Deck 7: Pathways to Entrepreneurial Ventures

Question 1

The sources of new business ideas among men and women are identical in type and proportion.

Answer 1

False

Question 2

It is always important that you weigh advantages against disadvantages in purchasing a franchise.

Answer 2

True

Question 3

When purchasing an existing business, the prospective owner should conduct an assessment of the business's current group of employees.

Answer 3

True

Question 4

The elimination of time and effort associated with starting a company is an advantage of acquiring an ongoing venture.

Question 5

The most important area to examine prior to purchasing a business is company profitability.

Question 6

The Federal Trade Commission does not provide information on franchise success.

Question 7

Uniqueness in a product or service can be demonstrated through a new-new approach or a new-old approach.

Question 8

It is not uncommon for a buyer to be faced with a franchise fee of $250,000 to $1,000,000.

Question 9

In purchasing an existing business the first question should be: "Why are you selling?"

Question 10

The actual cost of "opening the doors" of a franchise establishment can be more than $200,000.

Question 11

The terms upside gain and downside loss refer to the profits the business can make and the losses it can suffer.

Question 12

Perhaps the greatest advantage of buying a franchise, as compared to starting a new business or buying an existing one, is that the franchisor will usually provide both training and guidance to the franchisee.

Question 13

Much franchise litigation has arisen over termination of owners.

Question 14

Sales records are of very little value to a buyer in evaluating a company's worth.

Question 15

Business brokers help entrepreneurs locate the funds necessary to start a business.

Question 16

The prospective investor should get as much information as possible on the franchisor.

Question 17

The term risk versus loss refers to the amount of return for funds invested.

Question 18

The way to approach a new business venture is to think up a good or service that is unique.

Question 19

Franchisees have the option of using the logo and symbols of the franchisor.

Question 20

Generally, the larger and more successful the franchisor, the greater the franchise fee that is charged.

Question 21

Which of the following is not a key question a prospective buyer needs to ask in buying a business?

A) Why is the owner selling?
B) What is the owner's personal net worth?
C) How many of the personnel will remain with the firm?
D) What type of competition exists?

Question 22

A key question to ask when buying an on-going small business is which of the following?

A) How old is the business?
B) Where should you retire someday?
C) Can you become a millionaire by buying this business?
D) How many personnel are going to remain?

Question 23

When buying a business, competition must be investigated because

A) price competition may affect profits.
B) new competition may reduce market share.
C) competition may be spending more money on advertising than you.
D) all of the above

Question 24

A franchise system can be used for handling

A) goods.
B) services.
C) both of the above.
D) none of the above.

Question 25

Which of the following is a question that can be sidestepped when buying a business?

A) Where should the business be located?
B) What types of customers does this store attract?
C) What pricing strategy should the firm use?
D) All can be sidestepped.

Question 26

An additional consideration to keep in mind when negotiating to purchase an existing business includes requesting that the seller retain __________ in the firm.

A) a minority interest
B) a majority interest
C) either a minority or majority interest
D) none of the above

Question 27

Business-related reasons for selling do not include which of the following?

A) The owner may be in trouble with suppliers.
B) Changes in leasehold conditions.
C) Changes in the product supply chain.
D) Changes in zoning which affect the business.

Question 28

Business-related reasons for selling may include all but which of the following?

A) The owner may be in trouble with suppliers.
B) Changes in leasehold conditions.
C) Changes in zoning which affect the business.
D) All of the above.

Question 29

The person who gets the franchise is usually required to do all of the following except:

A) invest money in the operation.
B) maintain a specified quality of performance.
C) pay a fee.
D) design a logo for the unit.

Question 30

An advantage to buying an on-going business is

A) reduced concern over future operations.
B) time and effort are reduced
C) it may be purchased at a bargain price.
D) all of the above.

Question 31

An agreement not to compete is also known as

A) a trade restriction clause.
B) a legal restraint of trade.
C) a waiver of competition clause.
D) a deferential sale of business clause.

Question 32

The inventory should be examined for which of the following?

A) salability
B) correspondence between the physical count and the book count
C) up-to-datedness
D) All of the above.

Question 33

In negotiating a deal to purchase an existing business, it is possible to request that the seller retain a minority interest in the firm.

Question 34

When one discusses upside gain and downside loss, one is talking about

A) inventory turnover.
B) risk versus reward.
C) asset pricing.
D) liquidation pricing

Question 35

Which of the following is an intangible asset?

A) goodwill
B) inventory
C) plant
D) machinery

Question 36

When one designs a unique good or service, the individual is said to have used a(n) ____approach to starting the business.

A) new-new
B) old-old
C) old-new
D) new-old

Question 37

A ____ is a system of distribution that enables a supplier to arrange for a dealer to handle a specific product or service under certain mutually agreed upon conditions.

A) franchisee
B) franchise
C) franchisor
D) franchiser

Question 38

The individual who buys the franchise is the

A) franchisee.
B) franchisor.
C) franchisette.
D) franchatter.

Question 39

The Franchise Disclosure Document (FDD) is a legally required disclosure document that must be presented to potential franchisees during presale discussions.

Question 40

"Piggybacking" one's way into a new business involves using a ____approach.

A) new-new
B) old-new
C) new-old
D) old-old

Question 41

Starting a business by adapting something already on the market is called __________.

