QUESTION 50

One advantage of setting up a business as a sole proprietorship is that net losses for the business can be used to offset income from other sources of income. This can reduce income tax liabilities for the entrepreneur.

True

False

QUESTION 51

Japanese-Style Cheesecake by Sarah Lee, H Caf, Unionville, ON

Always Fluffy, Not Stuffy

Remember Sarah Lee from H Caf in Unionville?

H Caf always has long lineups of customers who patiently wait for Sarah Lee's famous (and delicious) Japanese-Style Cheesecakes. While she could very easily purchase similar cheesecakes from Costco and resell them at H Caf, which would save her time and earn considerably more profit, Sarah insists on crafting her own cheesecakes. She asserts that Costco's Japanese-Style Cheesecakes are as fluffy as hers because they're missing one key ingredient: Love.

Which of the following is a likely explanation as to why Sarah refuses to purchase similar Japanese-Style Cheesecakes from Costco for resale at H Caf?

		If Sarah were to buy Japanese-Style Cheesecakes from Costco and resell them, she wouldn't be able to claim that she had made them.
		If Sarah were to purchase the product from Costco, customers may find out. They would go to Costco to buy their Japanese-Style Cheesecakes instead of buying them from H Caf.
		Costco's Japanese-Style Cheesecakes lack one ingredient: Love.
		The product available for sale at Costco are mass-produced and lack the same high-quality ingredients that gives Sarah's Japanese-style Cheesecakes its unique fluffiness.

1 points

QUESTION 52

Suppose you are an entrepreneur who wishes to set up a light manufacturing facility in small town north of the GTA because you expect costs will be lower than operating in the Greater Toronto Area (GTA). Why would you be interested in the trading area's economic base?

		Potential for future sales
		Availability of skilled labour and rate of expected pay
		Determine competition in the local trading area
		Possible receipt of economic incentives from the local municipality

1 points

QUESTION 53

Suppose you plan to purchase an existing restaurant.

When would you not need to complete an industry analysis before submitting the Offer to Purchase?

		When the cost to complete a comprehensive analysis is too high, the process to complete one would be a lengthy process or would jeopardize your ability to bargain competitively.
		When the industry in which the business is in is NOT dominated by one or more key players.
		When you already have extensive and current knowledge of the industry.
		When there is NO information readily available for the trading area in which the business operates.

1 points

QUESTION 54

When purchasing a business, how should non-liquid assets be treated?

		They should be considered to have no value whatsoever
		They should be given a value of 20% of book value
		They should be ignored for business planning purposes
		They should be subjected to an independent appraisal

1 points

QUESTION 55

Suppose that you're considering to buy an existing business, but upon reviewing the financial statements, you discover that it's been losing money for the past couple of years. Which of the following would persuade you to purchase this business, despite its recent losses?

		You feign deep concern over the firm's recent losses and make a low-ball offer that's 10% of her asking price while informing her that you're doing a favour.
		You make an offer that's 50 per cent of the asking price and attach the condition that she finances the purchase.
		You realize that factors causing recent losses can be changed so that the business can turn around and generate a profit (e.g., use of outdated technology/equipment)
		Based on the principle that the sum of a business' parts is greater than its whole, you buy the business and sell part of it piece by piece (divestiture) to generate a profit

1 points

QUESTION 56

Which of the following non-financial aspects of a business is most likely a red flag that you should further examine when purchasing an existing business?

		Owner provides audited financial statements for the last three years.
		Firm's employees has a high turnover rate
		The owner has been traveling overseas extensively
		A preliminary analysis of the industry suggests future growth

QUESTION 57

You observe that an existing business that you wish to purchase, has very strong relationships with its customers. What does this indicate?

		The business has a policy of low pricing
		The business has a high demand of its product/service
		The business has good management and good employees
		The business is in a market with few competitors

1 points

QUESTION 58

Registration fee of 2% of the total amount borrowed under the CSBFP must be paid to the lender by the borrower AND the value of this fee may be financed as part of the loan.

True

False

1 points

QUESTION 59

Sam's small business loan application for $5,000 to start her new dog walking and pet sitting service was recently declined by her credt union's Financial Advisor.

What should Sam do?

		Sam should return to her credit union financial advisor and specifically ask for a CSBFP loan, informing him that the loan is 85% guaranteed by the federal government.
		Apply at a Big 5 Bank using the same business plan because they have staff who specialize in lending to businesses.
		Tell her financial advisor that he's "barking" up the wrong tree
		Meet with her Financial Advisor to learn why her loan application was declined, then resubmit another application that addresses and rectifies factors that caused her first submission to be declined.
		Consider leasing equipment instead of purchasing them to reduce start-up costs.

QUESTION 60

To be eligible for Futurpreneur funding, applicants must be aged 18-39 years.

Unlike most financial institutions, Futurpreneur doesn't require borrowers to provide collateral to secure its loans.

Which of the following best explains why Futurpreneur doesn't require its borrowers to provide collateral?

		As a non-profit organization with no shareholders to report to, Futurpreneur doesn't need collateral to secure loans that it advances
		Not requiring collateral to secure its loans to target customers differentiates Futurpreneur from its profit-seeking competitors
		Requiring its target customers, many of whom may not have accumulated sufficient wealth, to provide collateral may be unreasonable and can add stress that hampers success in their business ventures.
		Doing so attracts and retains customers who have some training and experience to support their business ideas. These are perceived to be more valuable than collateral.