Chapter 6 ent

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Which of the following costs do not add to the cost of franchising? a. insurance c. legal and professional fees b. prepaid utility bills d. opening product inventory

B

A franchise system can be used for handling a. goods. c. both of the above. b. services. d. none of the above.

C

Evaluating franchise opportunities include finding out more about which of the following? a. the franchisor c. the franchisee b. the franchise d. all of the above

D

Reviewing personnel of the business about to be purchased is important in order to determine a. whether employees with key skills will stay or leave. c. the cost of replacing an employee. b. if employees are leaving, will enough remain to operate the business. d. a, b, and c above

D

Starting a business by adapting something already on the market is called what approach? a. franchising c. new-new b. buying a new business d. new-old

D

Which franchise is not included in the top ten franchises? a. 7-eleven Inc. c. Pizza Hut b. Subway d. Jimmy John's

D

Which is not a start-up expense? a. Rent c. Supplies b. Advertising d. Depreciation

D

Business Brokers help entrepreneurs locate the funds necessary to start a business.

F

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

F

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

F

The term "risk vs. loss" refers to the amount of return for funds invested.

F

The way to approach a new business venture is to think up a good or service that is unique.

t

What is the largest source of new business ideas among men? a. Chance c. Hobby b. Prior job d. Education courses

B

Generally, the larger and more successful the franchisor, the greater the franchise fee that is charged.

T

The UFOC contains how many sections: a. 41 c. 9 b. 23 d. 100

B

The "right questions" the prospective small business owner should ask about a franchise deal with a. the franchisor. c. the market. b. the franchise. d. all of the above.

D

The advantages of franchising include: a. training and guidance. c. proven track record. b. brand-name appeal. d. all of the above.

D

The franchisee's responsibilities include: a. a financial investment. c. engaging in a continuous business relationship. b. payment of a fee. d. all of the above.

D

The franchisor's responsibilities include providing a. company name. c. management and training. b. symbols and logos. d. a, b, and c only.

D

The inventory should be examined for which of the following? a. Salability c. Is it up to date? b. Does a physical count correspond with the book count? d. All of the above.

D

The person who gets the franchise is usually required to do all of the following except: a. invest money in the operation. c. pay a fee. b. maintain a specified quality of performance. d. design a logo for the unit.

D

When buying a business, competition must be investigated because a. price competition may affect profits. c. competition may be spending more money on advertising than you. b. new competition may reduce market share. d. all of the above

D

When buying a small business you need to know all of the following items except: a. the owner's reason for selling. c. the financial picture of the business. b. the competition in the area. d. the owner's family stability and relationships.

D

Which is not a cost of franchising? a. Insurance c. Payroll b. Debt Service d. All are costs

D

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

T

Which of the following costs add to the cost of franchising? a. insurance c. legal and professional fees b. payroll d. all of the above

d

Have a seller retain a _____interest in the business. a. minority c. 20% b. majority d. 40%

A

The _____approach indicates the importance of people's awareness of their daily lives for developing new business ideas. a. new-new c. old-new b. old-old d. new-old

A

An advantage to buying an on-going business is a. reduced concern over future operations. c. it may be purchased at a bargain price. b. time and effort are reduced d. all of the above.

D

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

T

Coming up with a unique good or service is a _____approach, while adapting something that is currently on the market or extending the offering to an area where it is not presently available is a(n) _____approach. a. new-new, old-old c. new-new, new-old b. new-old, old-old d. new-old, old-new

C

Competitor factors in a buying decision do not include a. quality of the competition. c. age of the competition's owners. b. location of the competition. d. number of competitors.

C

Sales records are of very little value to a buyer in evaluating a company's worth.

F

The extra value a business can command in a sale is known as a. goodwill. c. market value. b. saleable value. d. asset value.

A

The individual who buys the franchise is the a. franchisee. c. franchisette. b. franchisor. d. franchatter.

A

The person who sells the franchise is usually required to do all of the following except: a. pay a fee. c. help out with financial assistance. b. provide professional management training to the unit's staff. d. provide continuing aid and a guidance to the person buying the franchise.

