Deck 5: Buying a Business and Franchising

Question 1

If a business is not listed as being for sale

A)its privacy should be respected
B)then it won't be for sale
C)it's not worth investigating it
D)a prospective purchaser can ask the owner if they would be interested in selling

Answer 1

D

Question 2

The fastest growing sector in the Canadian economy is

A)the service sector
B)the professional sector
C)the manufacturing sector
D)the import/export sector

Answer 2

A

Question 3

Goodwill

A)is the process of extending credit to needy customers
B)measures the added value in a product
C)always exist so long as a business operates
D)is essentially a business's favourable reputation

Answer 3

D

Question 4

According to research traditional franchise businesses include

A)hotels
B)construction
C)retailing
D)soft drink companies

Question 5

Industry analysis may not be required if

A)a buyer has considerable experience in the industry
B)the cost to do so would be prohibitive
C)there is no information readily available
D)the industry is not dominated by one large business

Question 6

When purchasing a business,non-liquid assets

A)should be considered not to have any value
B)should be subjected to an independent appraisal
C)should by ignored for business planning purposes
D)should be valued at 20% of total fixed assets

Question 7

According to the text,most businesses that are for sale

A)are only marginally successful
B)have valuable locations to transfer to a new owner
C)provide a steady base on which to expand
D)have a solid banking arrangements in place

Question 8

Franchisee training is most likely to involve

A)internet research
B)personal industry reading
C)competitor research
D)site visits

Question 9

Under a franchising arrangement

A)a franchisor owns an outlet
B)both the franchisor and the franchisee operate an outlet
C)a franchisee owns an outlet
D)a franchisee develops the best system for their outlet

Question 10

A franchise system can best be characterized as

A)a voluntary chain
B)a money making machine
C)a business excellence strategy
D)an approach to market dominance

Question 11

Established franchises can provide

A)guaranteed cash flow
B)franchisee success
C)instant brand recognition
D)healthy opportunities for franchisee creativity

Question 12

One of the attractive benefits of being a franchisee is

A)future income is a high certainty
B)it can replace a lost job
C)there is no need to learn about an industry in depth
D)the total freedom of owning your own business

Question 13

Government Departments

A)are not likely to be aware of business for sale
B)are never connected with individual businesses
C)may be aware of businesses for sale
D)often act as brokers in connecting purchasers and sellers of businesses

Question 14

________ is a type of franchise

A)Manufacturer-retailer
B)Wholesaler-retailer
C)Retailer-service depot
D)Franchise developer

Question 15

An offer to purchase will most likely be made

A)to the seller's CEO
B)by the buyer or through a realtor or lawyer
C)by the buyer's banker on behalf of the buyer
D)anonymously (until accepted)

Question 16

It is argued in the text that the most significant advantage of buying a business is

A)it has already been registered with the authorities
B)it has inventory
C)it has an established image and track record
D)to avoid being sued

Question 17

Strong customer relations is usually an indictor

A)of a market with few competitors
B)of a high demand product or service
C)of good management and employees
D)of low pricing

Question 18

Market value is

A)the price where demand and supply meet
B)the lowest amount that a seller will accept in the market
C)the average of the three most recent sales transactions in an industry
D)the net realizable value of a business's fixed assets

Question 19

Common sources of businesses for sale include

A)supermarket ad boards
B)trade journals
C)yellow pages (hard copy or web based)
D)FAQ pages

Question 20

The times earnings method is also called

A)productivity velocity method
B)return on investment accelerator
C)efficiency measure
D)the price-earnings ratio

Question 21

Future growth of franchising will

A)reduce employment numbers
B)make competition more difficult for small businesses in certain industries
C)result in less competition
D)lead to more monopolies

Question 22

Franchises with territorial protection

A)are the most desirable
B)are increasing in frequency
C)are generally not possible
D)are illegal due to non-competition laws

Question 23

Becoming a franchisor

A)is a retirement strategy
B)is a way of reducing one's management pressures
C)is inevitable in a successful business
D)is a form of entrepreneurship

Question 24

Of the following elements,a potential franchisor should be concerned most about

A)supply chains
B)renewal and termination terms
C)hours of (business operation
D)future Canadian/US dollar exchange rates

Question 25

A proven franchise offers

A)greater opportunity and more freedom
B)small market share and weaker competition
C)lower risk and higher financial investment
D)higher returns and reduced employee turnover

Question 26

Secret shoppers

A)refers to customers who pretend not to be interested in making a purchase
B)means asking someone else to make your purchase in their name
C)is a strategy used by some franchisors
D)are used in by government agencies to detect tax fraud

Question 27

Potential franchisees will usually have to provide

A)the names of relatives who have succeeded in business
B)collateral
C)a current health certificate
D)their work history