The corporate form of ownership has a significant advantage in that:

Question 1

The corporate form of ownership has a significant advantage in that:

it is easy to transfer ownership.

it has a lower tax rate than either partnerships or sole proprietorships.

there is little cost to its formation.

there is little regulatory oversight by the government.

2 points

Question 2

Probably the most important feature of a partnership agreement is:

that it identifies the name of the partnership.

that it states the purpose and location of the business.

that it determines how the partnership will pay taxes and fees.

that it resolves potential sources of conflict.

2 points

Question 3

A corporation receives its authority to operate from:

the federal government.

the state.

the board of certification.

the stockholders.

2 points

Question 4

The ________ is the most complex form of ownership and is a separate legal entity in the eyes of the law.

sole proprietorship

partnership

corporation

joint venture

2 points

Question 5

The most popular form of business ownership is the:

sole proprietorship.

partnership.

corporation.

S-corporation.

2 points

Question 6

The franchiser has the right to cancel a contract if a franchisee:

declares a bankruptcy.

fails to make required payments on time.

fails to maintain quality standards.

All of the above

2 points

Question 7

A significant advantage a franchisee has over the independent small business owner is participation in the franchiser's ________.

centralized and large-volume buying power

social gatherings

profits

policies

2 points

Question 8

The document that governs the relationship between a franchisor and the franchise is the:

FTC.

FDD.

UFOC.

FOC.

2 points

Question 9

Despite all the benefits, there are a number of disadvantages to franchises, such as:

the time consumed by the management training and support the franchiser provides.

the cost of national advertising.

strict adherence to standardized operations.

territory limitations.

2 points

Question 10

Typically, the franchiser controls are very tight on what the franchisee:

does in terms of who they hire as employees.

sets in terms of retail pricing and hours of operation.

does with his/her net profits after fees and taxes are paid.

sells in terms of the product or service they offer.

2 points

Question 11

The ________ approach to valuing a business uses the price-earnings ratios of similar businesses to establish the value of a company.

balance sheet

capitalized earnings

discounted future earnings

market

2 points

Question 12

The capitalized earnings approach determines the value of a business by capitalizing its expected profits using:

the rate of return reflecting the risk level.

the prime interest rate.

the normal rate of return.

the prevailing rate of inflation.

2 points

Question 13

Normally, when buying a business, the seller:

does not sign a restrictive covenant.

notifies creditors 10 days prior to the sale of the business.

cannot assign his credit arrangements with suppliers to the buyer.

has little formal role or obligation in preparing documents and information necessary to the sale.

2 points

Question 14

The ________ approach to valuing a business assumes that a dollar earned in the future is worth less than that same dollar is today.

balance sheet

capitalized earnings

excess earnings

discounted future earnings

2 points

Question 15

To avoid a bumpy transition, a business buyer should do the following:

concentrate on communicating with employees.

be honest with employees.

devote time to selling your vision for the company to its key stakeholders.

All of the above

2 points

Question 16

Which of the following statements is true?

The useful life of the financed asset must be less than the maturity of the loan.

An entrepreneur should try to camouflage any weaknesses in the small business.

Projected financial statements should prove the company's ability to repay the loan.

Officers' personal assets that can be used as collateral must be included in the financial statement.

2 points

Question 17

The phrase, "avoid the off-the-shelf, 'cookie-cutter' approach that produces look-alike plans" means:

avoiding a business plan that looks ordinary.

that every business plan is unique.

the business plan should reflect the excitement of the entrepreneur.

All of the above

2 points

Question 18

The process of testing the business model on a small scale before committing serious resources to launch a business that might not work is called:

benchmarking.

business prototyping.

scaling.

lean modeling.

2 points

Question 19

The primary purpose of building a business plan is to:

raise capital.

attract potential employees.

provide direction, to create a "target" to shoot for.

meet SEC requirements designed to protect lenders and investors.

2 points

Question 20

Business plans need to pass three tests:

the financial test, the market test, and the management test.

the appearance test, the substance test, and the concept test.

the reality test, the competitive test, and the value test.

the presentation test, the content test, and the application test.