a few more years under the new owner.

Accepted Answer

A) True 
 B)False

Question 19

The first step in buying a business is not searching out potential acquisition candidates.

Accepted Answer

A) True 
 B)False

Question 20

The due diligence process involves investigating four critical areas of the business, which are ________, asset valuation, legal issues, and financial condition.

Accepted Answer

A) negotiation 
B) business valuation 
C) motivation 
D) planning 
A) negotiation 
B) business valuation 
C) motivation 
D) planning

Communicating with employees helps smoothen the transition.

When evaluating the assets of an existing business, the inventory ________.

The first step an entrepreneur should take when buying an existing business is to ________.

One of the closing documents required is the non-disclosure agreement (NDA).

A letter of intent is a firm commitment by both sides that they are ready to move toward closing the sale of the business.

The most common reason for an owner to sell his or her business is planned retirement.

To avoid a bumpy transition, it is important to not ask the seller to remain as a consultant.

The primary focus of the self-audit is to identify the type of business that you will be happiest and most successful owning.

Book value is the same as market value.

Paige Dominick is considering purchasing an existing business. She has asked you to advise her on her purchase. How would you explain to her what a letter of intent is and why it is important?

Asset valuation is an important part of the due diligence process. Why?

When done correctly, the due diligence process will ________.

Advantages to buying an existing business that you do not have with a startup include ________.

Once the deal stage is complete, the transition stage begins with the actual closing of the purchase.

A non-compete is usually one of the documents required for closing.

Briefly describe the advantages and the disadvantages of buying an existing business.

The nondisclosure agreement is a nonbinding document.

Earn-out is when the seller agrees to accept a percentage of the sales price and stays on to manage the business for a few more years under the new owner.

The first step in buying a business is not searching out potential acquisition candidates.

The due diligence process involves investigating four critical areas of the business, which are ________, asset valuation, legal issues, and financial condition.

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

Communicating with employees helps smoothen the transition.

When evaluating the assets of an existing business, the inventory ________.

The first step an entrepreneur should take when buying an existing business is to ________.

One of the closing documents required is the non-disclosure agreement (NDA).

A letter of intent is a firm commitment by both sides that they are ready to move toward closing the sale of the business.

The most common reason for an owner to sell his or her business is planned retirement.

To avoid a bumpy transition, it is important to not ask the seller to remain as a consultant.

The primary focus of the self-audit is to identify the type of business that you will be happiest and most successful owning.

Book value is the same as market value.

Paige Dominick is considering purchasing an existing business. She has asked you to advise her on her purchase. How would you explain to her what a letter of intent is and why it is important?

Asset valuation is an important part of the due diligence process. Why?

When done correctly, the due diligence process will ________.

Advantages to buying an existing business that you do not have with a startup include ________.

Once the deal stage is complete, the transition stage begins with the actual closing of the purchase.

A non-compete is usually one of the documents required for closing.

Briefly describe the advantages and the disadvantages of buying an existing business.

The nondisclosure agreement is a nonbinding document.

Earn-out is when the seller agrees to accept a percentage of the sales price and stays on to manage the business for a few more years under the new owner.

The first step in buying a business is not searching out potential acquisition candidates.

The due diligence process involves investigating four critical areas of the business, which are ________, asset valuation, legal issues, and financial condition.

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