MNGT 321 - Chapter 7

The terms upside gain and downside loss refer to the profits the business can make and the losses it can suffer.

True

A key question to ask when buying an on-going small business is which of the following?

How many personnel are going to remain?

In negotiating a deal to purchase an existing business, it is possible to request that the seller retain a minority interest in the firm.

True

Perhaps the greatest advantage of buying a franchise, as compared to starting a new business or buying an existing one, is that the franchisor will usually provide both training and guidance to the franchisee.

True

When one designs a unique good or service, the individual is said to have used a(n) ____approach to starting the business.

new - new

An advantage to buying an ongoing business is

reduced concern over future operations, time and effort are reduced, it may be purchased at a bargain price

The inventory should be examined for which of the following?

salability, correspondence between the physical count and the book count, and up-to-datedness

who must negotiate a final deal to purchase a business?

the potential buyer

The advantages of franchising include:

training and guidance, brand-name appeal, proven track record

The elimination of time and effort associated with starting a company is an advantage of acquiring an ongoing venture.

true

The prospective investor should get as much information as possible on the franchisor.

true

Which of the following is not a key question a prospective buyer needs to ask in buying a business?

what is the owner's personal net worth?

The Franchise Disclosure Document (FDD) is a legally required disclosure document that must be presented to potential franchisees during presale discussions.

True

The person who sells the franchise is usually required to do all of the following except:

pay a fee

The Federal Trade Commission does not provide information on franchise success.

False

Which is not a key question to ask when buying a business?

Is the building heated with gas or electricity?

Uniqueness in a product or service can be demonstrated through a new-new approach or a new-old approach.

True

When purchasing an existing business, the prospective owner should conduct an assessment of the business's current group of employees.

True

Franchisees have the option of using the logo and symbols of the franchisor.

false

A ____ is a system of distribution that enables a supplier to arrange for a dealer to handle a specific product or service under certain mutually agreed upon conditions

franchise

The individual who buys the franchise is the

franchisee

Which of the following is an intangible asset?

goodwill

When should a potential franchisee receive the FDD (Franchise Disclosure Document)?

at least ten days before signing a contract or paying any money

An agreement not to compete is also known as

a legal restraint of trade.

An additional consideration to keep in mind when negotiating to purchase an existing business includes requesting that the seller retain __________ in the firm

a minority interest