What is the advantage to starting a business from scratch instead of buying an existing business?
A) There is a proven ability to attract customers.
B) Profit is generated sooner.
C) There is a stronger relationship with lenders and other stakeholders.
D) There are no ill-effects from the previous owner.
E) There is a clearer picture of what to expect in terms of start-up.
Answer: D
Explanation: D) A new business doesn't suffer the ill effects of a prior owner's errors, and the start-up owner is free to choose lenders, equipment, inventories, locations, suppliers, and workers.
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You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 3 million shares of stock. Since then, you have sold an additional 2 million shares of stock to angel investors
You are now considering raising capital from a venture capital firm. This venture capital firm would invest $4 million and would receive 2 million newly issued shares in return. Assuming that this is the venture capitalist's first investment in your firm, what percentage of the firm will the venture capitalist own? A) 36% B) 29% C) 17% D) 21%