MGT 2550 Chapter 11.1 - Buying a Business S24

Question 1

Financial ratios should be relied on only to get a general perspective of the relative financial health of the business.

Accepted Answer

True

Question 2

The legal aspects of doing business are becoming complex and the use of a lawyer is practically a fact of business life.

Accepted Answer

True

Question 3

Application form for franchise is approved, franchisor will interview you to determine your suitability as a franchisee.

Accepted Answer

True

Question 4

Franchisees have minimal obligations and are never subject to inspection or supervision.

Accepted Answer

False

Question 5

It is generally conceded that the most important issue facing most family businesses is the question of succession.

Accepted Answer

True

Question 6

Franchising is based on mutual trust and a legal relationship between the two parties.

Accepted Answer

True

Question 7

Franchisors are not required by law in Ontario to provide prospective franchisees with a disclosure document.

Accepted Answer

False

Question 8

Poor union/management relationships is considered an advantage of business a business.

Accepted Answer

False

Question 9

Advantage of buying a new business is that equipment needed is available, its limitations & capabilities are known.

Accepted Answer

True

Question 10

Dun & Bradstreet is an organization that publishes information on acceptable financial ratios in particular industries.

Accepted Answer

True

Question 11

Brokers & commercial real estate agents work at bringing buyers and sellers together for a commission.

Accepted Answer

True

Question 12

MacDonald’s Restaurants is an example of an entire-business-format franchising.

Accepted Answer

True

Question 13

The most useful balance sheet method of evaluation is adjusted book value (ABV).

Accepted Answer

True

Question 14

About 80 percent of all family businesses report that they have a succession plan in place.

Accepted Answer

False

Question 15

Canada is one of the franchise capitals of the world, second only to the United States.

Accepted Answer

True

Question 16

Assessing and evaluating an existing firm does not require the assistance of lawyers and accountants.

Accepted Answer

False

Question 17

When purchasing an existing business it is advised that you replace key personnel with people loyal, and trust.

Accepted Answer

False

Question 18

Setting the purchase price for a going concern by evaluating the firm’s tangible net assets uses balance sheet methods

Accepted Answer

True

Question 19

Most franchisors expect the franchisee to put up 30-50% of the total franchise package cost as an initial investment.

Accepted Answer

True

Question 20

Assessing BS of the prospective, no need to determine actual/real value of the tangible assets, only intangible assets

Accepted Answer

False

Questions 20