25) ________ is not a sign of potential problems when practicing due diligence.
A) Inconsistent information
B) Refusal to provide contact names
C) Hesitancy to open up to questions
D) Conflicting information
E) Accurate information
Learning Obj.: LO 1
AACSB: Analytical thinking
26) Business ________ buy and sell businesses for a fee, in essence serving as a matchmaker.
A) Brokers
B) Agents
C) Contacts
D) Managers
E) Consultants
Learning Obj.: LO 3
AACSB: Analytical thinking
27) Today, a quick scan of the Internet for information on the company and/or owner can provide
ready access to information such as ________.
A) Customer satisfaction
B) Press coverage
C) Legal issues
D) Customer dissatisfaction
E) All of the above
Learning Obj.: LO 3
AACSB: Analytical thinking
28) The most common standards for asset valuation do not include which of the following?
A) Book value
B) Adjusted book value
C) Liquidation value
D) Adjusted liquidation value
E) Replacement value
Learning Obj.: LO 4
AACSB: Application of knowledge
7
29) A firm that has two or more members of the same family managing and/or working in it and
that is owned and operated for the benefit of that family’s members is called a ________.
A) Family business
B) Mob business
C) Domestic business
D) Household business
E) None of the above
Learning Obj.: LO 6
AACSB: Analytical thinking
30) Which of the following can jump start the ownership process?
A) Buying a business you already understand
B) Starting in a new industry
C) Not understanding the business
D) Experiencing a business for the first time
E) All of the above
Learning Obj.: LO 1
AACSB: Analytical thinking
31) Difficulty in finding and retaining necessary staff is a common undisclosed reason to sell a
business.
Learning Obj.: LO 3
AACSB: Analytical thinking
32) It is difficult to fall in love with the idea of owning a business and overlook the pitfalls and
problems.
Learning Obj.: LO 3
AACSB: Reflective thinking
33) Buying into a business over time is an option that may permit a current owner to separate
from a company over time, receive a stream of payments, and support customer loyalty.
Learning Obj.: LO 5
AACSB: Analytical thinking
8
34) An overly eager seller, or a price that sounds too good to be true, is never a sign that the
opportunity actually is too good to be true.
Learning Obj.: LO 1
AACSB: Reflective thinking
35) Sellers may be hesitant to disclose too much information to potential buyers.
Learning Obj.: LO 3
AACSB: Analytical thinking
36) Becoming a successful entrepreneur is a process that can be simplified and accelerated by
purchasing an operating business.
Learning Obj.: LO 1
AACSB: Analytical thinking
37) Approximately 50,000 businesses change ownership each year.
Learning Obj.: LO 1
AACSB: Application of knowledge
38) Liquidation value is a determination of the net cash that could be obtained through disposing
of assets via a quick sale, with liabilities either paid off or negotiated away.
Learning Obj.: LO 4
AACSB: Application of knowledge
39) You must consider the fit of the business you are buying to your personal habits and interests.
Learning Obj.: LO 2
AACSB: Reflective thinking
40) With a family business, much like the acquisition of any going concern, there is a chance to
build upon its strengths and to turn around problematic aspects.
Learning Obj.: LO 6
AACSB: Reflective thinking
41) Friends and family are not viable sources for leads on existing businesses that might be for
9
sale.
Learning Obj.: LO 3
AACSB: Analytical thinking
42) Although buying a business has many advantages that may translate into market benefits,
you will also take over its challenges and problems.
Learning Obj.: LO 2
AACSB: Reflective thinking
43) The offer price and the maximum amount you are willing to pay should encompass all of the
financial factors you have identified.
Learning Obj.: LO 4
AACSB: Analytical thinking
44) No matter what the price, in negotiation you must always close the deal with the purchase of
your targeted business.
Learning Obj.: LO 5
AACSB: Reflective thinking
45) Employees are not a particularly valuable part of an acquisition.
Learning Obj.: LO 1
AACSB: Analytical thinking
46) What methods discussed in the text would you use in finding leads on existing businesses?
Which methods would work the best? Why?
Learning Obj.: LO 3
AACSB: Analytical thinking
10
47) Discuss some of the potential pitfalls of buying an existing business that might be
detrimental to your business idea.
Learning Obj.: LO 2
AACSB: Analytical thinking
48) What method(s) of valuation would you use? Why?
Learning Obj.: LO 4
AACSB: Reflective thinking
49) Discuss some of the reasons why buying an existing business would benefit you.
Learning Obj.: LO 1
AACSB: Analytical thinking
50) How would you execute due diligence? What areas could you do yourself? In what areas
would you need help, and who would you recruit to assist you?
Learning Obj.: LO 3
AACSB: Analytical thinking
11