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Taking Over an Existing Business MCQ

A method of determining the value of a business based on its profit potential is known as a(n) ______.

Answer

Correct Answer: Income statement method of valuation

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When the buyer and the seller have agreed on the terms of the sale, the closing can be handled by ______.

Answer

Correct Answer: Escrow settlement

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Within his profession, Alex Wilson serves as an intermediary that brings sellers of businesses together with potential buyers. Alex can best be described as a/an

Answer

Correct Answer: Business broker

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Inventory, equipment, and building are examples of what kinds of assets?

Answer

Correct Answer: Only current assets

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Family, friends, the newspaper, the Small Business Administration (SBA), a local banker, and real estate brokers may all have information on ______.

Answer

Correct Answer: Possible businesses for sale

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Goodwill can be seen as compensation to the seller for which of the following?

Answer

Correct Answer: Beginner’s mistakes that the new owner will not have to make

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The financial statements can provide access to ______, a very important piece of information for a prospective buyer to use in determining net profit.

Answer

Correct Answer: Sales volume

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What of these is used to indicate whether sales volume is increasing or decreasing?

Answer

Correct Answer: Financial records

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The most practical method of paying for a business is ______.

Answer

Correct Answer: Paying in installments

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Few businesses that are for sale have a high amount of ______ value.

Answer

Correct Answer: Goodwill

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An advantage in purchasing an existing business is which of the following?

Answer

Correct Answer: There is an established customer base at the present location.

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Which of the following types of business are characterized by two or more members of the same family who control or are directly involved in and own a majority of the business?

Answer

Correct Answer: Family-owned businesses

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A settlement attorney during a closing represents ______.

Answer

Correct Answer: The buyer and the seller

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Which of the following is a guideline that should be followed in a family business?

Answer

Correct Answer: Family members must meet the same standards as nonfamily members in performance reviews.

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The prospective buyer should determine a price for the business by adding the value of tangible and intangible assets with the ______ potential.

Answer

Correct Answer: Profit

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Tangible assets are the assets owned by a business that can?

Answer

Correct Answer: Both a and b

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Price Multiples Business Valuation is a method of determining the value of a business based on applying specific appropriate:

Answer

Correct Answer: Both a and b

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Non compete clause is a provision often included in a contract to purchase a business that:

Answer

Correct Answer: All of them

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Multiple method business valuation is a formula that applies a weighting factor based on the benefit the selling business _____ has generated.

Answer

Correct Answer: Owner

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Intangible assets are assets that have value to a business and

Answer

Correct Answer: Not visible

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Goodwill is the intangible asset that allows businesses to earn a higher return than a comparable business with the different tangible assets might generate.

Answer

Correct Answer: False

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Valuation method based on future cash flows the business is projected to make is called?

Answer

Correct Answer: Discounted cash flow

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Comparables approach is a valuation technique to look at the value of comparable companies that have recently sold.

Answer

Correct Answer: True

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Business broker is a business intermediary that brings sellers of their businesses together with potential buyers.

Answer

Correct Answer: True

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Asset-based Business Valuation is a method of determining the _____ of a business based on the worth of its assets.

Answer

Correct Answer: All of them

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