Canadian Entrepreneurship and Small Business Management 10Th Edition By Wesley Balderson - Test Bank

Canadian Entrepreneurship and Small Business Management 10Th Edition By Wesley Balderson – Test Bank

 

Instant Download – Complete Test Bank With Answers

 

 

Sample Questions Are Posted Below

 

Chapter 05

Buying a Business and Franchising

 

 

Multiple Choice Questions

1. It is argued in the text that the most significant advantage of buying a business is:
   A.it has already been registered with the authorities.
   B. it has inventory.
   C. it has an established image and track record.
   D. to avoid being sued.

 

Difficulty: Easy
Learning Objective: 05-01 Describe the advantages and disadvantages of purchasing an ongoing business compared with the other methods of small business ownership.
Topic: 05-02 Advantages of Purchasing

2. According to the text, most businesses that are for sale:
   A.are only marginally successful.
   B. have valuable locations to transfer to a new owner.
   C. provide a steady base on which it can be expanded.
   D. have solid banking arrangements in place.

 

Difficulty: Easy
Learning Objective: 05-01 Describe the advantages and disadvantages of purchasing an ongoing business compared with the other methods of small business ownership.
Topic: 05-03 Disadvantages of Purchasing

3. Goodwill:
   A.is the process of extending credit to needy customers.
   B. measures the added value of a product.
   C. always exists so long as a business operates.
   D. is essentially a business’s favourable reputation.

 

Difficulty: Medium
Learning Objective: 05-01 Describe the advantages and disadvantages of purchasing an ongoing business compared with the other methods of small business ownership.
Topic: 05-03 Disadvantages of Purchasing

 

4. Common sources of businesses for sale include:
   A.supermarket ad boards.
   B. trade journals.
   C. yellow pages (hard copy or web-based).
   D. FAQ pages.

 

Difficulty: Easy
Learning Objective: 05-02 Identify the sources of businesses that are for sale.
Topic: 05-04 Sources of Businesses for Sale

5. If a business is not listed as being for sale:
   A.its privacy should be respected.
   B. then it won’t be for sale.
   C. it’s not worth investigating it.
   D. a prospective purchaser can ask the owner if they would be interested in selling.

 

Difficulty: Medium
Learning Objective: 05-02 Identify the sources of businesses that are for sale.
Topic: 05-04 Sources of Businesses for Sale

6. Government departments:
   A.are not likely to be aware of business for sale.
   B. are never connected with individual businesses.
   C. may be aware of businesses for sale.
   D. often act as brokers in connecting purchasers and sellers of businesses.

 

Difficulty: Medium
Learning Objective: 05-02 Identify the sources of businesses that are for sale.
Topic: 05-04 Sources of Businesses for Sale

7. Industry analysis may not be required if:
   A.a buyer has considerable experience in the industry.
   B. the cost to do so would be prohibitive.
   C. there is no information readily available.
   D. the industry is not dominated by one large business.

 

Difficulty: Medium
Learning Objective: 05-03 Explain how to evaluate a business that is for sale.
Topic: 05-06 Industry Analysis

 

8. When purchasing a business, non-liquid assets:
   A.should be considered not to have any value.
   B. should be subjected to an independent appraisal.
   C. should by ignored for business planning purposes.
   D. should be valued at 20% of total fixed assets.

 

Difficulty: Hard
Learning Objective: 05-03 Explain how to evaluate a business that is for sale.
Topic: 05-08 Financial Condition of the Business

9. Strong customer relations is usually an indicator:
   A.of a market with few competitors.
   B. of a high-demand product or service.
   C. of good management and employees.
   D. of low pricing.

 

Difficulty: Hard
Learning Objective: 05-03 Explain how to evaluate a business that is for sale.
Topic: 05-10 External Relationships–Suppliers And Customers

10. Market value is:
    A.the price where demand and supply meet.
    B. the lowest amount that a seller will accept in the market.
    C. the average of the three most recent sales transactions in an industry.
    D. the net realizable value of a business’s fixed assets.

 

Difficulty: Hard
Learning Objective: 05-04 Describe the methods used in determining the price to pay for a business.
Topic: 05-13 Market Value

11. The times earnings method is also called:
    A.productivity velocity method.
    B. return on investment accelerator.
    C. efficiency measure.
    D. price-earnings ratio.

 

Difficulty: Easy
Learning Objective: 05-04 Describe the methods used in determining the price to pay for a business.
Topic: 05-15 Earnings Value

 

12. An offer to purchase will most likely be made:
    A.to the seller’s CEO.
    B. by the buyer or through a realtor or lawyer.
    C. by the buyer’s banker on behalf of the buyer.
    D. anonymously (until accepted).

 

Difficulty: Hard
Learning Objective: 05-04 Describe the methods used in determining the price to pay for a business.
Topic: 05-17 The Purchase Transaction

13. One of the attractive benefits of being a franchisee is:
    A.future income is a high certainty.
    B. it can replace a lost job.
    C. there is no need to learn about an industry in depth.
    D. the total freedom of owning your own business.

 

Difficulty: Medium
Learning Objective: 05-05 Discuss the significance of franchising in the Canadian economy.
Topic: 05-19 History and Background of Franchising

14. According to research, traditional franchise businesses include:
    A.hotels.
    B. construction.
    C. retailing.
    D. soft drink companies.

