Q&A Hero

Q: In the _________ task, the mutual benefits from the relationship are explored, making the "size of the pie" larger. A.distributive B.assessment C.integrative D.reservation

Q: In negotiations the _________ task involves how the benefits of the relationship will be allocated between the parties. A.distributive B.assessment C.integrative D.reservation

Q: In order to further investigate a franchise opportunity an entrepreneur can request a franchise package from the franchisor which: A.is usually free. B.costs between $400-$600 and is usually refundable. C.costs between $800-$1000 and is usually not refundable. D.contains guarantees about expected sales revenues in years 1 and 2.

Q: Which of the terms in a franchise agreement is the most likely cause of a lawsuit? A.Termination B.Exclusivity of territory C.Schedule of payments D.Initial price of the franchise

Q: The disclosure document provided by the franchisor: A.is required by the FTC. B.will state a guaranteed yearly return for the franchisee. C.is done on a voluntary basis. D.has information that is certified by a CPA and the FTC so it is always a reliable source of data.

Q: Which of the following was not a recommended method of evaluating the potential market for a new franchise in the text? A.Evaluate traffic flow in the area B.Hire a marketing firm to survey foot traffic near the proposed location C.Locate competitors and their proximity to the proposed franchise location D.Evaluate demographics in the area

Q: A potential franchisee should seek answers to all of the following questions while assessing the financial stability of the franchisor, except: A.How many franchises are in the organization? B.Are most of the profits of the franchise a function of fees from the sale of franchises or from royalties based on profits of franchisees? C.What are the chances of further expansion of the company? D.Does the franchisor have management expertise in production, finance, and marketing?

Q: An unproven franchise: A.requires the franchisee to make a larger investment than a proven one. B.is riskier than a proven one. C.offers more excitement and challenge than a proven one. D.could see constant reorganization that could result in confusion and mismanagement.

Q: Franchising opportunities have often evolved from changes in the environment as well as important social trends. This is not one of the factors responsible:A.good health.B.environmental consciousness.C.acceptance of different cultures.D.the second baby boom.

Q: Which franchise below is an example of the most popular type of franchise? A.KFC B.An automobile dealership C.H&R Block D.Real estate franchises

Q: Franchisees usually contribute _____ of sales to an advertising pool. A.None, each franchisee pays for their own advertising B.1-2% C.4-5% D.8-10%

Q: Which statement about capital requirements in franchising is not true?A.Franchisees pool monies to lower the costs for advertising and sales promotion.B.Most franchisors will offer managerial assistance on the basis of need upon the start of the franchisee.C.Newsletters and other publications reflecting new ideas and developments are continuously sent to franchisees.D.The franchisee has to spend resources to establish the credibility of the business.

Q: Which of the following is not an advantage of franchising?A.No entry costB.Availability of management expertiseC.Product acceptanceD.Knowledge of the market

Q: ________ is an arrangement whereby the manufacturer or sole distributor of a trademarked product or service gives exclusive rights of local distribution to independent retailers in return for their payment of royalties and conformance to standardized operating procedures. A.A joint venture B.Franchising C.A merger D.A leveraged buyout

Q: The person who purchases the franchise is the: A.business architect. B.franchisor. C.franchisee. D.franchise.

Q: The person offering the franchise is known as the: A.franchisor. B.endower. C.franchisee. D.franchise.

Q: Which of the following would be a quantitative way to ascertain the fairness of an LBO's asking price? A.Price-earnings ratio B.Book value C.Present value of future earnings D.All of the above

Q: Which of the following is not a qualitative technique an entrepreneur can use to evaluate the asking price of an LBO? A.The competitive position of the firm B.The uniqueness of the firm's offerings C.Price-earnings ratio D.The abilities of management and other key personnel

Q: The debt to capital ratio for most _____ usually exceeds the equity by a factor of 5:1. A.mergers B.leveraged buyouts C.hostile takeovers D.franchises

Q: A ________ occurs when an entrepreneur or an employee group uses borrowed funds to purchase an existing venture for cash. A.leveraged buyout B.merger C.franchise agreement D.integrated task

Q: A common procedure to determine the value of a merger candidate is to estimate the present value of discounted cash flows and the expected after-tax earnings attributable to the merger. This can be done on all of the following levels except: A.Optimistic. B.Pessimistic. C.Probable scenarios. D.Logical scenarios.

Q: The ______ frequently issues guidelines for mergers. A.SBDC B.Department of Justice C.Supreme Court D.United States Senate

Q: Product innovation, diversification, protection against market encroachment are some of the reasons why a company would opt for this: A.Merger. B.Acquisition. C.Leveraged buyouts. D.Lease.

Q: The bootstrap purchase of assets: A.is a direct purchase of the entire assets of a firm. B.means the entrepreneur purchases a small percentage of a firm for cash. C.frequently results in a long-term capital gain to the seller. D.results in double taxation.

Q: The concept that "the whole is greater than the sum of its parts" is known as: A.the price earnings ratio. B.synergy. C.the bargaining zone. D.integration.

Q: Most ventures that are available for sale: A.are undervalued. B.lack established location. C.have a marginal or unprofitable track record. D.are listed on the stock market.

