Which of the following would avoid intra family strife when the family business is passed down to the next generation?

Which of the following would avoid intra family strife when the family business is passed down to the next generation? 

A. Providing each member of the family business with the opportunity to obtain education and experience within the business.

B. Allowing each family member who does wish to enter the business to find out and do those functions and activities that he or she does best.

C. Being certain that all family members know and accept that they must join the business to continue the family business.

D. Always assume that the leadership of the business must come from within the family.

Answer: B

Which of the following statements about family businesses succession is true?

Which of the following statements about family businesses succession is true? 

A. Turning over management authority is not easy for most founders.

B. Fewer than 10 percent of family-owned businesses are successfully transferred to a second generation.

C. It is easy for the heir of the founder to assume authority.

D. Fewer than 5 percent family-owned businesses succeed long enough to be inherited by the third.

Answer: A

Which of the following is a disadvantage of buying a franchise?

Which of the following is a disadvantage of buying a franchise? 

A. It is more expensive than starting a new business.

B. You give up control of marketing and operations.

C. You compete with the franchise company itself.

D. You receive no training and management support.

Answer: B

In many franchises the franchiser oversees (or even manages) the selection of location, the construction of facilities, the acquisition and installation of necessary equipment, and the initial inventory with which to open business. Which of the following terms best represents this type of franchising?

In many franchises the franchiser oversees (or even manages) the selection of location, the construction of facilities, the acquisition and installation of necessary equipment, and the initial inventory with which to open business. Which of the following terms best represents this type of franchising? 

A. Cannibalization

B. Turnkey

C. Liquidation

D. Consignment

Answer: B

_____ provides an organization through which independent businesses may combine resources.

_____ provides an organization through which independent businesses may combine resources. 

A. Product distribution franchising

B. Trade name franchising

C. Conversion franchising

D. Business format franchising

Answer: C

Which of the following holds true for product distribution franchising?

Which of the following holds true for product distribution franchising? 

A. It provides the franchisee with specific brand named products, which are resold by the franchisee in a specified territory.

B. It provides an organization through which independent businesses may combine resources.

C. It is an agreement that provides only the rights to use the franchisor's trade name and/or trademarks.

D. It is an agreement that provides a complete business format.

Answer: A

Which of the following is an agreement that provides only the rights to use the franchisor's trade name and/or trademarks?

Which of the following is an agreement that provides only the rights to use the franchisor's trade name and/or trademarks? 

A. Product distribution franchising

B. Trade name franchising

C. Conversion franchising

D. Business format franchising

Answer: B

The value of a franchise is determined by:

The value of a franchise is determined by: 

A. the rights granted.

B. the conditions and standards set.

C. the operating permissions granted.

D. the value of assets acquired.

Answer: A

Which of the following is one important advantage of key resource allocation?

Which of the following is one important advantage of key resource allocation? 

A. It has a financial plan for the future, based on a single level of operations; a quantitative expression of the use of resources necessary to achieve a business's strategic goals.

B. As only assets are acquired, a subsequent business, regardless of its legal form, is not responsible for any of the acts or transactions made prior to purchasing the business.

C. It has an agreement between two or more entities to pool resources in order to complete a project.

D. It specifies the time that is required for a business to acquire resources, convert them into product, sell the product, and receive cash from the sale.

Answer: B

_____ are the only way a sole proprietorship may be purchased.

_____ are the only way a sole proprietorship may be purchased. 

A. Buy-ins

B. Takeovers

C. Key resource acquisitions

D. Buyouts

Answer: C

The primary advantage to a buyout is its:

The primary advantage to a buyout is its: 

A. hands-off approach.

B. significantly less cost.

C. simplicity.

D. employee stock option plan.

Answer: C

Seizing of control of a business by purchasing its stock to be able to select the board of directors refers to a(n):

Seizing of control of a business by purchasing its stock to be able to select the board of directors refers to a(n): 

A. buy-in.

B. takeover.

C. merger.

D. earn-out.

Answer: B

The price at which a buyer is indifferent about buying or not buying the business is called:

The price at which a buyer is indifferent about buying or not buying the business is called: 

A. the balance point.

B. the point of indifference.

C. caveat emptor.

D. the reversing point.

Answer: B

Which of the following refers to income capitalization?

Which of the following refers to income capitalization? 

A. Regular and systematic reduction in income that transfers asset value to expense over time.

B. Dividing projected net income excluding depreciation, interest, and owner draws, by the best return that you could expect to obtain in other investments.

C. Multiplying your estimate of future earnings by the net income to equity ratio.

D. The amount of profit earned by a business before calculating the amount of income tax owed.

Answer: B

_____ are rules of thumb that are commonly used to estimate firm value in relation to some easily observable characteristic of the business.

_____ are rules of thumb that are commonly used to estimate firm value in relation to some easily observable characteristic of the business. 

A. Synergies

B. Spin-offs

C. Codicils

D. Heuristics

Answer: D

The ratio of the value of a firm to its annual earnings is called:

The ratio of the value of a firm to its annual earnings is called: 

A. unappropriated profit.

B. accumulated earning.

C. retained earning.

D. the earnings multiple.

Answer: D

Which of the following is commonly used to estimate the value of a business?

Which of the following is commonly used to estimate the value of a business? 

A. Synergy

B. Comparable sales of other firms

C. Spin-offs

D. Industry heuristics

Answer: B

The amount for which an asset would sell, less the costs of selling the asset is called:

The amount for which an asset would sell, less the costs of selling the asset is called: 

A. book value.

B. replacement value.

C. net realizable value.

D. earnings multiple.

Answer: C

The difference between original acquisition cost and the amount of accumulated depreciation is called the:

The difference between original acquisition cost and the amount of accumulated depreciation is called the: 

A. replacement value.

B. book value.

C. earnings multiple.

D. discounted cash flow.

Answer: B

____ analysis is based on the concept that the longer you have to wait to receive money, the less valuable it is right now.

____ analysis is based on the concept that the longer you have to wait to receive money, the less valuable it is right now. 

A. Discounted cash flow

B. Replacement value cash flow

C. Free cash flow

D. Book value cash flow



Answer: A