MGT 241 Midterm Ch. 7 – Flashcards
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The way to approach a new business venture is to think up a good or service that is unique.
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True
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Uniqueness in a product or service can be demonstrated through a new-new approach or a new-old approach.
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True
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The sources of new business ideas among men and women are identical in type and proportion.
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False
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Sales records are of very little value to a buyer in evaluating a company's worth.
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False
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The actual cost of "opening the doors" of a franchise establishment can be more than $200,000.
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True
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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.
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True
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Generally, the larger and more successful the franchisor, the greater the franchise fee that is charged.
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True
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The prospective investor should get as much information as possible on the franchisor.
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True
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Franchisees have the option of using the logo and symbols of the franchisor.
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False
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The terms upside gain and downside loss refer to the profits the business can make and the losses it can suffer.
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True
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The term risk versus loss refers to the amount of return for funds invested.
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False
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Business brokers help entrepreneurs locate the funds necessary to start a business.
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False
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The elimination of time and effort associated with starting a company is an advantage of acquiring an ongoing venture.
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True
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In purchasing an existing business the first question should be: "Why are you selling?"
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True
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When purchasing an existing business, the prospective owner should conduct an assessment of the business's current group of employees.
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True
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The most important area to examine prior to purchasing a business is company profitability.
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True
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It is always important that you weigh advantages against disadvantages in purchasing a franchise.
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True
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It is not uncommon for a buyer to be faced with a franchise fee of $250,000 to $1,000,000.
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False
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Much franchise litigation has arisen over termination of owners.
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False
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The Federal Trade Commission does not provide information on franchise success.
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False
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In negotiating a deal to purchase an existing business, it is possible to request that the seller retain a minority interest in the firm.
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True
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The Franchise Disclosure Document (FDD) is a legally required disclosure document that must be presented to potential franchisees during presale discussions.
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True
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When one designs a unique good or service, the individual is said to have used a(n) ____approach to starting the business.
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new-new
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When one discusses upside gain and downside loss, one is talking about
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risk versus reward
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"Piggybacking" one's way into a new business involves using a ____approach.
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new-old
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Which of the following is not a key question a prospective buyer needs to ask in buying a business?
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What is the owner's personal net worth?
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Which of the following is an intangible asset?
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goodwill
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An advantage to buying an on-going business is
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all of the above.
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A key question to ask when buying an on-going small business is which of the following?
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How many personnel are going to remain?
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When buying a business, competition must be investigated because
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all of the above
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Which of the following is a question that can be sidestepped when buying a business?
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All can be sidestepped.
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Business-related reasons for selling may include all but which of the following?
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All of the above.
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An agreement not to compete is also known as
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a legal restraint of trade.
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Business-related reasons for selling do not include which of the following?
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Changes in the product supply chain.
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The inventory should be examined for which of the following?
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All of the above.
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An additional consideration to keep in mind when negotiating to purchase an existing business includes requesting that the seller retain __________ in the firm.
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a minority interest
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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.
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franchise
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The individual who buys the franchise is the
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franchisee.
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A franchise system can be used for handlingv
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both of the above.
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The person who gets the franchise is usually required to do all of the following except:
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design a logo for the unit.
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The franchisee's responsibilities include:
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all of the above.
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The advantages of franchising include:
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all of the above.
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The person who sells the franchise is usually required to do all of the following except:
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pay a fee.
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The "right questions" that a prospective owner should ask about a franchise deal with
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all of the above.
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Evaluating franchise opportunities include finding out more about which of the following?
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all of the above
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The FDD contains how many sections?
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23
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When should a potential franchisee receive the FDD (Franchise Disclosure Document)?
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at least ten days before signing a contract or paying any money
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Which of the following costs add to the cost of franchising?
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all of the above
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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.
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new-new, new-old
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Starting a business by adapting something already on the market is called __________.
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a new-old approach
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When buying a small business you need to know all of the following items except:
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the owner's family stability and relationships.
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Reviewing personnel of the business about to be purchased is important in order to determine
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all of the above
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When this asset is purchased, the buyer should be sure to deduct those that they are deemed uncollectible.
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accounts receivable
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Business-related reasons for selling may include all except:
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all of the above
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The extra value a business can command in a sale is known as
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goodwill
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Competitor factors in a buying decision do not include
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age of the competition's owners.
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The individual who arranges for a dealer to handle a specific product or service under certain mutually agreed upon conditions is known as the _____.
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franchisor
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The franchisor's responsibilities include providing
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all of the above
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Which of the following is not a disadvantage of a major franchise?
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track record of the franchisor
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Which of the following costs do not add to the cost of franchising?
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prepaid utility bills
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The final decision to purchase a franchise should be up to
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you.
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Which is not a start-up expense?
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Depreciation
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Which is not a key question to ask when buying a business?
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Is the building heated with gas or electricity?
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The _____ approach indicates the importance of people's awareness of their daily lives for developing new business ideas.
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new-new
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Which of the following is not currently cited as a trend creating business opportunities?
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breakfast cereals
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What is the largest source for new business ideas among men?
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Prior job
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What is the largest source of new business ideas among women?
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Prior job
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What is an often overlooked asset when acquiring a new business?
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Records
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An analysis of the competition should look for ______.
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unscrupulous practices.
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Who must negotiate a final deal to purchase a business?
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The potential buyer
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When is the buyer likely to have power over the seller in the negotiation to purchase a business?
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if the seller has already purchased another business
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When does a business have to increase its sales annually to net as much as it did in the previous year?
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when profits are not rising as fast as sales
