Chapter 5: Business Formation Quiz

What is one method of starting a business?

• Investing in stocks

• Taking a loan

• Starting from scratch

• Hiring a consultant

What is a key advantage of starting a business from scratch?

• Existing customer base

• Ability to choose the business form

• Immediate cash flow

• Lower initial investment

What does due diligence involve when buying an existing business?

• Setting up a marketing strategy

• Creating a business plan

• Reviewing all available information

• Hiring new employees

What is a family business succession?

• Buying a franchise

• Starting a new business

• Investing in a startup

• Taking over a business from predecessors

What is a franchise?

• A type of investment

• A non-profit organization

• A product and/or service distribution system governed by a contract

• A government-owned business

Who is the franchisor?

• The supplier of the franchise products

• The business that sells the right to operate the franchise

• The person who operates the franchise

• The customer of the franchise

What is one of the franchise payments?

• Insurance costs

• Employee salaries

• Franchise fee

• Startup capital

What is a disadvantage of starting a business from scratch?

• Immediate brand recognition

• Substantial effort to acquire knowledge and skills

• Existing customer loyalty

• Lower risk of failure

What is a potential benefit of buying an existing business?

• Complete control over the business model

• Immediate cash flow and customer base

• Lower operational costs

• No need for due diligence

What is one reason entrepreneurs might choose to acquire a franchise?

• To avoid all startup costs

• To have complete creative freedom

• To operate without any contracts

• To have a proven business model