Q: Which of the following is the most significant advantage of an acquisition according to the text? A.Established image and track record B.Location C.Cost D.Existing employees

Q: Which of the following would be an advantage of an acquisition? A.Established customer base B.Customer familiarity with location C.Existing employees D.Period of acquisition deal

Q: One method of expanding a business is the purchase of an entire company or part of it so that the entity is completely absorbed and no longer exists as a separate company. This is called: A.a joint venture. B.an acquisition. C.a subsidiary. D.take over.

Q: In order for a joint venture to be successful: A.the expectations of the results must be reasonable. B.there should be symmetry between the partners. C.the timing must be right. D.all of the above.

Q: Which of the following are not factors in the success of joint ventures according to the text? A.Chemistry and symmetry. B.Symmetry and reasonable expectations. C.Finance and education. D.Timing and chemistry.

Q: Which of the following is(are) not an advantage of an international joint venture? A.Complimenting governmental policies. B.The ease of developing common business objectives. C.Ready access to international markets. D.Cultural synergy.

Q: The most common type of joint venture is: A.international joint ventures. B.created for cooperative research. C.an industry-university agreement. D.between two or more private sector companies.

Q: Joint ventures are sometimes called: A.mergers. B.strategic alliances. C.acquisition. D.leveraged buyout.

Q: Joint ventures can involve a wide variety which include: A.universities. B.not-for-profit organizations. C.traditional businesses. D.all of these.

Q: A _________ is a separate entity that involves a partnership between two or more active participants. A.merger B.franchise C.joint venture D.leveraged buyout

Q: When negotiating, the entrepreneur should make only one offer and stick to it.

Q: By understanding more about the other party, the entrepreneur has a greater opportunity to achieve integration in negotiation.

Q: The bargaining zone is the range of outcomes between the entrepreneur's reservation price and the reservation price of the other party.

Q: The reservation price is the price at which the entrepreneur is ready to accept the agreement.

Q: Negotiating parties will often focus on the distribution task and ignore the integration task.

Q: Negotiating how the benefits of the relationship will be allocated between the parties is known as the distribution task.

Q: The best way to "increase the size of the pie" in negotiation is to use a conflict resolution approach.

Q: The integration task phase of negotiation explores mutual benefits for the parties.

Q: If a franchise looks good as an investment, the entrepreneur may request a franchise package from the franchisor at no cost, which usually contains a draft franchise agreement or contract.

Q: A new franchisee can be expected to be required to undergo considerable training on operating the business.

Q: Terminating a franchise results in more lawsuits than any other issue in franchising.

Q: The Federal Trade Commission requires franchisors to make full presale disclosure of about 20 separate aspects of a franchise offering.

Q: In evaluating the potential profit for a new franchise the entrepreneur should request data from the franchisor so they can develop pro forma income and cash flow statements.

Q: The most common type of franchise is the dealership.

Q: Growing a venture through franchising allows the venture to expand quickly using little capital.

Q: For the franchisor, the capital required to expand a venture quickly is more than it would be without franchising.

Q: Franchising allows the franchisor to benefit from economies of scale in purchasing.

Q: By buying a franchise the entrepreneur reduces the amount of money available for advertising.

Q: One advantage of franchising is that the entrepreneur usually enters into a business that has an accepted name and product.

Q: One important advantage of buying a franchise is that the entrepreneur incurs no risk.

Q: Franchising involves payment of royalties in exchange for exclusive distribution rights.

Q: Quantitative methods of analyzing the fairness of an LBO's asking price include price-earnings ratios, present value of future earnings and book value.

Q: In evaluating an LBO's asking price an entrepreneur can use qualitative measures such as evaluating the abilities of key personnel.

Q: In most leveraged buyouts, the equity usually exceeds the debt capital equity by 5:1.

Q: In a leveraged buyout, the entrepreneur uses equity funds to purchase an existing venture for cash.

Q: A common procedure for determining a merger's value is to estimate the present value of discounted cash flows and the expected after-tax earnings attributable to the merger.

Q: A key concern in any merger or acquisition is the legality of the purchase.

Q: Popular reasons to merge include protection, diversification and survival.

Q: The U.S. Department of Justice frequently issues guidelines for different types of mergers.

Q: Brokers for acquisitions represent the buyer, not the seller.

Q: When an entrepreneur bootstraps the purchase of a company, the entrepreneur usually puts down 10-20% in cash and then financing the remainder of the price with long-term debt paid back through the company's earnings.

Q: When an entrepreneur bootstraps the purchase of a company, none of the price of the acquisition is cash.

Q: The two most common means of acquisition are the entrepreneur's direct purchase of the firm's entire stock or assets or the bootstrap purchase of these assets.

Q: Lack of synergy is one of the most frequent causes of an acquisition's failure to meet its objectives.

Q: Synergy is defined as "the intangible benefits of mergers and acquisitions".

Q: Often, when a business changes hands, key employees move into the acquiring company.

Q: Most ventures that are up for sale have good to very successful profit records.

Q: Synergy is when the whole is the aggregate of all of its parts.

Q: Some acquisitions are motivated more by the CEO's ego than by the return on investment.

Q: One disadvantage to an acquisition is that they are often a slow way to expand.

Q: One advantage to an acquisition is that there is an established customer base.

Q: An acquisition is the purchase of a company, or part of a company, in which the acquired company ceases to exist independently.

Q: To be successful the partners in a joint venture should have symmetry.

Q: Cultural differences between international joint venture partners can create management difficulties.