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WorksheetsENTR Ch 1-3 Review
Total questions: 60
Worksheet time: 45mins
Name
Class
Date
1.
Based on the idea of cost and benefits, which of the following activities is most beneficial?
a)
A) Playing video games
b)
B) Watching a PBS special about nature
c)
C) Seeing a speaker you admire and want to mentor you
d)
D) Going to a movie with your favorite actor/actress
e)
E) Hanging out with friends
2.
Which of the following could be considered an acquisition?
a)
A) Inheriting your father's business
b)
B) Building a new restaurant
c)
C) Inventing a new product and selling it
d)
D) Starting a recycling business
e)
E) Buying a business from a retiring owner
3.
Which is not part of Schumpeter's definition regarding the ways that entrepreneurs find opportunities to create new businesses?
a)
A) Use a new technology to produce a new product
b)
B) Use an existing technology to produce a new product
c)
C) Use an existing technology to produce an old product in a new way
d)
D) Find a new source of resources
e)
E) Find a new market for a new product
4.
Which of the following could not be considered opportunity costs?
a)
A) Time
b)
B) Energy
c)
C) Money
d)
D) Entertainment
e)
E) All of the above can be considered opportunity costs.
5.
A ________ is a legal and commercial relationship between the owner of a trademark, service mark, trade name or advertising symbol and an individual or group seeking to use that identification in a business.
a)
A) Franchise
b)
B) License
c)
C) Acquisition
d)
D) Merger
e)
E) Opportunity
6.
Which of the following is not an economic question listed in the text?
a)
A) What should be produced?
b)
B) How much will it cost to be produced?
c)
C) When will it be produced?
d)
D) Who will produce it?
e)
E) Who gets to have what is produced?
7.
Which of the following is not a way to identify business opportunity as discussed in the text?
a)
A) Exploiting changes in the world
b)
B) Seeing opportunity where others see problems
c)
C) Training your mind to recognize opportunity
d)
D) Using your imagination
e)
E) Seeing what is wrong, but not a way to fix it
8.
According to the text, which of the following is not a cost of becoming an entrepreneur?
a)
A) Contribution to society
b)
B) Business failure
c)
C) Obstacles
d)
D) Loneliness
e)
E) Long Hours
9.
A savvy entrepreneur should not ________.
a)
A) Rely mainly on making mistakes for themselves and learning from them
b)
B) Learn from the mistakes of others
c)
C) Appreciate the wisdom and experience of trusted advisors and mentors
d)
D) Carefully plan and prepare to avoid mistakes
e)
E) All of the above
10.
According to the text, which of the following is not a benefit of becoming an entrepreneur?
a)
A) Independence
b)
B) Fame
c)
C) Satisfaction
d)
D) Financial reward
e)
E) Self-esteem
11.
Every business idea is an opportunity.
a)
Answer: FALSE
b)
Page Ref: 17
c)
Learning Obj.: LO 3
d)
AACSB: Reflective thinking
12.
Franchises are governed by ________ laws and regulations.
a)
A) State and federal
b)
B) State
c)
C) Federal
d)
D) International
e)
E) Federal and international
13.
Many fees are must be paid regardless of ________.
a)
A) Profitability
b)
B) Cash flow
c)
C) Sales
d)
D) Both A and B
e)
E) A, B, and C
14.
Franchise operating guidelines ________.
a)
A) Vary considerably
b)
B) Are constant
c)
C) Are always well defined
d)
D) Never change
e)
E) All of the above
15.
All of the following are a new type of franchising opportunity except ________.
a)
A) Internet franchises
b)
B) Conversion franchises
c)
C) Co-branding franchises
d)
D) Piggybacking franchises
e)
E) Leapfrogging franchises
16.
Which of the following is not an ongoing cost of franchises?
a)
A) Start-up fees
b)
B) Royalties
c)
C) Top-line revenues
d)
D) Cooperative advertising fees
e)
E) All of the above are ongoing costs.
17.
The franchisor cannot require the individual franchisee to adhere to a ________.
a)
A) Pricing structure
b)
B) Advertising agreement
c)
C) Supplier agreement
d)
D) Operating structure
e)
E) Product line
18.
Start-up standards required of franchisees may include which of the following?
a)
A) Specific types of experience and skills
b)
B) Net worth requirements
c)
C) Liquidity requirements
d)
D) All of the above
e)
E) None of the above
19.
