Declan Plans to Open Up Three Pizza Pals Franchises in the Greater

question 208

Multiple Choice

Declan plans to open up three Pizza Pals franchises in the greater Phoenix area. He tells you that he plans to negotiate with the franchisor to get rid of the giant Preston the Pizza that sits on the roof of all Pizza Pal restaurants. Declan is likely to learn that

• A) the parent company will give him a start-up cost break for the same amount that it would have to pay for three of these signs.
• B) he is making a smart decision because it is not the sign that will bring customers to his pizza joint. It is the wide selection of toppings and six different crust offerings that keep the customers coming in.
• C) it is nonnegotiable due to company rules.
• D) his failure rate will not increase or decrease because franchises traditionally have low failure rates.

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Definitions:

Deferred Tax Asset

A tax reduction or benefit that arises due to temporary differences between the book value and tax value of assets and liabilities, which can be used to offset future tax liabilities.

Income Taxes Payable

The amount of income tax a company owes to the government but has not yet paid, usually accumulated over a financial period.

Income Tax Expense

The amount of money a company owes in taxes based on its taxable income.

Long-term Debt

Debt obligations with a maturity of more than one year, utilized to finance a company's operations or expansions over a longer period.