Small Business Management Chapter 6

pass off

type of business transfer where the owner gives the business to someone else without a payment.

Which of the following statements about buyouts are correct?

They are restricted to businesses that have a formal legal form of organization, including corporations, limited liability companies, and some partnerships. Partnerships and sole proprietorships do not exist separately from the owners and thus cannot be purchased. The assets of the business must be purchased and the liabilities assumed in a process called key resource acquisition or bulk asset sale.

revolving credit

allows borrowers to pay all or part of loan balance at any time

The three most commonly used methods to estimate a firm's assets' values

book value, net realizable value, and replacement value

four basic forms of franchising

trade name, product distribution, conversion, and business format franchising

discounted cash flows method

reduces the value of the business' cash flow because they will be received in the future

Bricolage

the process of analyzing the resources available and creating a product or service from them

Due diligence

the process of investigating a business to determine its value

earnings multiple

the ratio of the value of a firm to its annual revenues

Which of the following statements regarding the four basic forms of franchising are correct?

Conversion franchising provides the opportunity for independent businesses to combine resources. Product distribution franchising provides franchisees with specific brand named products to resell. Trade name franchising is an agreement that provides only the rights to use the franchisor's trade name and/or trademarks. Business format franchising includes trade names, products, operating methods, a marketing plan, and national advertising program.

minimum viable product

least version of the product that can be produced at a low cost and sold to customers in order to get feedback to improve upon the product

UFOC document

It is an important document created by the franchisor that explains the firm's operations, requirements, and costs of owning the franchise

methods used to determine value of a firm's assets

Replacement value. Book value. Net realizable value.

heuristic

a commonsense rule or a rule of thumb

strategic partnerships or alliances

formal or informal relationships with customers, vendors, or mentors to ensure the success of an entrepreneurial venture

Which of the following are likely to increase the success of a start-up business?

Make sure the business provides a product or service with a proven demand. Join a mentoring program, such as SCORE. Choose a business with high margins. Create and update a detailed start-up budget. Have a business partner who has complementary skills. Start the business in a business incubator.

lean business practices

These practices refer to methodically removing wastage of time, materials, and money throughout a business address the specifics of new business creation, particularly Internet-based businesses, where rapid experimentation and constant monitoring of viewers' choices are possible

Which of the following is a problem associated with using asset valuation methodologies?

They are time consuming as they involve identifying and estimating all assets of a business separately

effectual reasoning

a logical process in which one analyzes the resources available and restraints on the use of resources to create an attainable goal

net realizable value

amount for which an asset will sell, less the costs of selling

asset valuations

based on the postulation that the value of a business is the value of its resources and holdings minus the value of any obligations

book value

the difference between the original acquisition cost and the amount of accumulated depreciation

affordable loss

the minimum possible expenditure of capital and other resources in order to bring an entrepreneurial idea to market

Net income to equity is

determined by dividing income by the owners' equity.

causal reasoning

predicated reasoning

Leveraging contingencies

the practice of and ability to seize upon novel opportunities that become apparent during the conduct of business