A

"Piggybacking" one's way into business involves using a ____approach. a. new-new c. new-old b. old-new d. old-old

C

After all of your investigation into a franchise, the final decision should be up to a. your lawyer. c. you. b. your financial backer. d. your accountant.

C

An analysis of the competition should look for ______. a. opportunitites. c. unscrupulous practices. b. weaknesses. d. None of the above

C

When this asset is purchased, the buyer should be sure to deduct those so old that they are deemed uncollectible. a. prepaid expenses c. accounts receivable b. inventory d. equipment

C

Which of the following is not a disadvantage of a major franchise? a. franchise fees c. track record of the franchisor b. control exercised by the franchisor d. awareness of some of the unfilled promises from franchisors

C

Who must negotiate the final deal? a. A lawyer c. The potential buyer b. A CPA d. All of the above

C

Which of the following is a question which can be sidestepped when buying a business? a. Where should the business be located? c. What pricing strategy should the firm use? b. What types of customers does this store attract? d. All can be sidestepped.

D

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 condtions. a. franchisee c. franchisor b. franchise d. franchiser

B

An agreement not to compete is also known as a. a trade restriction clause. c. a waiver of competition clause. b. a legal restraint of trade. d. a deferential sale of business clause.

B

The individual who arranges for a dealer to handle a specific product or service under certain mututally agreed upon conditions is known as the _____. a. franchisee c. franchiser b. franchisor d. franchisette

B

When one discusses upside gain and downside loss, one is talking about a. inventory turnover. c. asset pricing. b. risk versus reward. d. liquidation pricing

B

It is not uncommon for a buyer to be faced with a franchise fee of 250,000 to 1,000,000.

F

Much franchise litigation has arisen over termination of owners.

F

What is an often overlooked asset when acquiring a new business? a. Firm's records c. Equipment b. Buildings d. None of the above

A

Which of the following is an intangible asset? a. goodwill c. plant b. inventory d. machinery

A

In purchasing an existing business the first question should be: "Why are you selling?"

T

It is always important that you weigh the advantages vs. disadvantages in purchasing a franchise.

T

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.

T

The action plan covers 3 primary areas: the owner, the finances, and other vital factors.

T

What is the largest source of new business ideas among women? a. Prior job c. Education courses b. Hobby d. Chance

A

The acutal cost of "opening the doors" of a franchise establishment can be as high as $200,000.

T

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

T

The most important area to examine prior to purchasing a business is company profitability.

T

The term "upside gain and downside loss" refers to the profits the business can make and the losses it can suffer.

T

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

T

Business related reasons for selling may include all but which of the following? a. The owner may be in trouble with suppliers. c. Changes in zoning which affect the business. b. Changes in leasehold conditions. d. All of the above.

D

Business related reasons for selling do not include which of the following? a. The owner may be in trouble with suppliers. c. Changes in the product supply chain. b. Changes in leasehold conditions. d. Changes in zoning which affect the business.

C

Which of the following are trends creating business opportunities? a. green products c. health care b. alternative energy d. all of the above

D

When one designs a unique good or service, the individual is said to have used a(n) ____approach to starting the business. a. new-new c. old-new b. old-old d. new-old

A

Which is not a key question to ask when buying a business? a. Why is the business being sold? c. What is the condition of the inventory? b. Is the building heated with gas or electric? d. How many of the employees will remain?

B

A key question to ask when buying an on-going small business is which of the following? a. How old is the business? c. Can you become a millionare by buying this business? b. Where should you retire someday? d. How many personnel are going to remain?

D

Which of the following is not a key question a prospective buyer needs to ask in buying a business? a. Why is the owner selling? c. How many of the personnel will remain with the firm? b. What is the owner's personal net worth? d. What type of competition exists?

B

An advantage associated with franchising is a. training and guidance provided by the franchisor. c. track record of the other franchisees as proof of success b. brand-name appeal of the franchise d. all of the above

D


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