MGMT 3850 CHAPTER 7 ASSIGNMENT BUYING AN EXISTING BUSINESS

1 MGMT 3850 CHAPTER 7 ASSIGNMENT BUYING AN EXISTING BUSINESS Essentials of Entrepreneurship & Small Business Mgmt., 7e (Scarborough) Chapter 7 Buying an Existing Business 1) The due diligence process of analyzing and evaluating an existing business: A) may be just as time consuming as the development of a comprehensive business plan for a start-up. B) helps to determine if the company will generate sufficient cash to pay for itself and leave you with a suitable rate of return on your investment. C) helps to determine what the company's potential for success is. D) All of the above Answer: D Diff: 1 Page Ref: 231 AACSB: Analytic Skills Learning Obj.: 1 2) When 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. Answer: A Diff: 1 Page Ref: 231 AACSB: Analytic Skills Learning Obj.: 1 3) Advantages to buying an existing business that you do not have with a startup include: A) greater access to venture capital. B) the opportunity to participate in a national advertising campaign. C) inventory is in place and trade credit is established. D) easy implementation of innovations and changes from past policies. Answer: C Diff: 2 Page Ref: 231-233 AACSB: Reflective Thinking Learning Obj.: 1 4) Which of the following is a potential disadvantage of purchasing an existing business? A) The employees inherited with the business may not be suitable. B) The previous owner may have created ill will among the company's customers. C) Equipment and facilities may be obsolete or inefficient. D) All of the above Answer: D Diff: 1 Page Ref: 233-237