Question 1

When it comes to buying an existing business,it is not uncommon to find it:

Accepted Answer

A) overpriced. 
B) difficult to finance. 
C) with accounts receivable worth more than face value. 
D) bargain priced. 
A) overpriced. 
B) difficult to finance. 
C) with accounts receivable worth more than face value. 
D) bargain priced.

Question 2

One of the biggest mistakes business buyers can make is entering negotiations with only a vague notion of the strategies they will employ.

Accepted Answer

A) True 
 B)False

Question 3

The best method for valuing a business is to use established rules of thumb.

Accepted Answer

A) True 
 B)False

Question 4

A new owner of an existing business can generally introduce change and innovation almost as easily as if the company was a new business start-up.

Accepted Answer

A) True 
 B)False

Question 5

The bargaining process may eventually lead both parties into the non-compete zone.

Accepted Answer

A) True 
 B)False

Question 6

It is important that both the buyer and seller have their objectives thought out,written down,and prioritized when they go into the negotiation.

Accepted Answer

A) True 
 B)False

Question 7

A straight business sale may be worst for a seller who wants to step down and turn over the reins of the company to someone else.

Accepted Answer

A) True 
 B)False

Question 8

When it comes to transferring goodwill in a business valuation,goodwill:

Accepted Answer

A) is considered an intangible asset and therefore not taxed. 
B) can be used as a deduction by the seller. 
C) is taxed for the seller as capital gains. 
D) cannot be used as a deduction by the buyer because it is a capital asset. 
A) is considered an intangible asset and therefore not taxed. 
B) can be used as a deduction by the seller. 
C) is taxed for the seller as capital gains. 
D) cannot be used as a deduction by the buyer because it is a capital asset.

Question 9

Explain five exit strategies business owners can use for their businesses.

Accepted Answer

Common exit strategies include a straigh

Question 10

In most business sales,the buyer bears the responsibility of determining whether or not the business is a good value.

Accepted Answer

A) True 
 B)False

Question 11

A bulk transfer prevents creditors of the seller of a business from laying claim to the assets the buyer purchases to satisfy the seller's debts.

Accepted Answer

A) True 
 B)False

Question 12

Generally speaking,current employees will prove flexible and able to meet whatever changes the new owner desires to make once the business is acquired.

Accepted Answer

A) True 
 B)False

Question 13

A business owner who buys a company whose financial statements show a pattern of short-term profitability is guaranteed of getting a good deal.

Accepted Answer

A) True 
 B)False

Question 14

Under the capitalized earnings approach to business valuation,firms with lower risk factors are more valuable than those with higher risk factors.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is a way to smooth the transition of leadership/management from the seller of a business to the buyer?

Accepted Answer

A) Focus on the customer,offer new incentives,improve customer service. 
B) Focus on the employees,listen to them,keep them informed. 
C) Concentrate on operations,updating equipment and changing processes. 
D) Visit your competitors and introduce yourself and get to know them. 
A) Focus on the customer,offer new incentives,improve customer service. 
B) Focus on the employees,listen to them,keep them informed. 
C) Concentrate on operations,updating equipment and changing processes. 
D) Visit your competitors and introduce yourself and get to know them.

Question 16

The bargaining zone is:

Accepted Answer

A) the area within bargaining process which an agreement can be reached. 
B) where the buyer gets the best deal. 
C) where the seller gets the best deal. 
D) None of the above 
A) the area within bargaining process which an agreement can be reached. 
B) where the buyer gets the best deal. 
C) where the seller gets the best deal. 
D) None of the above

Question 17

The buyer of the business wants to minimize the cash up front and avoid enabling the seller to open a competing business.

Accepted Answer

A) True 
 B)False

Question 18

Describe the earnings approach for valuing a company,outlining the calculation and the strengths and weaknesses of this technique.

Accepted Answer

The earnings approach is more refined th

Question 19

A valuation method that is more realistic than the balance sheet because it adjusts book value to reflect actual market value is the:

Accepted Answer

A) excess-earnings method. 
B) market approach. 
C) capitalization method. 
D) adjusted balance sheet method. 
A) excess-earnings method. 
B) market approach. 
C) capitalization method. 
D) adjusted balance sheet method.

Question 20

Which of the following valuation methods does not consider the future income-earning potential of a business?

Accepted Answer

A) Balance sheet technique 
B) Excess-earnings method 
C) Discounted future earnings approach 
D) Market approach 
A) Balance sheet technique 
B) Excess-earnings method 
C) Discounted future earnings approach 
D) Market approach

Exam 5: Buying an Existing Business

When it comes to buying an existing business,it is not uncommon to find it:

One of the biggest mistakes business buyers can make is entering negotiations with only a vague notion of the strategies they will employ.

The best method for valuing a business is to use established rules of thumb.

A new owner of an existing business can generally introduce change and innovation almost as easily as if the company was a new business start-up.

The bargaining process may eventually lead both parties into the non-compete zone.

It is important that both the buyer and seller have their objectives thought out,written down,and prioritized when they go into the negotiation.

A straight business sale may be worst for a seller who wants to step down and turn over the reins of the company to someone else.

When it comes to transferring goodwill in a business valuation,goodwill:

Explain five exit strategies business owners can use for their businesses.

In most business sales,the buyer bears the responsibility of determining whether or not the business is a good value.

A bulk transfer prevents creditors of the seller of a business from laying claim to the assets the buyer purchases to satisfy the seller's debts.

Generally speaking,current employees will prove flexible and able to meet whatever changes the new owner desires to make once the business is acquired.

A business owner who buys a company whose financial statements show a pattern of short-term profitability is guaranteed of getting a good deal.

Under the capitalized earnings approach to business valuation,firms with lower risk factors are more valuable than those with higher risk factors.

Which of the following is a way to smooth the transition of leadership/management from the seller of a business to the buyer?

The bargaining zone is:

The buyer of the business wants to minimize the cash up front and avoid enabling the seller to open a competing business.

Describe the earnings approach for valuing a company,outlining the calculation and the strengths and weaknesses of this technique.

A valuation method that is more realistic than the balance sheet because it adjusts book value to reflect actual market value is the:

Which of the following valuation methods does not consider the future income-earning potential of a business?

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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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