Question 1

Book value of a business is not the same as its market value.

Accepted Answer

A) True 
 B)False

Question 2

In general,the seller of the business is looking to:

Accepted Answer

A) get the highest price possible for the company. 
B) sever all responsibility for the company's liabilities. 
C) minimize the cash she gets from the deal. 
D) Both A and B 
A) get the highest price possible for the company. 
B) sever all responsibility for the company's liabilities. 
C) minimize the cash she gets from the deal. 
D) Both A and B

Question 3

Which one of the following is not a goal of a buyer?

Accepted Answer

A) Buying the business at the lowest price possible 
B) Outsmarting the seller 
C) Negotiating favorable payment terms 
D) Minimizing the amount of cash paid out front 
A) Buying the business at the lowest price possible 
B) Outsmarting the seller 
C) Negotiating favorable payment terms 
D) Minimizing the amount of cash paid out front

Question 4

While there are numerous advantages to buying an existing business,there are also some disadvantages,like the previous owner having created ill will rather than goodwill with customers and suppliers.

Accepted Answer

A) True 
 B)False

Question 5

Hiring the previous owner as a consultant for the first few months can be a valuable investment.

Accepted Answer

A) True 
 B)False

Question 6

If the corporation,rather than the business seller,signs a restrictive covenant,the seller may not be bound by its terms.

Accepted Answer

A) True 
 B)False

Question 7

For a new owner of an existing business,physical facilities and equipment costs are very similar to what would have been spent on a start-up with all new facilities and equipment.

Accepted Answer

A) True 
 B)False

Question 8

A competent owner is a master of day-to-day operations of the business and can help a buyer to make a smooth transition into business ownership.

Accepted Answer

A) True 
 B)False

Question 9

Business evaluations based on balance sheet methods offer one key advantage: they consider the future earning potential of the business.

Accepted Answer

A) True 
 B)False

Question 10

When a buyer is reviewing a candidate company's lease arrangements,location and appearance,intangible assets,etc. ,he is answering what basic acquisition question?

Accepted Answer

A) Is the business financially sound? 
B) Why does the owner want to sell? 
C) What is the physical condition of the business? 
D) What legal aspects should be considered? 
A) Is the business financially sound? 
B) Why does the owner want to sell? 
C) What is the physical condition of the business? 
D) What legal aspects should be considered?

Question 11

Before purchasing an existing business,an entrepreneur should analyze closely both direct and indirect competitors.

Accepted Answer

A) True 
 B)False

Question 12

Traditional lenders of capital often shy away from deals involving the purchase of an existing business.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

The market approach to valuing a company relies primarily on the price/earnings ratio of the company in comparison to the average P/E of similar companies.

Accepted Answer

A) True 
 B)False

Question 15

The recommended step(s)when buying a business is(are):

Accepted Answer

A) investigate the potential acquisitions. 
B) explore a variety of financing options. 
C) analyze your skills and abilities. 
D) All of the above 
A) investigate the potential acquisitions. 
B) explore a variety of financing options. 
C) analyze your skills and abilities. 
D) All of the above

Question 16

For a bulk transfer to be effective,a buyer must keep the list of creditors and list of property for six months.

Accepted Answer

A) True 
 B)False

Question 17

Perhaps the ideal source of financing the purchase of an existing business is:

Accepted Answer

A) the seller. 
B) the Small Business Administration. 
C) a venture banker. 
D) your local bank. 
A) the seller. 
B) the Small Business Administration. 
C) a venture banker. 
D) your local bank.

Question 18

ESOP is the acronym for:

Accepted Answer

A) Employees' Share of Profits. 
B) Equal Share of Profits. 
C) Employee Stock Ownership Plan. 
D) Equitable Share of Profits. 
A) Employees' Share of Profits. 
B) Equal Share of Profits. 
C) Employee Stock Ownership Plan. 
D) Equitable Share of Profits.

Question 19

Failing to age accounts receivable could lead a buyer into paying more for a business than it is worth.

Accepted Answer

A) True 
 B)False

Question 20

One reason why an owner is selling the business is because the business location may have become unsatisfactory.

Accepted Answer

A) True 
 B)False

Exam 5: Buying an Existing Business

Book value of a business is not the same as its market value.

In general,the seller of the business is looking to:

Which one of the following is not a goal of a buyer?

While there are numerous advantages to buying an existing business,there are also some disadvantages,like the previous owner having created ill will rather than goodwill with customers and suppliers.

Hiring the previous owner as a consultant for the first few months can be a valuable investment.

If the corporation,rather than the business seller,signs a restrictive covenant,the seller may not be bound by its terms.

For a new owner of an existing business,physical facilities and equipment costs are very similar to what would have been spent on a start-up with all new facilities and equipment.

A competent owner is a master of day-to-day operations of the business and can help a buyer to make a smooth transition into business ownership.

Business evaluations based on balance sheet methods offer one key advantage: they consider the future earning potential of the business.

When a buyer is reviewing a candidate company's lease arrangements,location and appearance,intangible assets,etc. ,he is answering what basic acquisition question?

Before purchasing an existing business,an entrepreneur should analyze closely both direct and indirect competitors.

Traditional lenders of capital often shy away from deals involving the purchase of an existing business.

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

The market approach to valuing a company relies primarily on the price/earnings ratio of the company in comparison to the average P/E of similar companies.

The recommended step(s)when buying a business is(are):

For a bulk transfer to be effective,a buyer must keep the list of creditors and list of property for six months.

Perhaps the ideal source of financing the purchase of an existing business is:

ESOP is the acronym for:

Failing to age accounts receivable could lead a buyer into paying more for a business than it is worth.

One reason why an owner is selling the business is because the business location may have become unsatisfactory.

Entrepreneurs: the Driving Force Behind Small Business

Strategic Management and the Entrepreneur

Choosing a Form of Ownership

Franchising and the Entrepreneur

Conducting a Feasibility Analysis and Crafting a Winning Business Plan

Creating a Solid Financial Plan

Managing Cash Flow

Building a Guerrilla Marketing Plan

Creative Use of Advertising and Promotion

Pricing and Credit Strategies

Global Marketing Strategies

E-Commerce and Entrepreneurship

Sources of Equity Financing

Sources of Debt Financing

Location,layout,and Physical Facilities

Supply Chain Management

Managing Inventory

Staffing and Leading a Growing Company

Management Succession and Risk Management Strategies in the Family Business

Ethics and Social Responsibility: Doing the Right Thing

The Legal Environment: Business Law and Government Regulation

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