Question 1

A drawback to the price/earnings ratio method is that

Accepted Answer

A)  the stock of a private company is publicly traded. 
B)  the stated net income of a private company may not truly reflect its actual earning power. 
C)  it is relatively easy to find a truly comparable publicly held company, even in the same industry. 
D)  it distorts profits earned. 
A)  the stock of a private company is publicly traded. 
B)  the stated net income of a private company may not truly reflect its actual earning power. 
C)  it is relatively easy to find a truly comparable publicly held company, even in the same industry. 
D)  it distorts profits earned.

Question 2

Potential earning power, which determines the True value of the firm, is best calculated using

Accepted Answer

A)  the price/earnings ratio method. 
B)  the adjusted tangible book value method. 
C)  the discounted earnings method. 
D)  The adjusted tangible book value method. 
A)  the price/earnings ratio method. 
B)  the adjusted tangible book value method. 
C)  the discounted earnings method. 
D)  The adjusted tangible book value method.

Question 3

Some buyers are willing to pay more for a business than what valuation methods determine its worth to be. What are these buyers attempting to avoid?

Accepted Answer

A)  start-up costs. 
B)  earlier losses. 
C)  previous profits. 
D)  all of the above. 
A)  start-up costs. 
B)  earlier losses. 
C)  previous profits. 
D)  all of the above.

Question 4

Traditional valuation methods includes all of the following except:

Accepted Answer

A)  adjusted tangible book value 
B)  price/earnings ratio 
C)  high equity/low debt 
D)  discounted earnings 
A)  adjusted tangible book value 
B)  price/earnings ratio 
C)  high equity/low debt 
D)  discounted earnings

Question 5

Price/earnings ratio is a method of valuation that is

Accepted Answer

A)  most common with public corporations. 
B)  not affected by market conditions. 
C)  not sensitive to market conditions. 
D)  not affected by competitors. 
A)  most common with public corporations. 
B)  not affected by market conditions. 
C)  not sensitive to market conditions. 
D)  not affected by competitors.

Question 6

An entrepreneur does not need to know how to calculate the value of a competitor's operation.

Accepted Answer

A) True 
 B)False

Question 7

The timing of projected income or cash flows is not a critical factor in establishing the value of a firm.

Accepted Answer

A) True 
 B)False

Question 8

Entrepreneurs should try to be as objective as possible in determining the fair market value for their enterprise.

Accepted Answer

A) True 
 B)False

Question 9

When a company is liquidated, preferred stockholders received a certain fixed amount after assets are distributed to common stockholders.

Accepted Answer

A) True 
 B)False

Question 10

Sales and earnings of a venture are projected from

Accepted Answer

A)  historical projections 
B)  historical financials 
C)  data on start-ups 
D)  property values 
A)  historical projections 
B)  historical financials 
C)  data on start-ups 
D)  property values

Question 11

Weaknesses in small closely held businesses call for careful analysis of the business being valued.

Accepted Answer

A) True 
 B)False

Question 12

Explain the purpose of a letter of intent.

Accepted Answer

A letter of intent is preliminary, mostl

Question 13

When considering sales and distribution, the entrepreneur should be concerned about

Accepted Answer

A)  whether any sales are made on consignment. 
B)  how many sales are internal. 
C)  how sales vary with social demographics. 
D)  how many distributors are necessary. 
A)  whether any sales are made on consignment. 
B)  how many sales are internal. 
C)  how sales vary with social demographics. 
D)  how many distributors are necessary.

Question 14

Goodwill, family members on the payroll, and planned losses are examples of

Accepted Answer

A)  analyzing the business. 
B)  underlying issues. 
C)  emotional bias. 
D)  establishing the value of a firm. 
A)  analyzing the business. 
B)  underlying issues. 
C)  emotional bias. 
D)  establishing the value of a firm.

Question 15

Closely held ventures usually suffer from which of the following shortcomings?

Accepted Answer

A)  a lack of management depth 
B)  overcapitalization 
C)  insufficient controls 
D)  internal conflict 
A)  a lack of management depth 
B)  overcapitalization 
C)  insufficient controls 
D)  internal conflict

Question 16

If cash flow is deemed the most important consideration in buying a business, which valuation method is likely to be used?

Accepted Answer

A)  adjusted tangible book value 
B)  price/earnings ratio 
C)  high equity/low debt 
D)  discounted earnings 
A)  adjusted tangible book value 
B)  price/earnings ratio 
C)  high equity/low debt 
D)  discounted earnings

Question 17

The price/earnings ratio is determined by

Accepted Answer

A)  patents. 
B)  dividing market price of common stock by earnings per share. 
C)  goodwill. 
D)  deferred financing costs. 
A)  patents. 
B)  dividing market price of common stock by earnings per share. 
C)  goodwill. 
D)  deferred financing costs.

Question 18

When Facebook went public in May of 2012, what was its starting valuation?