Which of the following is not a type of franchising according to the text?
a)
A) Product and trade-name franchising
b)
B) Business-format franchising
c)
C) Inclusive franchising
d)
D) All of the above are types of franchising.
e)
E) None of the above is a type of franchising.
20.
The most significant advantage of a franchise is the increased probability of ________, given that franchise brands have positive track records and instant recognition in most communities.
a)
A) Success
b)
B) Failure
c)
C) Popularity
d)
D) Optimism
e)
E) Regret
21.
Performing due diligence may include ________.
a)
A) Fully understanding the FDD of the franchise company
b)
B) Calling on existing franchisees
c)
C) Visiting the franchise headquarters
d)
D) Doing Internet research
e)
E) All of the above
22.
Products and services in a franchise may not be altered, added, or dropped without ________.
a)
A) Franchisor agreement
b)
B) Termination of the franchise
c)
C) Penalty
d)
D) Legal action
e)
E) An act of God
23.
The term "FDD" stands for which of the following?
a)
A) Franchise Disclosure Document
b)
B) Franchisee Disclosure Document
c)
C) Franchisor Disclosure Document
d)
D) Federal Disclosure Document
e)
E) None of the above
24.
In many instances, products or ingredients in a franchise must be purchased from ________.
a)
A) The franchisor
b)
B) Designated suppliers
c)
C) Any suppliers
d)
D) Both A and B
e)
E) All of the above
25.
Which of the following aspects would the franchisor control in a business-format franchising situation?
a)
A) Accounting
b)
B) Marketing
c)
C) Operations
d)
D) Quality assurance
e)
E) All of the above
26.
Franchisors are focused on creating wealth for ________.
a)
A) Themselves
b)
B) Friends
c)
C) Franchisees
d)
D) The community
e)
E) Employees
27.
All of the following are selected franchise fees and costs according to the text, except ________.
a)
A) Training
b)
B) Advertising and promotion
c)
C) Fixtures
d)
D) Initial inventory
e)
E) Local publicity campaigns
28.
The franchisor is the second party to the franchise agreement and is the owner of the unit or territory rights.
a)
true
b)
false
29.
Sound franchisors provide a significant quantity and excellent quality of start-up assistance to new franchisees, as well as ongoing education and support for established ones.
a)
true
b)
false
30.
As a franchisee you will benefit from the purchasing power of the franchisor to get lower costs and improved vendor service.
a)
true
b)
false
31.
If you are looking to start a business that is creative and is not controlled by others, then franchising is your best option.
a)
true
b)
false
32.
Product and trade-name franchising is the licensing of the product or the production of the product and the use of the trademark, logo, or other identity of the franchise.
a)
true
b)
false
33.
A franchise is a business that markets a product or service developed by a franchisor, typically in the manner specified by the franchisor.
a)
true
b)
false
34.
The start-up and ongoing assistance provided by a franchisor guarantees your success.
a)
true
b)
false
35.
The most significant advantage for a franchisee is the increased probability of success.
a)
true
b)
false
36.
With a family business, much like the acquisition of any going concern, there is a chance to build upon its ________ and to turn around ________ aspects.
a)
A) Strengths, problematic
b)
B) Strengths, awkward
c)
C) Gifts, problematic
d)
D) Strengths, tricky
e)
E) None of the above
37.
Due diligence can be defined as ________.
a)
A) The exercise of reasonable care in the evaluation of a business opportunity
b)
B) The exercise of sensible care in the evaluation of a business opportunity
c)
C) The exercise of rational care in the evaluation of a business opportunity
d)
D) The exercise of judicious care in the evaluation of a business opportunity
e)
E) The exercise of equitable care in the evaluation of a business opportunity
38.
A legal document enumerating the type of information that is to remain confidential is called a ________.
a)
A) Nondisclosure agreement
b)
B) Disclosure agreement
c)
C) Nondisclosure letter
d)
D) Noncompete agreement
e)
E) None of the above
39.
Cash flow valuation uses projected future cash flows and the ________ to arrive at a figure.
a)
A) Time value of money
b)
B) Nominal value of money
c)
C) Value of investment
d)
D) Future customer demand
e)
E) All of the above
40.
