True/False
Indicate whether the statement is true or
false.
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1.
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Before you buy a business, you should request a written list of all
suppliers.
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2.
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While entering a family business can give entrepreneurs a sense of pride and
satisfaction, they usually do not enjoy working with relatives.
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3.
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A disadvantage of buying an existing business is that banks are less likely to
lend to a new owner.
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4.
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In most family-owned businesses, the family members are able to keep business
problems from affecting their private lives.
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5.
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Many entrepreneurs do not have enough money to purchase an existing
business.
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6.
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A business broker or a lawyer can help you determine a price to offer for an
existing business.
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7.
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The start-up costs for a franchise include renting a facility and purchasing
inventory.
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8.
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Equipment and supplies for a franchise can be purchased at a discount from the
franchisor because franchises are parts of large chains.
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9.
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In evaluating a particular franchise, you should compare the initial costs of
purchasing the franchise to the cost of buying an existing business.
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10.
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Franchisees must offer only certain products or services and must charge prices
set by the franchisor.
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11.
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More than 500,000 people in the United States own franchises and the number is
growing.
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12.
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The initial franchise fee, start-up costs, and royalty fees only have to be paid
the first year of operation.
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13.
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There is less risk in starting your own business than in buying a business or
franchise because there is less money involved.
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14.
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Franchise owners have an established product or service and are not dependent on
the performance of other franchises in the chain.
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15.
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Both a sole proprietorship and a partnership are simple to start and have low
initial costs.
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16.
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The difference between an S corporation and a regular corporation is that an S
corporation is not taxed as a business.
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17.
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The board of directors of a corporation is responsible for deciding how much the
corporation should pay out in dividends.
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18.
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Ease of raising money is the main reason entrepreneurs set up
corporations.
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19.
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In a corporation, one person is in control of all aspects of the
business.
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20.
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A partnership agreement identifies the salaries to be withdrawn by each
partner.
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Multiple Choice
Identify the choice that best completes the
statement or answers the question.
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21.
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An advantage of buying an existing business is that
a. | a large amount of capital is not required | b. | policies and
procedures are already established | c. | it is financially viable | d. | it has a reputation
with customers |
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22.
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When buying a business, you should do all of the following except
a. | have an accountant write the sales contract | b. | analyze financial
reports for the past three years | c. | determine how to finance the
business | d. | have an expert determine the value of the business |
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23.
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Entrepreneurs who work for their family businesses
a. | must be prepared to compromise | b. | cannot make all decisions
themselves | c. | enjoy working with relatives | d. | all of these |
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24.
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Operating costs of a franchise
a. | are paid by the franchisor | b. | include a fee for writing the franchise
agreement | c. | include a fee for advertising | d. | are usually less than one thousand
dollars |
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25.
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Which of the following is not a disadvantage of owning a
franchise?
a. | some profits must be returned to franchisor as royalty fees | b. | only certain
products or services may be offered | c. | uncertainty of attracting
customers | d. | a large amount of initial capital is usually needed |
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26.
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Before buying a franchise, you should
a. | determine all costs and royalty fees | b. | have an accountant examine the
agreement | c. | talk to a business broker | d. | none of these |
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27.
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When starting your own business, an important consideration is
a. | the location | b. | what product or service to
offer | c. | what employees to hire | d. | all of these |
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28.
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There is very little government regulation for businesses that are
a. | sole proprietorships or S corporations | b. | partnerships or
corporations | c. | sole proprietorships or partnerships | d. | partnerships or S
corporations |
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29.
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A disadvantage of a partnership is that partners share
a. | decision-making | b. | losses | c. | management
responsibilities | d. | profits |
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30.
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An advantage of setting up as a corporation is the
a. | distribution of profits | b. | ability to raise capital | c. | taxation
benefits | d. | ease of establishment |
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