QUESTION 21

Franchising allows franchisors to expand quickly because franchisees provide capital for the company's growth.

Founded in 1999, Booster Juice is Canada's largest chain of fruit juice and smoothie bars. Using the franchising model, the company set a Canadian record for having opened 50 stores during its first two years of operation. In 2002, however, CEO, Dale Wishewan, deliberately slowed expansion of its franchise.

Which of the following likely explains why the CEO pulsed the brakes on Booster Juice's expansion plans?

		Rapid growth can cause the firm's resources to be stretched beyond their initial capacity (e.g., quality control, supply chain, finance, etc.). Slowing expansion ensures resources are available to facilitate the company's stable growth.
		Rapid growth can result in an influx of applications from prospective franchisees. Slowing expansion would allow the franchisor to carefully review and vet applications for compatible fit.
		Deliberately slowing expansion can enable the franchisor to consider buying out and taking over competing fruit and smoothie bars. This would be a cost-effective way of gaining share of market.
		In 2002, the economy in the U.S. was still recovering from The Great Recession. Slowing expansion would have mitigated the financial impact from The Great Recession and allow existing franchisees to grow their sales.

1 points

QUESTION 22

One reason why prospective buyers of an existing business should meet the firm's key employees is to evaluate their reaction to the sale of the business.

True

False

1 points

QUESTION 23

Aged Listing of Accounts Receivables

Suppose that a banker received the foregoing monthly Aged Listing of Accounts Receivables from her client, Acme Inc., as partial requirements to secure an Operating Line of Credit. According to our lesson, what value of Accounts Receivables would she discount because her bank doesn't consider them collectible?

		$10,000 ($6,000 + $1,500 + $2,500)
		$24,500 ($14,500 + $6,000 + $1,500 + $2,500)
		$4,000 ($1,500 + $2,500)
		$2,500

1 points

QUESTION 24

Which term describes the type of accounting engagement in which the accountant presents information in the financial statement based solely on information provided by the firm's management, and to which the accountant has made no attempt to confirm the veracity of the information provided?

		Compilation
		Audit
		Review
		Engagement

1 points

QUESTION 25

John Deere manufactures and sells agricultural and heavy equipment through a network of stores that exclusively sell John Deere products.

True or false: John Deere is a Manufacturer-directed franchise.

True

False

1 points

QUESTION 26

What is a disadvantage of asking a lender for a government-guaranteed Canada Small Business Financing Program loan?

		The lender has sole authority to approve or decline the loan application.
		Businesses must have at least one year's operating experience prior to applying for the the CSBFP.
		Interest payments must be paid monthly regardless of the business' cash flow.
		Reduction in interest expense are considered taxable benefits and are not deductible.

1 points

QUESTION 27

Debt leverage is described as increasing the rate of return on funds invested by borrowing funds.

True

False

1 points

QUESTION 28

A disadvantage of equity financing is diluted ownership.

True

False

1 points

QUESTION 29

What are some disadvantages that business owners face when applying for a loan under the Canada Small Business Financing Program?

[NOTE: Choose all responses that are correct. Partial credits are alloted for correct responses.]

		Loans decisions are made solely at the discretion of the lender (financial institution)
		CSBFP loans may be eligible for reduced interest expense deductions
		Small business owners may be required to provide more collateral to secure loans
		Small businesses may be subject to increased monitoring/reporting

1 points

QUESTION 30

One disadvantage of debt financing is the lack of diversification of risk to other investors.

True

False