Ch. 14- kuratko quiz
T/F: Adjusted tangible book value is a popular method of valuation.
True
T/F: Entrepreneurs should try to be as objective as possible in determining the fair market value of their enterprise.
True
T/F: One of the most common reasons for acquiring a business is developing more growth-phase products.
True
In the context of buying a business, a known commodity may command a higher price for which of the following reasons?
avoiding start up costs has value
Which of the following does a post-money valuation include that a pre-money valuation does not?
venture capital investment
A business valuation is not usually essential when
when hiring a new director of operations
When considering sales and distribution, the entrepreneur should be concerned about
whether sales are made on consignment
When considering physical facilities, the entrepreneur should be concerned about
which facilities are owned verses leased
_____ refers to conducting a thorough analysis of every facet of an existing business.
due diligence
When calculating the total amount needed to buy a business venture, which of the following would not be included?
employee retention
_____ gives investors some protection against founders selling their interest to a third party.
A co-sale right
T/F: Vesting on founders' stock refers to holders of preferred stock having the right to purchase additional shares when issued by the company.
False
The adjusted tangible book value includes all of the following except
common price
Which of the following is the first step in the traditional pricing formula?
determine the adjusted tangible net worth
Potential earning power, which determines the true value of the firm, is best calculated using the _____ method.
discounted earnings
The price/earnings ratio is determined by
dividing the market price of commons stock by earnings per share
T/F: Knowing a venture's pre-money valuation is not possible.
false
Emotional bias is likely to have which of the following effects on a seller's valuation of a business?
increase the valuation
When considering employees, the entrepreneur should be concerned about
the total number of employees by function
T/F: Business valuation is essential when attempting to buy out a partner.
true
T/F: Buyers and sellers assign different values to a business.
true
T/F: Increasing market share by acquiring a firm in the company's industry is one reason for the acquisition.
true
T/F: Replacement value of a business is based upon the value of each asset if it had to be replaced at current cost.
true
T/F: The real value of any venture is its potential earning power.
true
Goodwill, family members on the payroll, and planned losses are examples of
hidden costs
Return on investment
is net profit divided by investment
Sales and earnings of a venture are projected from
historical financials
The primary advantage of the price/earnings approach to valuation is that it
is simple to use
Which of the following provides an absolute bottom line value of a firm?
liquidation value
When comparing and contrasting major competitors along core competitive dimensions, you should include
product, technology, and distribution
Some buyers are willing to pay more for a business than what valuation methods determine its worth to be to avoid
start-up costs
Goodwill, patents, deferred financing costs, and other intangible assets are considered when computing
the adjusted tangible book value
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
T/F: Avoiding start-up costs is a factor to consider when valuing a business.
true
T/F: "Why is the business being sold?" is not an important question to ask when analyzing the viability of buying a business.
false
Which of the following is a reason for buyers to keep projections in perspective?
fluctuating markets
If cash flow is deemed to be the most important consideration in buying a business, which of the following valuation methods is likely to be used?
discounted future earnings
T/F: An entrepreneur does not need to know how to calculate the value of a competitor's operation.
false
T/F: Emotional bias is not an underlying issue in valuing a business.
false
T/F: Insufficient controls are a strength for a small business and should be considered when the business is being valued.
false
T/F: The "timing" of projected income or cash flows is not a critical factor in establishing the value of a firm
false
T/F: The price/earnings ratio is determined by dividing the market price of common stock by retained earnings.
false
T/F: Weaknesses in small, closely held businesses do not call for careful analysis of the business being valued.
false
T/F: When a company is liquidated, preferred stockholders receive a certain fixed amount after assets are distributed to common stockholders.
false
Which of the following methods of valuation was developed by the U.S. Treasury to determine a firm's intangible assets?
market value
The price/earnings ratio is a method of valuation that is mostly used
with publicly held corporations
Which of the following is not an underlying issue when determining proper valuation of the venture set to be acquired?
The amount of risk involved in an acquisition
Many closely held ventures are undercapitalized, which often indicates
a high level of debt
Closely held ventures usually suffer from which of the following shortcomings?
a lack of management depth
The discounted earnings method of valuation establishes
a potential earning power
Which of the followings venture valuation methods is the most effective if the business being valued needs to generate a return greater than investment?
discounted future earning
How much revenue did Facebook raise with its initial public offering (IPO) in 2012?
$50 billion
When considering management, the entrepreneur should be concerned about
ownership positions
Which of the following hidden costs are involved when establishing the value of a firm?
personal expenses
T/F: Tangible assets as well as intangible assets of a business need to be assessed for proper venture evaluation.
true