Exam (elaborations)
mana 3325 chapter 7 questions and answers
- Course
- Institution
mana 3325 chapter 7 questions and answers
[Show more]
Content preview
mana 3325 chapter 71) 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 - correct answer ✔✔D) All of the above
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 - correct answer ✔✔A) reveal both the positive and negative aspects of
an existing business
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 - correct answer ✔✔C) inventory
is in place and trade credit is established
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 - correct answer ✔✔D) All of the above
, 5) When evaluating the assets of an existing business, the inventory ________.
A) is always current and salable
B) usually appreciates over time, making the business a bargain
C) should be judged on the basis of its market value, not its book value
D) is usually stated honestly and does not need an independent audit - correct answer ✔✔C) should be
judged on the basis of its market value, not its book value
) An entrepreneur who is considering purchasing a business is analyzing a company's accounts
receivable. The following table summarizes her findings. - correct answer ✔✔
6) An entrepreneur who is considering purchasing a business is analyzing a company's accounts
receivable. The following table summarizes her findings.
Age of Accounts Amount Probability of Collection
0 - 30 days $12,000 .96
31 - 60 days $ 4,000 .87
61 - 90 days $ 2,500 .71
91 - 120 days $ 1,400 .65
121+ days $ 800 .24
How much should this potential buyer be willing to pay for these accounts receivable?
A) Nothing; a buyer should never purchase existing accounts receivable.
B) $20,700
C) $17,877
D) Not enough information given to determine - correct answer ✔✔C) $17,877
7) The process of investigating the details of a company that is for sale to determine the strengths,
weaknesses, opportunities and threats facing it is known as the ________ process.
A) hidden market
B) due diligence
C) skimming
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller BravelRadon. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $12.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
81298 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now