Question 1

The possibility of buying a business at a bargain price depends on

Accepted Answer

The possibility of buying a business at a bargain price can be influenced by the owner's reasons for selling, their financial sophistication, and how the sale is handled. All these factors can affect the price and terms of the sale.

Question 2

In negotiating with an owner for the purchase of his or her business you should

Accepted Answer

It is important to listen to the owner but also verify the information independently to ensure accuracy and make an informed decision.

Question 3

If the owner of a business decides what the selling price will be, that price

Accepted Answer

The owner may not have complete information about market conditions, competition, or customer perception, which can lead to setting a price that is either too high or too low compared to its real value.

Question 4

Owners of small businesses use various approaches to determine how much to ask for the business; among these approaches are the following:

Accepted Answer

Small business owners may use any or all of these approaches to determine the asking price for their business, including considering their costs, their financial needs, and market comparisons with similar businesses.

Question 5

Buying a business from its founder

Accepted Answer

Founders often have a strong emotional attachment to their business, which can complicate the sale process.

Question 6

Buying a business from the family of a deceased founder

Accepted Answer

The family may want to sell the business quickly to settle the estate and move on, making the transaction potentially easier.

Question 7

The way in which the sale is made

Accepted Answer

The way in which a sale is made can vary based on numerous factors including the entrepreneur's strategy, market conditions, and legal requirements, so none of the given options accurately describe it.

Question 8

When it comes time to sell a business the owner

Accepted Answer

The correct answer is A because entrepreneurs are often self-reliant and prefer to handle the sale of their business personally.

Question 9

Intermediaries are often used in selling a business; they are

Accepted Answer

Intermediaries in business sales, such as brokers, act as agents to arrange the sale and offer advantages like expertise, market knowledge, and negotiation skills, making all the statements correct.

Question 10

Among the advantages of using a broker to sell a business are the following:

Accepted Answer

Using a broker to sell a business does not eliminate tax liabilities, sale-gain reporting requirements, or establish a corporate liability shield.

Question 11

The independence of spirit and action so characteristic of many entrepreneurs

Accepted Answer

Independence of spirit and action can lead to challenges when selling a business, as entrepreneurs may struggle with relinquishing control or adapting to new ownership structures.

Question 12

Some businesses that are on the market suffer a limitation due to

Accepted Answer

Businesses can face limitations due to environmental factors, internal problems, and changes in ownership, making all options relevant.

Question 13

A business' environmental problems might include:

Accepted Answer

The answer of A business' environmental problems might include:
...

Question 14

A business' internal problems

Accepted Answer

Internal problems can be unique to a business, include issues like a poor corporate image, and can be troublesome for new owners, making all options applicable.

Question 15

One-man shows are firms closely linked to the current owner; these businesses

Accepted Answer

One-man shows are typically small businesses that are heavily reliant on the current owner, making them less attractive for purchase due to the risk associated with the owner's departure. They are not specifically regulated by the Small Business Administration, nor are they primarily found in manufacturing.

Question 16

Businesses that are on the market can be found

Accepted Answer

Businesses for sale can be found in various sources including The Wall Street Journal, classified ads in local newspapers, and business broker listings.

Question 17

The reasons for selling a business

Accepted Answer

A business may be sold because it is struggling, as owners might want to cut their losses or lack the resources to turn it around.

Question 18

The indirect approach to locating a business, for possible purchase, that is not on the market

Accepted Answer

The indirect approach involves networking with professionals like lawyers, bankers, and accountants to uncover potential business prospects that are not actively on the market, and it does not necessarily exclude the use of brokers.

Question 19

The direct approach to locating a business that is not on the market

Accepted Answer

The direct approach involves contacting the business owner directly, without using an intermediary, to inquire about purchasing the business.

Question 20

If a business being considered for purchase is experiencing slumping sales

Accepted Answer

Slumping sales could be due to various reasons such as an industry cycle downturn, a long-term industry decline, or internal issues within the firm.

Quiz 10: Buying an Existing Business