BUSE129 Ch 13-15

Identify a true statement about Chapter 13 bankruptcy.

A court-appointed trustee receives money from the debtor and is liable for making scheduled payments to all creditors.

Hassan is an entrepreneur who has started a software firm that creates mobile applications. Hassan thinks that he should resign from the role of CEO and hire someone who has the ability to satisfy his aspiration for growth. He plans to focus on developing the R&D and creating new apps. Based on the ability of the entrepreneur to make a transition to professional management practices and the entrepreneur's aspirations, identify the type of the firm growth outcome.

A firm with constrained growth

Jemina is an entrepreneur who runs a fashion boutique for a range of clothes for girls aged 12 to 17 years. Her dream is to grow her business only to an extent that her task does not become that of a professional manager's. She has been a successful entrepreneur and has effectively managed many firms. Her current venture is an example of a lifestyle business. Based on the ability of the entrepreneur to make a transition to professional management practices and the entrepreneur's aspirations, identify the type of the firm growth outcome.

A firm with unused potential for growth

Which of the following is true about franchising?

A franchisee uses the brand name of the franchise that is well established.

Which of the following are the disadvantages of franchising for a franchisor? (Check all that apply.)

A franchisor may find it very difficult to obtain quality franchisees. The ability of a franchisor to maintain tight controls becomes more difficult as the number of franchises increases.

Identify an example of backward integration as a diversification strategy.

A laptop manufacturer establishing a retail unit that sells microprocessors and other parts of a laptop

Identify a true statement about acquisitions.

Acquisitions can take many forms based on the goals and position of the parties involved in the transaction.

In the context of succession planning in nonfamily business situations, which of the following issues should be considered in a succession plan when there are only a small number of shareholders? (Check all that apply.)

All employees should be welcomed to participate in the transition process. Senior management of the company must be committed to any succession plan.

Identify a true statement about the sensitivity analysis conducted when projecting cash flow in the early stages of a venture.

An entrepreneur can use 1 plus and minus 5 for an optimistic and pessimistic cash estimate for monthly expected cash flow.

______ has become a more common and frequently used exit strategy in the current economic environment.

An entrepreneur selling out to a larger company

Which of the following is true according to the principle of effectiveness in time management?

An entrepreneur should try to finish each task in a single session.

Match the types of diversification strategies used by companies (in the left column) with their examples (in the right column).

Backward integration A company that sells dairy products buys a dairy farm. Forward integration A manufacturer of men's clothing starts a retail store that sells its clothing line. Horizontal integration A company that manufactures personal computers develops operating systems.

Match the types of diversification strategies used by companies (in the left column) with their definitions (in the right column).

Backward integration Refers to taking a step up on the value-added chain toward the raw materials Forward integration Refers to taking a step down on the value-added chain toward the customers Horizontal integration Occurs at the same level of the value-added chain but involves a rather different, but complementary, value-added chain

Identify the lessons that can be learned from entrepreneurs who have experienced bankruptcy. (Check all that apply.)

Bankruptcy safeguards entrepreneurs only from creditors. Entrepreneurs should file early when they consider that their business is going to fail

Which of the following are the most common means of acquisition? (Check all that apply.)

Bootstrap purchase of a firm's assets An entrepreneur's direct purchase of a firm's entire stock or assets

Identify a true statement about brokers in acquisitions.

Brokers represent the seller and will sometimes aggressively find buyers using referrals, advertising, or direct sales.

Which of the following is a stress point that an entrepreneur should be aware of when managing a venture in its early stages?

Change in the size of the venture

Instead of a forcing the end of a business, Blank______ can offer an entrepreneur an option to reorganize or to merge with another company.

Chapter 11

The least severe alternative to bankruptcy is

Chapter 11

Which form of bankruptcy provides the option to an entrepreneur to reorganize and make a venture more solvent?

Chapter 11 bankruptcy

______ is the most extreme case of bankruptcy and is in the best interests of the entrepreneur if there is no hope of recovery.

