Ch 4 Review Questions

There is very little government regulation for businesses that are

b. sole proprietorships or partnerships

A disadvantage of setting up as a corporation is the

d. limited liability

An advantage of a partnership is that partners share

b. decision-making

Entrepreneurs who work for their family businesses

b. must be prepared to compromise

There is less risk in starting your own business than in buying a business or franchise because there is less money involved.

false

Liability is the main reason entrepreneurs set up corporations.

true

There is limited liability for businesses that are

b. partnerships or corporations

An advantage of buying an existing business is that

c. policies and procedures are already established

A disadvantage of buying an existing business is that

c. problems may be inherited

Operating costs of a franchise a. are paid by the franchisee b. include a fee for the right to run the franchise c. include a fee for advertising d. all of these

d. all of these

Entrepreneurs who work for their family businesses a. must be prepared to compromise b. cannot make all decisions themselves c. enjoy working with relatives d.all

d.all

When starting your own business, an important consideration is a. the location b. what product or service to offer c. what employees to hire d. all of these

d.all of these

A partnership agreement identifies the salaries to be withdrawn by each partner.

true

Although start-up costs are only incurred when you open a franchise business, you will have to pay royalty fees every year of operation.

true

An accountant or a valuator can help you determine a price to offer for an existing business.

true

An advantage of buying an existing business is that banks are more likely to lend to an established business.

true

Before you buy a business, you should request a written list of all suppliers.

true

Entering a family business can give entrepreneurs a sense of pride and satisfaction in carrying on traditions.

true

Equipment and supplies for a franchise can be purchased at a discount from the franchisor because franchises are parts of large chains.

true

Franchisees must offer only certain products or services and must charge prices set by the franchisor.

true

In a partnership, all the partners are legally liable for the errors of one partner.

true

In a sole proprietorship, one person is in control of all aspects of the business.

true

Many entrepreneurs do not have enough money to purchase an existing business.

true

The board of directors of a corporation is responsible for deciding how much the corporation should pay out in dividends.

true

The difference between an S corporation and a regular corporation is that an S corporation is not taxed as a business.

true

The separation between business life and private life is not clearcut in family-owned businesses.

true

The start-up costs for a franchise include renting a facility and purchasing inventory.

true

There is more risk in starting your own business than in joining a family business or buying a business or franchise because there is more uncertainty.

true

While entering a family business can give entrepreneurs a sense of pride and satisfaction, they usually do not enjoy working with relatives.

true

A disadvantage of buying an existing business is that banks are less likely to lend to a new owner.

false

An advantage of setting up as a corporation is the

a. ability to raise capital

When buying a business, you should do all of the following except

a. have an accountant write the sales contract

Demand for your product or service is an important consideration when

a. starting your own business

A disadvantage of buying an existing business is that it may not have complete financial records.

false

Before you buy a business, you should analyze the last five year's financial accounts of the business.

false

In a corporation, one person is in control of all aspects of the business.

false

In most family-owned businesses, the family members are able to keep business problems from affecting their private lives.

false

The initial franchise fee, start-up costs, and royalty fees only have to be paid the first year of operation.

false