Deck 3: Venture Choices

Question 1

Each industry has its own proven method for correctly valuing companies.

Answer 1

False

Question 2

Verbal agreements are legally binding after the purchase of an ongoing business.

Answer 2

False

Question 3

The scientific method of market analysis should only be used by firms or individuals creating a new venture.

Answer 3

False

Question 4

When buying a business, always have the seller "earn out" some of the purchase price.

Question 5

When buying a business, always investigate everything.

Question 6

Consumer surveys should always be conducted by the entrepreneur to ensure specificity.

Question 7

Piggybacking to create a new venture entails improving upon an existing product or service.

Question 8

The drawback of the New-Old approach is that competitors can move in more easily.

Question 9

Facebook would be an example of a New-New approach to a business venture.

Question 10

Cropital, the crowdfunding platform, was built to help lenders in developing nations so that they can provide funding to farmers at a higher interest rate.

Question 11

What is the difference between the New-New approach and the New-Old approach when evaluating a new business venture?

A) The New-New method looks for new ideas to make a product better while the New-old approach uses old ideas to make new innovations on existing products
B) New-New looks to create a new product or service while New-Old innovates an existing product to make it better
C) New-New innovates an existing product to break into new markets while New-Old seeks market penetration in existing markets with the new innovation
D) New-New creates a new product or service for a new market while New-Old seeks to create a new product or service using old ideas.

Question 12

What is not one of the advantages of buying an on-going venture?

A) Because the enterprise is already in operation, it's continued successful operation of the business is more likely
B) The time and effort associated with starting a new enterprise are eliminated
C) The venture allows you to capture a completely different market that has not yet been tapped.
D) It is possible to buy an ongoing business at a discount to its proper valuation

Question 13

What is Book Value of a firm?

A) How much it would cost to buy the same machinery, materials, or merchandise on the market today
B) Value of the business's assets if they were placed on the market immediately and purchased by knowledgeable buyers within a short span of time
C) The projected value of the firm based on its current and future projected free cash flows
D) The value of the company's assets from an accounting standpoint

Question 14

According to chapter 3, what are five of the most important indexes to valuing a company?

A) Cash Flow, Past Earnings, net profit/current ratio, book value, equity value
B) Replacement Value, Fair Market Value, Cash Flow, Past Earnings, Liquidation Value
C) Liquidation Value, Cash flow, Book Value, Replacement Value, Past Earnings
D) Equity value, book value, cash flow, enterprise value, replacement value

Question 15

What are four critical elements in negotiating a deal to purchase an ongoing venture?

A) information, reputation, pressure, alternatives
B) information, time, pressure, and alternatives
C) time, pressure, alternatives, reputation
D) information, time, pressure, reputation

Question 16

Why must an entrepreneur interview the current employees of a business before she or he purchases it?

A) All employee terminations must happen within thirty days of the purchase to be legally valid
B) The employees are more likely to provide information regarding the business that may be ambiguous or negative
C) Interviewing the employees shows the seller the entrepreneur is serious about purchasing the business
D) The employees are able to cross check information the owner provided to identify if he or she is lying to the entrepreneur

Question 17

Using a new-old approach to creating a new venture is often called:

A) Riding the coattails
B) Bleeding Edge
C) Piggybacking
D) Bootstrapping

Question 18

Which of these is not a factor that needs to be taken into consideration while implementing an action plan?

A) The Entrepreneur as a Person
B) The financial picture
C) Competitor Analysis
D) Record keeping

Question 19

Which of these products would be considered to be in the introduction phase?

A) Electric Cars
B) Microwaves
C) DVD Players
D) Vacuums

Question 20

What is the first step of the scientific method used to evaluate a good or service?

A) Gather all the necessary facts about the problem or question.
B) Observe the progress of this alternative and adjust it as required.
C) State the problem or question in as clear a manner as possible.
D) Organize and analyze the facts.

Question 21

What is the largest source of new business ideas among both men and women?

A) Education Courses
B) Suggestion from a friend
C) Hobbies/Interest
D) Prior Job

Question 22

After breaking the scientific method into four steps, what is the final step of analyzing a business opportunity?

A) Analysis of the facts
B) Implementation of an action plan
C) Observe the progress of this alternative and adjust it as required
D) Select the best alternative and implement it

Question 23

In the "Analysis of the Facts" stage, the entrepreneur asks which question?

A) Do any competitors exist in the area?
B) Who would be attracted to this product or service?
C) What does it all mean?
D) What will be done, and how will it be done?

Question 24

When implementing an action plan, what is the worst thing an entrepreneur could do?

A) Scrap all of their efforts when they find the business plan is ineffective
B) Focus their efforts on modifying their business plan while attempting to implement it
C) Switching to a contingency plan simply because the initial plan did not work out
D) Make constant concessions in their plan until it does not resemble the original plan

Question 25

What is Goodwill (in its entirety)?

A) Patents
B) The value of a business beyond its stated book value
C) The amount of purchase premium above company valuation a seller receives
D) Client accounts that are currently making significant returns

Question 26

What is an earn out?

A) Clause in a purchase agreement where the buyer earns out the difference in purchase price through performance in their own stock
B) Clause that allows the seller to buy part of the company back if it "earns out" specific milestones
C) Clause in a purchase agreement that allows the seller to receive stock in the buyer company so that they can "earn out" some of the future company value
D) Clause where the purchase price of a business is dependent on future performance

Question 27

What is a Noncash expense?

A) An expense item that a company purchases on credit to be paid later
B) An expense item that can be written off income tax because no cash is paid because of it
C) A liability such as unearned revenue that the company has to perform services to earn
D) An item such as interest expense from financing

Question 28

"Auction Value" is another term for what?

A) Book Value
B) Market Value
C) Replacement Value
D) Liquidation Value

Question 29

What is a consumer survey?

A) An indirect method of identifying physical and geographic population makeup of a given area
B) A study of the income and demographic information of potential consumers in an area
C) An attempt to identify what consumers want through direct questioning
D) Indirectly identifying customer needs through analysis of the competitive landscape

Question 30

What is a noncompete agreement?

A) A clause where one party agrees not to enter into a similar business or market as the other
B) An agreement between regional competitors to split up the market between the two of them
C) A clause that restricts an employee from maintaining employment with a new business owner
D) An agreement between the Seller and Buyer to not compete over the purchase price of the business

Question 31

Using examples from chapter 3, describe how you would discover ideas for a new product and what factors you would take into consideration.

Question 32

What is Market analysis and why is it crucial for an entrepreneur?

Question 33

Name three of the most influential trends Faith Popcorn has identified are driving the marketplace and provide a reason why each one is influential.

Question 34

What are the three primary areas an entrepreneur's action plan should take into account? What factors and consideration does the entrepreneur need to consider each area?

Question 35

Describe the 5 most important indexes that reflect an operating venture's value while assessing its price?