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