In buying a business, it is usually recommended to purchase the stock of the business rather than the assets of the business.
True False
When purchasing a business, the more important consideration is:
The economics of the business The management quality that has been running the business
The BEST way to verify the sales of a small business is to:
Stand at the cash register and record the sales. Study the present and past income statements of the business. Analyze the state sales tax returns. Review cash register tapes.
To be a real entrepreneur you should concentrate your efforts on buying a business that produces something, has inventory, a factory and, hopefully, is vertically integrated.
True False
Before buying a franchise, which of the following choices is the LEAST IMPORTANT step to take in your "due diligence" investigation:
Have the franchiser give you names of franchisees to talk to. Make a "for and against" analysis as to whether you would be better off starting independently. Talk to franchisees of your own choosing. Have your lawyer review the franchise agreement and determine if there are franchisee lawsuits pending against the franchiser.
The best source of financing when you buy a business is:
The Small Business Administration Your savings Taking on a partner The seller of the business Friends and relatives
If you invest $50,000 in a business and earn $10,000 annually, your return would be:
25% 10% 20%
If you are considering buying a franchise, existing franchises will be reluctant to disclose financial information to you.
True False
The best way to verify the quality of receivables in a business you are considering buying is:
Require the seller to furnish a certified financial statement. Inspection of the seller's records by your CPA Obtain written verification from accounts receivable parties.
A "pro-forma" financial statement shows:
Past financial information Projected future financial information (estimated) Financial information before accounting for state and federal income tax obligations.