 

Difficulty: Easy
Learning Objective: 05-05 Discuss the significance of franchising in the Canadian economy.
Topic: 05-19 History and Background of Franchising

15. The fastest growing sector in the Canadian economy is:
    A.the service sector.
    B. the professional sector.
    C. the manufacturing sector.
    D. the import/export sector.

 

Difficulty: Easy
Learning Objective: 05-05 Discuss the significance of franchising in the Canadian economy.
Topic: 05-19 History and Background of Franchising

 

16. Under a franchising arrangement:
    A.a franchisor owns an outlet.
    B. both the franchisor and the franchisee operate an outlet.
    C. a franchisee owns an outlet.
    D. a franchisee develops the best system for their outlet.

 

Difficulty: Easy
Learning Objective: 05-06 Explain the various types of franchises available for small business.
Topic: 05-20 What is Franchising?

17. ________ is a type of franchise.
    A.Manufacturer-retailer-directed
    B. Wholesaler-retailer-directed
    C. Retailer-service depot
    D. Service-retailer depot

 

Difficulty: Medium
Learning Objective: 05-06 Explain the various types of franchises available for small business.
Topic: 05-20 What is Franchising?

18. A franchise system can best be characterized as:
    A.a voluntary chain.
    B. a money-making machine.
    C. a business excellence strategy.
    D. an approach to market dominance.

 

Difficulty: Hard
Learning Objective: 05-06 Explain the various types of franchises available for small business.
Topic: 05-20 What is Franchising?

19. Established franchises can provide:
    A.guaranteed cash flow.
    B. franchisee success.
    C. instant brand recognition.
    D. healthy opportunities for franchisee creativity.

 

Difficulty: Hard
Learning Objective: 05-07 List the relative strengths and weaknesses of franchising as a method of starting a small business.
Topic: 05-21 Advantages of Franchising

 

20. Franchisee training is most likely to involve:
    A.Internet research.
    B. personal industry reading.
    C. competitor research.
    D. site visits.

 

Difficulty: Medium
Learning Objective: 05-07 List the relative strengths and weaknesses of franchising as a method of starting a small business.
Topic: 05-21 Advantages of Franchising

21. Potential franchisees will usually have to provide:
    A.the names of relatives who have succeeded in business.
    B. collateral.
    C. a current health certificate.
    D. their work history.

 

Difficulty: Easy
Learning Objective: 05-07 List the relative strengths and weaknesses of franchising as a method of starting a small business.
Topic: 05-23 Finding a Franchise

22. Which is not a common franchise agreement restriction?
    A.Product or service offered
    B. Line forcing
    C. Exaggeration of financial success
    D. Remodelling clauses

 

Difficulty: Medium
Learning Objective: 05-07 List the relative strengths and weaknesses of franchising as a method of starting a small business.
Topic: 05-22 Potential Disadvantages of Franchising

23. Which is not a potential disadvantage of franchising?
    A.Proven dispute resolution methods
    B. Saturation of the market
    C. Cost of the franchise
    D. Lack of security

 

Difficulty: Medium
Learning Objective: 05-07 List the relative strengths and weaknesses of franchising as a method of starting a small business.
Topic: 05-22 Potential Disadvantages of Franchising

 

24. A proven franchise offers:
    A.greater opportunity and more freedom.
    B. small market share and weaker competition.
    C. lower risk and higher financial investment.
    D. higher returns and reduced employee turnover.

 

Difficulty: Medium
Learning Objective: 05-08 Explain how to evaluate a franchise opportunity.
Topic: 05-24 Evaluation of a Franchise Opportunity

25. Of the following elements, a potential franchisor should be concerned most about:
    A.supply chains.
    B. renewal and termination terms.
    C. hours of business operation.
    D. future Canadian/US dollar exchange rates.

 

Difficulty: Hard
Learning Objective: 05-08 Explain how to evaluate a franchise opportunity.
Topic: 05-24 Evaluation of a Franchise Opportunity

26. Franchises with territorial protection:
    A.are the most desirable.
    B. are increasing in frequency.
    C. are generally not possible.
    D. are illegal due to non-competition laws.

 

Difficulty: Medium
Learning Objective: 05-08 Explain how to evaluate a franchise opportunity.
Topic: 05-24 Evaluation of a Franchise Opportunity

27. Becoming a franchisor:
    A.is a retirement strategy.
    B. is a way of reducing one’s management pressures.
    C. is inevitable in a successful business.
    D. is a form of entrepreneurship.

 

Difficulty: Medium
Learning Objective: 05-09 Discuss how to organize a franchising system.
Topic: 05-25 The Entrepreneur as Franchisor

 

28. Secret shoppers:
    A.refers to customers who pretend not to be interested in making a purchase.
    B. means asking someone else to make your purchase in their name.
    C. is a strategy used by some franchisors.
    D. are used by government agencies to detect tax fraud.

 

Difficulty: Hard
Learning Objective: 05-09 Discuss how to organize a franchising system.
Topic: 05-27 How Does One Become a Franchisor?

29. Converting existing chain outlets into franchises is called:
    A.mini-franchises.
    B. branchising.
    C. piggybacking.
    D. teamchising.

 

Difficulty: Medium
Learning Objective: 05-09 Discuss how to organize a franchising system.
Topic: 05-28 Franchising in the Future

30. Future growth of franchising will:
    A.reduce employment numbers.
    B. make competition more difficult for small businesses in certain industries.
    C. result in less competition.
    D. lead to more monopolies.

 

Difficulty: Hard
Learning Objective: 05-09 Discuss how to organize a franchising system.
Topic: 05-28 Franchising in the Future