Chapter 7 bankruptcy

Which of the following is a requirement for keeping a new venture afloat?

Create good marketing plans with clear objectives.

Which of the following are the major problems that have kept industry-university joint ventures from proliferating at a fast pace? (Check all that apply.)

Demands of industry partners to have all proprietary rights Demands of universities to have a share in the financial returns from patents Demands of industry partners to be given total control over the partnership

Match the means of acquisition (in the left column) with their descriptions (in the right column). Instructions

Direct purchase of firm's entire stock or assets An entrepreneur often obtains funds for the purchase from an outside lender or the seller of the company being purchased. Bootstrap purchase of a firm's assets An entrepreneur acquires a small amount of the firm for cash and then purchases the remainder of the company with a long-term note that is paid off over time out of the acquired company's earnings.

Which of the following is true about the managerial assistance provided by franchisors?

Each new franchisee is usually required to undergo a training program on all aspects of operating the franchise.

Which of the following are the advantages of the participative style of management of employees? (Check all that apply.)

Employees are better prepared and inspired to implement the decided course of action in a decision-making process. Involving others in the decision-making process reduces the information-processing demands on the entrepreneur.

Identify the internal problems that are created when a business is transferred to a family member who has not been involved in the business. (Check all that apply.)

Employees who have been with the firm since startup may resent the younger family member's assuming control of the venture. The family member may be entrusted with the responsibility of running the business without adequate training.

dentify the strategies that an entrepreneur should follow when he or she has decided to sell the business but does not need to sell immediately. (Check all that apply.)

Ensure all financial statements are in order, including budgets and cash flow projections Get nondisclosures from important employees

Identify the factors that can reduce the risk of business failure. (Check all that apply.)

Ensure relatively accurate cash projections are made. Identify stress points that can cause the business to be in danger.

______ involve an initial public offering, private sale of stock, succession by a family member or a nonfamily member, merger with another company, or liquidation of a company.

Exit strategies

Match the decisions made in a reorganization plan in Chapter 11 bankruptcy (in the left column) with their characteristics (in the right column). Instructions

Extension This happens when two or more of the largest creditors agree to postpone any claims. Substitution If the future potential of a venture looks encouraging, it may be possible to exchange stock or something else for the existing debt. Composition settlement The debt is prorated to the creditors as a settlement for any debt.

Identify the disadvantages of franchising to a franchisee.

Failure of the franchisor to offer services, advertising, and location Inability of the franchisor to keep promises made in the franchise agreement

True or false: An inexpensive way for entrepreneurs to overcome pressures on existing financial resources is by acquiring new resources.

False

True or false: An unproven franchise will be a less expensive investment with a low risk.

False

True or false: Comparison of the actual and budgeted expenses in the income statement can be helpful for new ventures where there are multiple products or services.

False

True or false: Entrepreneurs should plan an exit strategy at the expansion stage of their venture.

False

True or false: Management buyouts usually involve an indirect sale of the venture for a bid price.

False

True or false: Managing one's time means that an entrepreneur must make himself or herself inaccessible to others.

False

True or false: The bargaining zone approach in a negotiation between an entrepreneur and the growth partner focuses on the integrative stage.

False

True or false: The degree of symmetry in a joint venture is limited to the chemistry between the companies involved.

False

True or false: The results of each bankruptcy filing is mostly similar.

False

True or false: When deciding to sell his or her business, an entrepreneur should project the business as having a smaller share in a large market than a larger share in a small market niche.

False

Which of the following are suggestions that can be followed for survival from bankruptcy? (Check all that apply.)

File before the venture exhausts cash or has no incoming revenue. Focus efforts on developing a reasonable financial reorganization plan.

Identify a true statement about management buyout of a venture.

Financing the sale of the venture can be achieved through a bank, or the entrepreneur could also agree to carry the note.

Identify the type of firms that are led by entrepreneurs who possess the necessary abilities for transition but do not aspire to do so.

Firms with unused potential for growth

Identify the strategies that an entrepreneur should follow when he or she has decided to sell the business but does not need to sell immediately. (Check all that apply.)

