True/False
Indicate whether the sentence or statement is true
or false.
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1.
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Before you buy a business, you should request a written list of all
supplies.
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2.
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While
entering a family business can give entrepreneurs a sense of pride and satisfaction, they usually do
not enjoy working with relatives.
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3.
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A
disadvantage of buying an existing business is that banks are less likely to lend to a new
owner.
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4.
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In
most family-owned businesses, the family members are able to keep business problems from affecting
their private lives.
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5.
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Many
entrepreneurs do not have enough money to purchase an existing business.
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6.
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A
business broker or a lawyer can help you determine a price to offer for an existing
business.
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7.
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The
start-up costs for a franchise include renting a facility and purchasing inventory.
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8.
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Equipment and supplies for a franchise can be purchased at a discount from the
franchisor because franchises are parts of large chains.
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9.
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In
evaluating a particular franchise, you should compare the initial costs of purchasing the franchise
with the cost of buying an existing business.
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10.
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Franchises must offer only certain products or services and must charge prices set by
the franchisor.
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11.
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More
than 500,000 people in the United States own franchises, and the number is growing.
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12.
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The
initial franchise fee, start-up costs, and royalty fees have to be paid only the first year of
operation.
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13.
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There
is less risk in starting your own business than in buying a business or franchise because there is
less money involved.
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14.
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Franchise owners have an established product or service and are not dependent on the
performance of other franchises in the chain.
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15.
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Both
a sole proprietorship and a partnership are simple to start and have low initial costs.
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16.
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The
difference between an S corporation and a regular corporation is that an S corporation is not taxed
as a business.
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17.
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The
board of directors of a corporation is responsible for deciding how much the corporation should pay
out in dividends.
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18.
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Ease
of raising money is the main reason entrepreneurs set up corporations.
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19.
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In a
corporation, one person is in control of all aspects of the business.
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20.
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A
partnership agreement identifies the salaries to be withdrawn by each partner.
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Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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21.
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An
advantage of buying an existing business is that a. | a large amount of capital is not
required | c. | it is
financially viable | b. | policies and procedures are already
established | d. | it has a
reputation with customers | | | | |
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22.
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When
buying a business, you should do all of the following except a. | have an
accountant write the sales contract | c. | determine how to finance the business | b. | analyze
financial reports for the past three years | d. | have an expert determine the value of the
business | | | | |
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23.
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Entrepreneurs who work for their family businesses a. | must be prepared
to compromise | c. | must enjoy
working with relatives | b. | cannot make all decisions
themselves | d. | all of
these | | | | |
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24.
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Operating costs of a franchise a. | are paid by the franchisor | c. | include a fee for advertising | b. | include a fee
for writing the franchise agreement | d. | are usually less than one thousand
dollars | | | | |
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25.
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Which
of the following is not a disadvantage of owning a franchise? a. | Some profits
must be returned to the franchisor as royalty fees | c. | Attracting customers is an
uncertainty | b. | Only certain products or services my be
offered | d. | A large amount
of initial capital is usually needed. | | | | |
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26.
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Before buying a franchise, you should a. | determine all
costs and royalty fees | c. | talk to a
business broker | b. | have an accountant examine the
agreement | d. | none of
these | | | | |
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27.
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When
starting your own business, an important consideration is a. | the
location | c. | what employees
to hire | b. | what product or service to
offer | d. | all of
these | | | | |
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28.
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There
is very little government regulation of businesses that are a. | sole
proprietorships or S corporations | c. | sole proprietorships or partnerships | b. | partnerships or
corporations | d. | partnerships or
S corporations | | | | |
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29.
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A
disadvantage of a partnership is that partners share a. | decision
making | c. | management
responsibilities | b. | losses | d. | profits | | | | |
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30.
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An
advantage of setting up as a corporation is the a. | distribution of profits | c. | taxation benefits | b. | ability to raise
capital | d. | ease of
establishment | | | | |
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Essay
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31.
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Explain why having prior records of revenues, expenses, and profits is an advantage of
buying an existing business.
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32.
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Why
is it important to analyze accounting records for past years before purchasing a
business?
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33.
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Describe these two operating costs of a franchise.
A. Royalty
fees:
B. Advertising
Fees:
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34.
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What
are the advantages and disadvantages of a sole proprietorship?
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35.
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What
role does the board of directors play in a corporation?
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