Question 1

Accounts receivable are rarely worth face value and should be "aged" when evaluating a company's assets.

Accepted Answer

A) True 
 B)False

Question 2

The amount the seller of a business receives for "goodwill" is taxed as:

Accepted Answer

A) a long-term capital gain. 
B) regular income. 
C) superlative income. 
D) None of the above 
A) a long-term capital gain. 
B) regular income. 
C) superlative income. 
D) None of the above

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

________ gives owners the security of a sales contract but permits them to stay at the "helm" for several years.

Accepted Answer

A) The two-step sale 
B) A controlled sale 
C) Company restructuring 
D) An ESOP 
A) The two-step sale 
B) A controlled sale 
C) Company restructuring 
D) An ESOP

Question 5

Briefly discuss the five steps in acquiring a business.

Accepted Answer

1.Analyze your skills,abilities,and inte

Question 6

A due-on-sale clause requires a buyer to pay the full amount of the remaining balance on a loan or to finance the balance at prevailing interest rates.

Accepted Answer

A) True 
 B)False

Question 7

A due-on-sale clause in a loan contract prohibits the buyer of a business from assuming a seller's loan even though it may carry a lower interest rate.

Accepted Answer

A) True 
 B)False

Question 8

When acquiring a business,the buyer should:

Accepted Answer

A) conduct a self-analysis of skills,abilities,and interests. 
B) prepare a list of potential candidates. 
C) investigate potential candidates and carefully evaluate them. 
D) All of the above 
A) conduct a self-analysis of skills,abilities,and interests. 
B) prepare a list of potential candidates. 
C) investigate potential candidates and carefully evaluate them. 
D) All of the above

Question 9

A prospective buyer should have an attorney thoroughly investigate all of the assets for sale in a business and their lien status before buying any business.

Accepted Answer

A) True 
 B)False

Question 10

Under the excess earnings method,what is the "extra earning power" of the business?

Accepted Answer

A) $86,219 
B) $2,181 
C) $11,175 
D) Cannot be determined from the information given 
A) $86,219 
B) $2,181 
C) $11,175 
D) Cannot be determined from the information given

Question 11

Price is what the business is actually worth; value is what the buyer agrees to pay.

Accepted Answer

A) True 
 B)False

Question 12

If the owner of an existing business refuses to disclose the company's financial records,an entrepreneur who is considering buying it should walk away from the deal.

Accepted Answer

A) True 
 B)False

Question 13

To avoid a stalled deal,a buyer should:

Accepted Answer

A) take a hard line and never give an inch. 
B) understand that they may not be able to get what they really want. 
C) go into the negotiation with a list of objectives ranked in order or priority. 
D) be firm,focused,and unbending. 
A) take a hard line and never give an inch. 
B) understand that they may not be able to get what they really want. 
C) go into the negotiation with a list of objectives ranked in order or priority. 
D) be firm,focused,and unbending.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Based on the excess earnings approach,what do you expect the business to be worth?

Accepted Answer

Tangible net worth ($230,000 - $18,000)$

Question 16

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

Accepted Answer

The advantages of buying an existing bus

Question 17

Potential buyers should examine income statements,balance sheets,and income tax returns for the past three to five years.

Accepted Answer

A) True 
 B)False

Question 18

Using the capitalized earnings method,calculate the value of the business.

Accepted Answer

Value = @#IMG-DLM& =

Question 19

Business evaluation based on balance sheet methods offers one key advantage: it considers the future earning potential of the business.

Accepted Answer

A) True 
 B)False

Question 20

The adjusted balance sheet method of valuing a business changes the book value of net worth to reflect its actual market value.

Accepted Answer

A) True 
 B)False

Accounts receivable are rarely worth face value and should be "aged" when evaluating a company's assets.

The amount the seller of a business receives for "goodwill" is taxed as:

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

________ gives owners the security of a sales contract but permits them to stay at the "helm" for several years.

Briefly discuss the five steps in acquiring a business.

A due-on-sale clause requires a buyer to pay the full amount of the remaining balance on a loan or to finance the balance at prevailing interest rates.

A due-on-sale clause in a loan contract prohibits the buyer of a business from assuming a seller's loan even though it may carry a lower interest rate.

When acquiring a business,the buyer should:

A prospective buyer should have an attorney thoroughly investigate all of the assets for sale in a business and their lien status before buying any business.

Under the excess earnings method,what is the "extra earning power" of the business?

Price is what the business is actually worth; value is what the buyer agrees to pay.

If the owner of an existing business refuses to disclose the company's financial records,an entrepreneur who is considering buying it should walk away from the deal.

To avoid a stalled deal,a buyer should:

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

Based on the excess earnings approach,what do you expect the business to be worth?

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

Potential buyers should examine income statements,balance sheets,and income tax returns for the past three to five years.

Using the capitalized earnings method,calculate the value of the business.

Business evaluation based on balance sheet methods offers one key advantage: it considers the future earning potential of the business.

The adjusted balance sheet method of valuing a business changes the book value of net worth to reflect its actual market value.

The Foundations of Entrepreneurship

Inside the Entrepreneurial Mind: From Ideas to Reality

Designing a Competitive Business Model and Building a Solid Strategic Plan

Conducting a Feasibility Analysis and Crafting a Winning Business Plan

Forms of Business Ownership

Franchising and the Entrepreneur

Building a Powerful Marketing Plan

E-Commerce and the Entrepreneur

Pricing Strategies

Creating a Successful Financial Plan

Managing Cash Flow

Sources of Financing: Debt and Equity

Choosing the Right Location and Layout

Global Opportunities

Building a Team and Management Succession

Filters

Exam 7: Buying an Existing Business

Accounts receivable are rarely worth face value and should be "aged" when evaluating a company's assets.

The amount the seller of a business receives for "goodwill" is taxed as:

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

________ gives owners the security of a sales contract but permits them to stay at the "helm" for several years.

Briefly discuss the five steps in acquiring a business.

A due-on-sale clause requires a buyer to pay the full amount of the remaining balance on a loan or to finance the balance at prevailing interest rates.

A due-on-sale clause in a loan contract prohibits the buyer of a business from assuming a seller's loan even though it may carry a lower interest rate.

When acquiring a business,the buyer should:

A prospective buyer should have an attorney thoroughly investigate all of the assets for sale in a business and their lien status before buying any business.

Under the excess earnings method,what is the "extra earning power" of the business?

Price is what the business is actually worth; value is what the buyer agrees to pay.

If the owner of an existing business refuses to disclose the company's financial records,an entrepreneur who is considering buying it should walk away from the deal.

To avoid a stalled deal,a buyer should:

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

Based on the excess earnings approach,what do you expect the business to be worth?

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

Potential buyers should examine income statements,balance sheets,and income tax returns for the past three to five years.

Using the capitalized earnings method,calculate the value of the business.

Business evaluation based on balance sheet methods offers one key advantage: it considers the future earning potential of the business.

The adjusted balance sheet method of valuing a business changes the book value of net worth to reflect its actual market value.

The Foundations of Entrepreneurship

Inside the Entrepreneurial Mind: From Ideas to Reality

Designing a Competitive Business Model and Building a Solid Strategic Plan

Conducting a Feasibility Analysis and Crafting a Winning Business Plan

Forms of Business Ownership

Franchising and the Entrepreneur

Building a Powerful Marketing Plan

E-Commerce and the Entrepreneur

Pricing Strategies

Creating a Successful Financial Plan

Managing Cash Flow

Sources of Financing: Debt and Equity

Choosing the Right Location and Layout

Global Opportunities

Building a Team and Management Succession

Filters