Chapter 5 Flashcards
1) It is argued in the text that the most significant advantage of buying a business is:
A) it has inventory.
B) it has already been registered with the authorities.
C) to avoid being sued.
D) it has an established image and tracks record.
D) it has an established image and tracks record.
2) According to the text, most businesses that are for sale:
A) are only marginally successful.
B) provide a steady base on which it can be expanded. C) have valuable locations to transfer to a new owner.
D) have solid banking arrangements in place.
A) are only marginally successful.
3) Goodwill:
A) is essentially a business’s favourable reputation.
B) always exists so long as a business operates.
C) is the process of extending credit to needy customers.
D) measures the added value of a product.
A) is essentially a business’s favourable reputation.
4) Common sources of businesses for sale include:
A) yellow pages (hard copy or web-based).
B) supermarket ad boards.
C) FAQ pages.
D) trade journals.
D) trade journals.
5) If a business is not listed as being for sale:
A) a prospective purchaser can ask the owner if they would be interested in selling.
B) it’s not worth investigating it.
C) its privacy should be respected.
D) then it won’t be for sale.
A) a prospective purchaser can ask the owner if they
6) Government departments:
A) are not likely to be aware of business for sale.
B) often act as brokers in connecting purchasers and sellers of businesses.
C) may be aware of businesses for sale.
D) are never connected with individual businesses.
C) may be aware of businesses for sale.
7) Industry analysis may not be required if:
A) a buyer has considerable experience in the industry.
B) there is no information readily available.
C) the industry is not dominated by one large business. D) the cost to do so would be prohibitive.
A) a buyer has considerable experience in the industry.
8) When purchasing a business, non-liquid assets:
A) should be subjected to an independent appraisal.
B) should be considered not to have any value.
C) should be ignored for business planning purposes.
D) should be valued at 20% of total fixed assets.
A) should be subjected to an independent appraisal.
9) Strong customer relations is usually an indicator: A) of a high-demand product or service. B) of good management and employees. C) of low pricing. D) of a market with few competitors.
B) of good management and employees.
10) Market value is:
A) the lowest amount that a seller will accept in the market.
B) the net realizable value of a business’s fixed assets.
C) the average of the three most recent sales transactions in an industry.
D) the price where demand and supply meet.
D) the price where demand and supply meet.
11) The times earnings method is also called: A) productivity velocity method. B) efficiency measure. C) price-earnings ratio. D) return on investment accelerator.
C) price-earnings ratio.
12) An offer to purchase will most likely be made:
A) anonymously (until accepted).
B) to the seller’s CEO.
C) by the buyer’s banker on behalf of the buyer.
D) by the buyer or through a realtor or lawyer.
D) by the buyer or through a realtor or lawyer.
13) One of the attractive benefits of being a franchisee is:
A) there is no need to learn about an industry in-depth.
B) the total freedom of owning your own business.
C) it can replace a lost job.
D) future income is a high certainty.
C) it can replace a lost job.
14) According to research, traditional franchise businesses include: A) construction. B) hotels. C) retailing. D) soft drink companies.
D) soft drink companies.
15) The fastest growing sector in the Canadian economy is: A) the professional sector. B) the manufacturing sector. C) the import/export sector. D) the service sector.
D) the service sector.