Get nondisclosures from important employees Ensure all financial statements are in order, including budgets and cash flow projections

Identify the suggestions that an entrepreneur should follow for surviving bankruptcy. (Check all that apply.)

Have a clear understanding of how the protection against creditors works and what is necessary to keep it in place. Be ready to have creditors examine all financial transactions for the last 12 months.

Matthias is an entrepreneur who runs a home stay for tourists visiting the Hawaiian Islands. His dream is to grow his business only to an extent that it does not become one of a professional manager. His business is an example of a lifestyle business. In the given context, which of the following steps is Matthias expected to take?

He is likely to control his business from growing beyond a certain point.

Adrian is an entrepreneur heading a rapidly growing venture. As the venture grows and expands, he experiences the pressure of managing the employees in the venture. Identify a strategy that Adrian should use to overcome the pressure of managing of employees.

He should provide training to employees to increase their ability and improve their performance.

Which of the following are critical factors to be considered for an effective succession plan for a business when family members are involved? (Check all that apply.)

Income for working family members and shareholders Role of the owner in the transition stage

CT Koffee, a chain of coffeehouses in the United States, wants to pursue the penetration strategy to increase its growth and revenue. Which of the following steps should the company take to achieve growth using the penetration strategy?

Increase its marketing budget for promotion campaigns that encourage existing customers to visit its cafes more often

Identify the benefits of time management for entrepreneurs of rapidly growing ventures. (Check all that apply.)

Increased productivity Improved interpersonal relationships

______ refers to exploring possible mutual benefits from a business relationship so that the "size of the pie" can be increased.

Integration task

Identify the implications of growth for a firm.

It can lead to a stretching of the existing financial resources. It can cause problems of employee morale and employee burnout.

What are the advantages of franchising to franchisors?

It helps them achieve economies of scale by buying supplies in large quantities. It helps the venture to grow quickly using little capital.

Identify the advantages of an employee stock option plan. (Check all that apply.)

It offers a unique incentive to employees that can boost their motivation to put in extra time or effort. It acts as a mechanism to pay back those employees who have been faithful to the venture.

Which of the following is a disadvantage of the employee stock option plan (ESOP)?

It requires a total valuation of the venture to estimate the amount of the ESOP package.

Identify a feature of an effective succession plan for a business.

It should be clearly communicated to all employees.

Ascento Inc. manufactures and sells smartphones that are aimed at high-end customers in the United States. The company decides to use market development strategies for enhanced growth. Which of the following should Ascento Inc. do to follow its market development strategy?

It should manufacture and sell budget smartphones.

AQO2, a company that sells fruit-based beverages in the United States, has a popular product named Ozo. Ozo is marketed as a sports drink for teenagers and young adults. The company plans to use the penetration strategy for growth. Which of the following should the company do to follow the penetration strategy?

It should revise the marketing strategy for Ozo to promote it as a supplemental drink that can be consumed every day.

AYZ Techno Solutions, a software solutions provider, is a newly established venture that is rapidly growing and expanding. This leads to pressure on its existing human resources. The venture does not have the luxury of a human resource department that can interview, hire, and evaluate employees. Which of the following steps should the company take to overcome pressures on its existing human resources?

It should use a professional employer organization to hire and retain employees.

Which of the following is true about leasing as an alternative for buying equipment or fixed assets?

Leasing may be a good alternative depending on the type of asset to be leased and the usage demand on the asset.

______ focus on selling a firm's existing products to new groups of customers.

Market development strategies

Which of the following is true about mergers?

Mergers can safeguard against market encroachment, product innovation, or an unwarranted takeover.

Which of the following are the disadvantages of acquisition for an entrepreneur? (Check all that apply.)

Most ventures that are up for acquisition have a marginally successful or even unprofitable track record. The actual purchase price may be inflated due to the established image, existing customer base, channel members, or suppliers.

Match the categories of customers in market development strategies (in the left column) with their descriptions (in the right column).

