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Final Exam MQM 128 questions with 100% correct answers
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Final Exam MQM 128 questions with 100% correct answers
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Final Exam MQM 128When done correctly, the due diligence process will,
a. reveal both the positive and negative aspects of an existing business
b. be time consuming and expensive
c. most often result in the purchase of the business
d. rarely prove to be beneficial - correct answer ✔✔a
when buying a business, an entrepreneur can usually purchase equipment and fixtures at prices well
below their book value
T or F - correct answer ✔✔True
Accounts receivable are rarely worth face value and should be "aged" when evaluating a company's
assets
T or F - correct answer ✔✔True
the letter of intent is a document
a. binding
b. nonbinding
c.transferable
d. final - correct answer ✔✔b
the first step an entrepreneur should take when buying an existing business is to
a. explore financing options
b. prepare a list of potential candidates
,c. analyze his or her skills, abilities and interests in an honest self-audit
d. contact existing business owners in the area and ask if their companies are for sale - correct answer
✔✔c
the due diligence process involves investigating four critical areas of the business, which are ,asset
valuation, legal issues, and financial condition
a.negotiation
b. business valuation
c. motivation
d. planning - correct answer ✔✔c
the method establishes the value of a company by computing the book value of its net worth, or owner's
equity
a. earnings
b. market
c. balance sheet
d. multiples - correct answer ✔✔c
one of the closing documents required is the non-disclosure agreement (NDA)
T or F - correct answer ✔✔False
pure franchising involves a system of franchising in which a franchisor sells a franchisee a complete
business format and system
T or F - correct answer ✔✔True
, A major advantage of a franchise contract is the national advertising campaign that most franchisors
provide free of charge for their franchisees
T or F - correct answer ✔✔False
The failure rate for franchises is
a. higher than the average rate for new businesses
b. no different from the rate for new businesses
c. lower than the average rate for new businesses
d. indeterminable because of the Right to Privacy Act - correct answer ✔✔c
Which of the following should make potential franchisee suspicious about a franchisor's honesty?
a. claims that the franchise contract is a standard agreement and that there is no need to read it or have
an attorney look it over
b. an offer of direct financing of a specific element of the franchise package
c. not providing detailed operational info until 10 days before signing the contract
d. requiring franchisees to spend a certain percentage of profits on advertising - correct answer ✔✔a
the principle of putting a franchise's products or services directly in the paths of potential customers
with smaller, less expensive outlets is called
a. cobranding
b. intercept marketing
c. are development
d. master franchise - correct answer ✔✔b
when the franchisor has the right to establish a semi-independent organization in a particular territory to
recruit, sell, and support other franchises, it is known as a franchise
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