A) a franchising approach
B) a buying approach
C) a new-new approach
D) a new-old approach

Question 42

Which of the following costs add to the cost of franchising?

A) insurance
B) payroll
C) legal and professional fees
D) all of the above

Question 43

Business-related reasons for selling may include all except:

A) trouble with suppliers.
B) changes in leasehold conditions.
C) changes in zoning that affect the business.
D) all of the above

Question 44

Coming up with a unique good or service is a _____ approach, while adapting something that is currently on the market or extending the offering to an area where it is not presently available is a(n) _____ approach.

A) new-new, old-old
B) new-old, old-old
C) new-new, new-old
D) new-old, old-new

Question 45

When should a potential franchisee receive the FDD (Franchise Disclosure Document)?

A) two days before signing a contract or paying any money
B) at least ten days before signing a contract or paying any money
C) two days before signing a contract
D) at least ten days before paying any money

Question 46

The individual who arranges for a dealer to handle a specific product or service under certain mutually agreed upon conditions is known as the _____.

A) franchisee
B) franchisor
C) franchiser
D) franchisette

Question 47

Which of the following is not a disadvantage of a major franchise?

A) franchise fees
B) control exercised by the franchisor
C) track record of the franchisor
D) awareness of some of the unfilled promises from franchisors

Question 48

Competitor factors in a buying decision do not include

A) quality of the competition.
B) location of the competition.
C) age of the competition's owners.
D) number of competitors.

Question 49

The advantages of franchising include:

A) training and guidance.
B) brand-name appeal.
C) proven track record.
D) all of the above.

Question 50

When this asset is purchased, the buyer should be sure to deduct those that they are deemed uncollectible.

A) prepaid expenses
B) inventory
C) accounts receivable
D) equipment

Question 51

Evaluating franchise opportunities include finding out more about which of the following?

A) the franchisor
B) the franchise
C) the franchisee
D) all of the above

Question 52

The "right questions" that a prospective owner should ask about a franchise deal with

A) the franchisor.
B) the franchise.
C) the market.
D) all of the above.

Question 53

The person who sells the franchise is usually required to do all of the following except:

A) pay a fee.
B) provide professional management training to the unit's staff.
C) help out with financial assistance.
D) provide continuing aid and a guidance to the person buying the franchise.

Question 54

Which of the following costs do not add to the cost of franchising?

A) insurance
B) prepaid utility bills
C) legal and professional fees
D) opening product inventory

Question 55

When buying a small business you need to know all of the following items except:

A) the owner's reason for selling.
B) the competition in the area.
C) the financial picture of the business.
D) the owner's family stability and relationships.

Question 56

Reviewing personnel of the business about to be purchased is important in order to determine

A) whether employees with key skills will stay or leave.
B) if employees are leaving, will enough remain to operate the business.
C) the cost of replacing an employee.
D) all of the above

Question 57

The franchisor's responsibilities include providing

A) company name.
B) symbols and logos.
C) management and training.
D) all of the above

Question 58

The extra value a business can command in a sale is known as

A) goodwill.
B) saleable value.
C) market value.
D) asset value.

Question 59

The franchisee's responsibilities include:

A) a financial investment.
B) payment of a fee.
C) engaging in a continuous business relationship.
D) all of the above.

Question 60

The FDD contains how many sections?

A) 41
B) 23
C) 9
D) 100

Question 61

The final decision to purchase a franchise should be up to

A) your lawyer.
B) your financial backer.
C) you.
D) your accountant.

Question 62

The _____ approach indicates the importance of people's awareness of their daily lives for developing new business ideas.

A) new-new
B) old-old
C) old-new
D) new-old

Question 63

Why did the Federal Trade Commission enact the Franchise Rule?

Question 64

When is the buyer likely to have power over the seller in the negotiation to purchase a business?

A) if the seller has already purchased another business
B) if potential buyers are numerous
C) if the buyer's backers wish to invest quickly
D) if the seller has no deadline for selling

Question 65

An analysis of the competition should look for ______.

A) opportunities.
B) weaknesses.
C) unscrupulous practices.
D) None of the above

Question 66

What is an often overlooked asset when acquiring a new business?

A) Records
B) Buildings
C) Equipment
D) None of the above

Question 67

What is the role of business brokers in acquiring an established entrepreneurial venture?

Question 68

When does a business have to increase its sales annually to net as much as it did in the previous year?

A) when profits are rising as fast as sales
B) when profits are not rising as fast as sales
C) when sales are trending upward
D) both a and c

Question 69

Which is not a key question to ask when buying a business?

A) Why is the business being sold?
B) Is the building heated with gas or electricity?
C) What is the condition of the inventory?
D) How many of the employees will remain?

Question 70

Which of the following is not currently cited as a trend creating business opportunities?

A) green products
B) breakfast cereals
C) health care
D) concierge services

Question 71

Who must negotiate a final deal to purchase a business?

A) A lawyer
B) A CPA
C) The potential buyer
D) All of the above

Question 72

What is the largest source of new business ideas among women?

A) Prior job
B) Hobby
C) Education courses
D) Chance

Question 73

What is the largest source for new business ideas among men?

A) Chance
B) Prior job
C) Hobby
D) Education courses

Question 74

Which is not a start-up expense?

A) Rent
B) Advertising
C) Supplies
D) Depreciation

Question 75

Briefly explain the new-old approach to creating new ventures.