Taking Over an Existing Business MCQs

Taking Over an Existing Business MCQs

Answer these 20+ Taking Over an Existing Business MCQs and assess your grip on the subject of Taking Over an Existing Business. Scroll below and get started!

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

A.   Worth

B.   Rate

C.   Value

D.   All of them

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

A.   True

B.   False

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

A.   True

B.   False

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

A.   Free cash flow

B.   Discounted cash flow

C.   Undiscounted cash flow

D.   Capitalized cash flow

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

A.   True

B.   False

6: Intangible assets are assets that have value to a business and

A.   Clearly visible

B.   Not visible

C.   Evident

D.   Conspicuous

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

A.   Owner

B.   Broker

C.   Bank broker

D.   None of them

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

A.   Restricts the seller from entering same business

B.   Restricts the seller from entering a specified area

C.   Restricts the seller from entering for a certain amount of time

D.   All of them

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

A.   Multiples to revenue

B.   Multiples to free cash flow

C.   Both a and b

D.   None of the mentioned

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

A.   Be Seen

B.   Be Examined

C.   Be not visible

D.   Both a and b

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

A.   Sales

B.   Expenses

C.   Income

D.   Profit

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

A.   To be hired, family members must meet more stringent criteria than nonfamily members.

B.   Family members should be supervised by older family members whenever possible.

C.   Family members should stay in entry-level positions indefinitely.

D.   Family members must meet the same standards as nonfamily members in performance reviews.

13: A settlement attorney during a closing represents ______.

A.   The buyer

B.   The seller

C.   The buyer and the seller

D.   Neither--the lawyer is a neutral third party

14: 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?

A.   Sole proprietorships

B.   Partnerships

C.   Corporations

D.   Family-owned businesses

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

A.   Image is difficult to change.

B.   There is an established customer base at the present location.

C.   Employees may be loyal only to previous management.

D.   The business location is unfamiliar.

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

A.   Current asset

B.   Long-term asset

C.   Goodwill

D.   Equipment

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

A.   Paying a lump sum

B.   Paying in installments

C.   A loan from the bank

D.   A loan from the Small Business Administration (SBA)

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

A.   Financial records

B.   Independent audit

C.   Expense ratio

D.   Working capital statement

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

A.   Sales volume

B.   Net assets

C.   Gross assets

D.   Accounts payable

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

A.   Beginner’s mistakes that the new owner will not have to make

B.   Tangible assets

C.   Sales potential

D.   Customer lists

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

A.   Possible sources of funding

B.   Possible businesses for sale

C.   Possible businesses soon to be terminated

D.   Possible venture capitalists

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

A.   Intangible assets

B.   Tangible assets

C.   Only current assets

D.   Only long-term assets

23: 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

A.   Real estate manager

B.   Financial broker

C.   Management broker

D.   Business broker

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

A.   An accountant

B.   The buyer and seller themselves

C.   Escrow settlement

D.   A nonpartial third party

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

A.   Balance sheet method of business valuation

B.   Asset method of business valuation

C.   Income statement method of valuation

D.   Cash-flow method of valuation