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Test: Enterprise Growth Strategies- 2 - Commerce MCQ


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12 Questions MCQ Test - Test: Enterprise Growth Strategies- 2

Test: Enterprise Growth Strategies- 2 for Commerce 2024 is part of Commerce preparation. The Test: Enterprise Growth Strategies- 2 questions and answers have been prepared according to the Commerce exam syllabus.The Test: Enterprise Growth Strategies- 2 MCQs are made for Commerce 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Enterprise Growth Strategies- 2 below.
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Test: Enterprise Growth Strategies- 2 - Question 1

Inshorts Pvt. Ltd. is hiring candidates for its new growth project. The HR team is conducting a campus placement drives in colleges. Since the position is required for growth project, HR asked one of the candidates whether the value of a merged firm will be greater or equal to the two independent firms. The candidate responded confidently that the value of a merged firm will be greater than the sum of two independent merging firms. Keeping in mind the above scenario, state whether the candidate has given a true statement or not.

Detailed Solution for Test: Enterprise Growth Strategies- 2 - Question 1
  • A merger typically occurs when one company purchases another company by buying a certain amount of its stock in exchange for its own stock. Typically, the share price of the company being bought will increase as goodwill is taken into consideration in the purchase price.
  • Mergers combine two separate businesses into a single new legal entity. Unlike mergers, acquisitions do not result in the formation of a new company. Instead, the purchased company gets fully absorbed by the acquiring company. Sometimes this means the acquired company gets liquidated.
Test: Enterprise Growth Strategies- 2 - Question 2

Shruti and Reema were discussing to open a restaurant of McDonalds. Reema informed Shruti that they would need the franchisee of McDonalds in order to open the restaurant. But Shruti denied and said that it is an MNC and they do not require the franchisee. In light of the above statements, state whether what Reema said is true or false. 

Detailed Solution for Test: Enterprise Growth Strategies- 2 - Question 2

MNC franchise: It provides entrepreneurs a low-risk opportunity to co-own a business with a proven format for success. In addition, franchising provides opportunities to capture economies of scale while empowering the entrepreneur.

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Test: Enterprise Growth Strategies- 2 - Question 3

Growth is always an essential part of a business for its existence. A business can only survive in the market and earn more profits if it grows from time to time. Rohan and Seema are planning to expand their business. They have started formulating growth strategies. Rohan has suggested a few ways to Seema which they can adopt. According to Rohan, they may expand the firm using external growth strategies. A few of them includes, Franchising, Mergers and Acquisitions. Keeping Rohan’s suggestion in mind, state whether it is true or not.

Detailed Solution for Test: Enterprise Growth Strategies- 2 - Question 3
  • Franchising: A franchise (or franchising) is a method of distributing products or services involving a franchisor, who establishes the brand's trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system.
  • Mergers: A merger is the voluntary fusion of two companies on broadly equal terms into one new legal entity. The firms that agree to merge are roughly equal in terms of size, customers, and scale of operations. After a merger, shares of the new company are distributed to existing shareholders of both original businesses.
  • Acquisitions: An acquisition is when one company purchases most or all of another company's shares to gain control of that company. Purchasing more than 50% of a target firm's stock and other assets allows the acquirer to make decisions about the newly acquired assets without the approval of the company's other shareholders.
Test: Enterprise Growth Strategies- 2 - Question 4

Given below are the types of acquisitions with their meanings. Match them correctly.

Detailed Solution for Test: Enterprise Growth Strategies- 2 - Question 4

Correct Match:

Test: Enterprise Growth Strategies- 2 - Question 5

Given below are the mergers with examples of each. Match them correctly. 

Detailed Solution for Test: Enterprise Growth Strategies- 2 - Question 5

Correct Match:

Test: Enterprise Growth Strategies- 2 - Question 6

State Whether the Following Statements are True or False.
Q. Internal expansion results from the gradual increase in the activities of the concern.

Detailed Solution for Test: Enterprise Growth Strategies- 2 - Question 6

Internal expansion: Internal expansion results from the gradual increase in the activities of the enterprise.
For internal expansion, a firm may:

  • Expand its present production capacity by adding more machines or by replacing old machines with the new machines with higher productive capacity.
  • By taking up the production of more products or by entering new fields on the production and marketing sides.
  • Internal expansion may be financed by the issue of more share capital, generating funds from old profits or by issuing long–term securities.
Test: Enterprise Growth Strategies- 2 - Question 7

State Whether the Following Statements are True or False.
Q. The operations manual is the part of the agreement that outlines the type of relationship a franchisee is entering into with the franchisor.

Detailed Solution for Test: Enterprise Growth Strategies- 2 - Question 7

The operations manual is the documentation by which an organisation provides guidance for members and employees to perform their functions correctly and reasonably efficiently. It documents the approved standard procedures for performing operations safely to produce goods and provide services.

Test: Enterprise Growth Strategies- 2 - Question 8

State Whether the Following Statements are True or False.
Q. In business format franchise opportunity approach, a company provides a business owner with a proven method for operating a business using the name and trademark of the company.

Detailed Solution for Test: Enterprise Growth Strategies- 2 - Question 8

A business format franchise is a franchising arrangement where the franchisor provides the franchisee with an established business, including name and trademark, for the franchisee to run independently.
Prominent examples of well-known franchise business models include many food chain restaurants, such as McDonald's and Subway. Other examples of franchise opportunities are businesses like UPS and H & R Block. In the United States, there are franchise opportunities available across a wide variety of industries.

Test: Enterprise Growth Strategies- 2 - Question 9

State Whether the Following Statements are True or False.
Q. The person offering the franchise is known as the franchisee.

Detailed Solution for Test: Enterprise Growth Strategies- 2 - Question 9

Franchising is an arrangement where franchisor (one party) grants or licenses some rights and authorities to franchisee (another party).
Franchisor authorizes franchisee to sell their products, goods, services and give rights to use their trademark and brand name. And these franchisee acts like a dealer.

Test: Enterprise Growth Strategies- 2 - Question 10

State Whether the Following Statements are True or False.
Q. A merger occurring between companies in the same industry is vertical merger.

Detailed Solution for Test: Enterprise Growth Strategies- 2 - Question 10

Vertical Merger: A merger between two companies producing different goods or services for one specific finished product. A vertical merger occurs when two or more firms, operating at different levels within an industry's supply chain, merge-operations.

Test: Enterprise Growth Strategies- 2 - Question 11

State Whether the Following Statements are True or False.
Q. During mergers and acquisitions, the value of the combined entity is expected to be greater than the sum of the independent values of the merging firms.

Detailed Solution for Test: Enterprise Growth Strategies- 2 - Question 11
  • Synergy is the concept that the combined value and performance of two companies will be greater than the sum of the separate individual parts.
  • Synergy is a term that is most commonly used in the context of mergers and acquisitions (M&A).
Test: Enterprise Growth Strategies- 2 - Question 12

State Whether the Following Statements are True or False.
Q. The merger between the Walt Disney Company and the American Broadcasting Company is an example of conglomerate merger.

Detailed Solution for Test: Enterprise Growth Strategies- 2 - Question 12
  • A conglomerate merger is "any merger that is not horizontal or vertical; in general, it is the combination of firms in different industries or firms operating in different geographic areas".
  • One example of a conglomerate merger was the merger between the Walt Disney Company and the American Broadcasting Company.
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