Entrepreneurship Final Chapter 14

Closely held ventures usually suffer from which shortcomings

A lack of management depth

Buying of a business, a known commodity may command a higher price for what reason?

Avoiding start-up costs has value

Book value of a firm is also known as

Balance sheet method

When is the size of a labor force in Africa expected to top that of China

By 2040

If cash flow is deemed the most important consideration in buying a business, which valuation method is likely to be used

Discounted earnings

The price/earnings ratio is determined by

Dividing market price of common stocks by earning s per share

____ refers to conducting a thorough analysis of every facet of an existing business

Due diligence

Goodwill, family members on the payroll, and planned losses are examples of

Establishing the value of a firm

Methods of valuation was developed by the U.S. Treasury to determine a firm's intangible assets?

Excess earnings

1 reason to keep projections in perspective

Fluctuating markets

An adjusted tangible book value method includes

Goodwill and patents

Not a shortcoming that many closely held ventures possess

High equity and low debt

Traditional valuation methods includes all of the following EXCEPT

High equity/low debt

Sales and earnings of a venture are projected from

Historical financials

Return on Investment

Is net profit/investment

Primary advantage of the price/earnings approach to valuation is that

It is simple to use

When Facebook went public in May of 2012, what is the starting value

More than 100 billion but less than 150 billion

Price/earnings ratio is a method of valuation that is

Most common with public corporations

Besides the purchase price, what else should be considered when buying a business?

New inventory and living expenses, 3 months operating expenses and sales tax

Considering management, the entrepreneur should be concerned about

Ownership positions

What hidden costs are involved when establishing the value of a firm?

Personal expenses

Discounted earnings method of valuation establishes

Potential earning power

Specific factors of a venture being offered for a sale that should be examined include

Profits, sales, and operating ratios

Considered methods for valuation of a venture

Return on investment and stock market method

Some buyers are willing to pay more for a business than what valuation methods determine its worth to be. What are the buyers avoiding

Start-up costs

What is a rollup?

The acquisition and merging of small companies in the same market

Potential earning power, which determines the true value of the firm, is best calculated using

The discounted earnings method

A drawback to the price/earnings ratio method is that

The stated net income of a private company may not truly reflect its actual earning power

When considering employees, the entrepreneur should be concerned about

Total number of employees by function

What does a post-money valuation include that a pre-money valuation does not

Venture capital investment

What occasion is a business valuation NOT usually essential?

When hiring a new director of operations

When considering sales and distribution, the entrepreneur should be concerned about

Whether any sales are made on consignment

When considering physical facilities, the entrepreneur should be concerned about

Which facilities are owned versus leased

Emotional bias is likely to have what effect on a seller's valuation of a business

Increase the valuation