Accepted Answer

A)  more than $10 billion but less than $50 billion 
B)  more than $50 billion but less than $100 billion 
C)  more the $100 billion but less than $150 billion 
D)  more than $150 billion 
A)  more than $10 billion but less than $50 billion 
B)  more than $50 billion but less than $100 billion 
C)  more the $100 billion but less than $150 billion 
D)  more than $150 billion

Question 19

On what occasion is a business valuation not usually essential?

Accepted Answer

A)  when giving a gift of stock 
B)  when going public 
C)  when selling a business division 
D)  when hiring a new director of operations 
A)  when giving a gift of stock 
B)  when going public 
C)  when selling a business division 
D)  when hiring a new director of operations

Question 20

List some of the questions to ask before making a potential purchase and explain why each is important.

Accepted Answer

Why is the business being sold? It is im

A drawback to the price/earnings ratio method is that

Potential earning power, which determines the True value of the firm, is best calculated using

Some buyers are willing to pay more for a business than what valuation methods determine its worth to be. What are these buyers attempting to avoid?

Traditional valuation methods includes all of the following except:

Price/earnings ratio is a method of valuation that is

An entrepreneur does not need to know how to calculate the value of a competitor's operation.

The timing of projected income or cash flows is not a critical factor in establishing the value of a firm.

Entrepreneurs should try to be as objective as possible in determining the fair market value for their enterprise.

When a company is liquidated, preferred stockholders received a certain fixed amount after assets are distributed to common stockholders.

Sales and earnings of a venture are projected from

Weaknesses in small closely held businesses call for careful analysis of the business being valued.

Explain the purpose of a letter of intent.

When considering sales and distribution, the entrepreneur should be concerned about

Goodwill, family members on the payroll, and planned losses are examples of

Closely held ventures usually suffer from which of the following shortcomings?

If cash flow is deemed the most important consideration in buying a business, which valuation method is likely to be used?

The price/earnings ratio is determined by

When Facebook went public in May of 2012, what was its starting valuation?

On what occasion is a business valuation not usually essential?

List some of the questions to ask before making a potential purchase and explain why each is important.

Entrepreneurship: Evolutionary Development-Revolutionary Impact

The Entrepreneurial Mind-Set in Individuals: Cognition and Ethics

The Entrepreneurial Mind-Set in Organizations: Corporate Entrepreneurship

Social Entrepreneurship and the Global Environment for Entrepreneurship

Innovation: The Creative Pursuit of Ideas

Assessment of Entrepreneurial Opportunities

Pathways to Entrepreneurial Ventures

Sources of Capital for Entrepreneurs

Legal Challenges of Entrepreneurial Ventures

Marketing Challenges for Entrepreneurial Ventures

Financial Preparation for Entrepreneurial Ventures

Developing an Effective Business Plan

Strategic Entrepreneurial Growth

Harvesting the Entrepreneurial Venture

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Exam 14: Valuation of Entrepreneurial Ventures

A drawback to the price/earnings ratio method is that

Potential earning power, which determines the True value of the firm, is best calculated using

Some buyers are willing to pay more for a business than what valuation methods determine its worth to be. What are these buyers attempting to avoid?

Traditional valuation methods includes all of the following except:

Price/earnings ratio is a method of valuation that is

An entrepreneur does not need to know how to calculate the value of a competitor's operation.

The timing of projected income or cash flows is not a critical factor in establishing the value of a firm.

Entrepreneurs should try to be as objective as possible in determining the fair market value for their enterprise.

When a company is liquidated, preferred stockholders received a certain fixed amount after assets are distributed to common stockholders.

Sales and earnings of a venture are projected from

Weaknesses in small closely held businesses call for careful analysis of the business being valued.

Explain the purpose of a letter of intent.

When considering sales and distribution, the entrepreneur should be concerned about

Goodwill, family members on the payroll, and planned losses are examples of

Closely held ventures usually suffer from which of the following shortcomings?

If cash flow is deemed the most important consideration in buying a business, which valuation method is likely to be used?

The price/earnings ratio is determined by

When Facebook went public in May of 2012, what was its starting valuation?

On what occasion is a business valuation not usually essential?

List some of the questions to ask before making a potential purchase and explain why each is important.

Entrepreneurship: Evolutionary Development-Revolutionary Impact

The Entrepreneurial Mind-Set in Individuals: Cognition and Ethics

The Entrepreneurial Mind-Set in Organizations: Corporate Entrepreneurship

Social Entrepreneurship and the Global Environment for Entrepreneurship

Innovation: The Creative Pursuit of Ideas

Assessment of Entrepreneurial Opportunities

Pathways to Entrepreneurial Ventures

Sources of Capital for Entrepreneurs

Legal Challenges of Entrepreneurial Ventures

Marketing Challenges for Entrepreneurial Ventures

Financial Preparation for Entrepreneurial Ventures

Developing an Effective Business Plan

Strategic Entrepreneurial Growth

Harvesting the Entrepreneurial Venture

Filters