1. __________ partners cannot take an active role in the operation of a business, but if the business fails, they stand to lose only what they have invested in the company.
a. General
b. Limited
c. Master
d. Insulated
2. A valid copyright last for:
a. the life of the creator.
b. 20 years from the date of publication and can be renewed once.
c. 50 years.
d. the life of the creator plus 50 years.
3. Approximately __________ percent of the small companies that are up for sale ever get sold.
a. 25 to 33
b. 40 to 50
c. 65 to 73
d. 80 to 85
4. The disclosure document that is designed to help prospective franchisees evaluate franchise opportunities and to protect themselves from unscrupulous franchisers is the:
a. Trade Regulation Rule
b. Federal Trade Commission Report
c. Franchisee Protection Prospectus
d. Uniform Franchise Offering Circular
5. Although this exit strategy is the safest path for a business owner selling out, it is also the most expensive, given the tax liability it generates for the seller.
a. straight business sale
b. selling a controlling interest
c. selling to company employees through an employee stock ownership plan (ESOP)
d. selling to the seller's children by establishing a family limited partnership
6. Polaroid's Creativity and Innovation Lab reports that out of every 3,000 new product ideas, __________ are actually launched, and __________ become(s) successful in the market.
a. 1000; 500
b. 500; 250
c. 10; 3
d. 2; 1
7. Which form of ownership has the greatest ability to attract capital?
a. sole proprietorship
b. partnership
c. corporation
d. S-corporation
8. A clearly defined vision:
a. provides meaningful direction for a company.
b. influences the decisions, both large and small, the people in an organization make.
c. motivates employees to higher levels of performance.
d. All of the above
9. A corporation doing business in a state other than the one in which it is incorporated is called a __________ corporation
a. domestic
b. alien
c. foreign
d. closely-held
10. According to VR Business Brokers, the average selling price of a small company is:
a. $55,000
b. $160,000
c. $575,000
d. $1,050,000
11. Bennett is considering buying a business and has collected the following information: Projected net earnings for next year = $117,000; rate of return on a similar risk investment = 27%. Hoping to use the market approach, Bennett has located three similar companies, whose stock is publicly traded. Their price-earnings ratios are 2.84, 2. 95, and 3.12. Under the market approach, how much is the business worth?
a. $117,000
b. $433,333
c. $93,822
d. $347, 490
12. In which of the following countries is entrepreneurial activity most prevalent?
a. Japan
b. Germany
c. Great Britain
d. United States
13. Bennett is considering buying an existing business and has collected the following information: Projected net earnings for next year = $117,000; owner's salary = $34,000; rate of return on a similar risk investment = 27%. Using the capitalized earnings approach, how much is the business worth?
a. $151,000
b. $433,333
c. $307,407
d. $40,770
14. Which of the following factors plays a role in determining the rate of return used to value a business using one of the earnings approaches?
a. the basic, risk-free rate of return
b. an inflation premium
c. the risk allowance for investing in that particular business
d. all of the above
15. Small businesses:
a. account for about 99 percent of all businesses in the United States.
b. employ 53 percent of the nation's private sector work force.
c. create more jobs than do large companies
d. produce 51 percent of the U.S. GDP.
e. all of the above