________ is/are a source for leads regarding businesses for sale.
a)
A) Your current employer
b)
B) Customers
c)
C) Suppliers
d)
D) Competitors
e)
E) All of the above
41.
Discovery of potential problems when buying a business is the responsibility of the ________.
a)
A) Buyer
b)
B) Seller
c)
C) Legal authorities
d)
D) Employees
e)
E) Customers
42.
In a whole business sale, the buyer acquires ________ of the company, known or unknown.
a)
A) All assets and liabilities
b)
B) Only the assets
c)
C) None of the liabilities
d)
D) The building
e)
E) The customers
43.
Records of information that a buyer should request and review during due diligence include all of the following except ________.
a)
A) Tax returns for the previous three to five years
b)
B) Bank deposit tickets for the past two years
c)
C) Employee records and turnover history for five years
d)
D) Supplier lists and references
e)
E) Personal correspondence
44.
A common undisclosed reason to sell a business is not ________.
a)
A) Lack of sufficient cash flow
b)
B) Unprofitability
c)
C) Entrance of new competitors
d)
D) Pending or active litigation
e)
E) Wanting to retire
45.
Two primary risks start-ups face are ________.
a)
A) Not finding a sufficient supplier and not being able to operate profitably
b)
B) Not finding a sufficient market and not being able to operate profitably
c)
C) Not finding a sufficient market and not being able to do accounting profitably
d)
D) Not finding sufficient advertising opportunities and not being able to operate profitably
e)
E) Not finding a sufficient market and not being able to price profitably
46.
Becoming a successful entrepreneur is a process that can be ________ and ________ by purchasing an operating business.
a)
A) Simplified, accelerated
b)
B) Simplified, stunted
c)
C) Complicated, accelerated
d)
D) Convoluted, accelerated
e)
E) Simplified, enhanced
47.
Buying a successful business can help an entrepreneur in all of the following ways except ________.
a)
A) Reducing risk
b)
B) Issues of location
c)
C) Customer development
d)
D) Product or service delivery
e)
E) All of the above are helpful.
48.
As the buyer in a negotiation, you are working to do all of the following except ________.
a)
A) Secure the best price
b)
B) Reduce your initial investment capital costs
c)
C) Maximize returns
d)
D) Give the buyer the most you can afford
e)
E) None of the above
49.
Typically, you will have to secure more capital to buy a business than to start one up because you are paying for the ________.
a)
A) Established customer base
b)
B) Supplier relationships
c)
C) Skilled employees
d)
D) All of the above
e)
E) None of the above
50.
Which of the following may not be an undisclosed issue when buying a business?
a)
A) The current owner is in poor health.
b)
B) Dissatisfied customers
c)
C) Failure to keep up with market trends
d)
D) Patents are no longer valid.
e)
E) Equipment is obsolete.
51.
Business ________ buy and sell businesses for a fee, in essence serving as a matchmaker.
a)
A) Brokers
b)
B) Agents
c)
C) Contacts
d)
D) Managers
e)
E) Consultants
52.
A firm that has two or more members of the same family managing and/or working in it and that is owned and operated for the benefit of that family's members is called a ________.
a)
A) Family business
b)
B) Mob business
c)
C) Domestic business
d)
D) Household business
e)
E) None of the above
53.
Which of the following can jump start the ownership process?
a)
A) Buying a business you already understand
b)
B) Starting in a new industry
c)
C) Not understanding the business
d)
D) Experiencing a business for the first time
e)
E) All of the above
54.
Buying into a business over time is an option that may permit a current owner to separate from a company over time, receive a stream of payments, and support customer loyalty.
a)
true
b)
false
55.
Sellers may be hesitant to disclose too much information to potential buyers.
a)
true
b)
false
56.
Liquidation value is a determination of the net cash that could be obtained through disposing of assets via a quick sale, with liabilities either paid off or negotiated away.
a)
true
b)
false
57.
You must consider the fit of the business you are buying to your personal habits and interests.
a)
true
b)
false
58.
Although buying a business has many advantages that may translate into market benefits, you will also take over its challenges and problems.
a)
true
b)
false
59.
The offer price and the maximum amount you are willing to pay should encompass all of the financial factors you have identified.
a)
true
b)
false
60.
Employees are not a particularly valuable part of an acquisition.
a)
true
b)
false
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