BUS 402 QUIZ 2

Question 1 

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 

1. 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 

1. A corporation receives its authority to operate from:

  

 

the federal government.

 

 

the state.

 

 

the board of certification.

 

 

the stockholders.

2 points   

Question 4 

1. 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 

1. The most popular form of business ownership is the:

  

 

sole proprietorship.

 

 

partnership.

 

 

corporation.

 

 

S-corporation.

2 points   

Question 6 

1. 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 

1. 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 

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

  

 

FTC.

 

 

FDD.

 

 

UFOC.

 

 

FOC.

2 points   

Question 9 

1. 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 

1. 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 

1. 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 

1. 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 

1. 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 

1. 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 

1. 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 

1. 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 

1. 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 

1. 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 

1. 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 

1. 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.