New geographical market Refers to selling an existing product in new territorial markets New demographic market Refers to characterizing customers based on their income, education, age, sex, and other factors New product use Refers to knowledge of a product's new use that allows producers to modify their product slightly to better satisfy customers

Which of the following should be practiced by an entrepreneur to deal with incompetent employees?

Problems should be identified with a proposed solution agreeable to both the employee and the entrepreneur.

______ for growth involves developing and selling new products to customers who are already purchasing a firm's existing products.

Product development strategies

Identify the strategies that an entrepreneur uses for overcoming pressures of managing employees. (Check all that apply.)

Providing frequent feedback to employees Conducting open and frequent communication with employees

Which of the following factors will increase the entrepreneur's chances of success?

Seek assistance from accounts, lawyers, or the SBA in understanding and projecting good cash flow. Have confidence in their abilities.

Which of the following is an advantage of franchising to a franchisor?

The ability to spend larger sums of money on advertising

Identify the advantages of acquisition for an entrepreneur.

The acquired firm has an established image and track record. New customers of the acquired firm are already familiar with the customer location.

Identify the factors involved in a joint venture success. (Check all that apply.)

The assessment of the parties involved should be accurate to best manage the new entity in light of the ensuing relationships. The timing of the venture must be right.

Identify a true statement about Chapter 11 bankruptcy.

The courts try to give the venture in this situation time to pay its debts.

An entrepreneur decides to transfer his business to his family member. How can the family member who is a successor and is in the transition stage be helped in making business decisions?

The entrepreneur can act as an advisor for the successor during the transition stage.

Identify the disadvantages of acquisition for an entrepreneur. (Check all that apply.)

The entrepreneur may have overconfidence in his or her ability. The key employees of the acquired company may often leave when the business changes hands.

Which of the following should an entrepreneur do to effectively manage costs and profits in a rapidly growing new venture?

The entrepreneur should assess each item to decide whether costs can be reduced or increased to ensure future positive profits.

Which of the following should an entrepreneur do when assessing the opportunity of investing in a franchise?

The entrepreneur should assess the profit potential for the franchise.

Which of the following should an entrepreneur do when managing a venture in its early stages?

The entrepreneur should set sales values that may represent key decision marks in terms of major capital investment.

Identify a true statement about the participative style of management of employees by entrepreneurs.

The entrepreneurs involve the employees in the decision-making process.

Which of the following statements about the capital requirements of franchisees is true?

The franchisor may finance the initial investment to start the franchise operation in some cases.

Which of the following are true about joint venture arrangements between two or more private-sector companies? (Check all that apply.)

The joint venture can be formed to perform cooperative research. There is a detailed cost-sharing arrangement between the different entities of the partnership.

______ is the primary reason why acquisitions fail to generate the expected synergies and future benefits.

The problem of integrating the new organization's culture with the existing organizational culture

Identify a feature of the succession process in nonfamily business situations.

The process may be precisely defined in a partnership agreement and could involve a predetermined choice.

Identify the factors that should be considered by an entrepreneur when choosing a franchise. (Check all that apply.)

The purchase of a franchise should involve an assessment of the financial stability of the franchisor. It is important for the entrepreneur to assess the market that the franchise will attract.

Identify the true statements about the reforms in the Bankruptcy Code that were signed into law in April 2005. (Check all that apply.)

The reforms made it more challenging to walk away from all debt by filing for Chapter 7 bankruptcy. Under the law, individuals have to necessarily obtain credit counseling within six months of filing.

Identify a true statement about the third and the last step, or principle, in a business turnaround process.

The step involves aggressive corrective action.

Shoptop Retail Inc. is a new retail corporation that has established retail stores in different cities in the United States. The company has completed six months. Which of the following would most likely be a warning sign of bankruptcy for the company?

The stores giving large discounts to customers to increase cash flow

Identify a true statement about joint venture agreements between two or more private-sector companies.

These types of joint venture agreements are the most common.

Identify a true statement about employee stock option plans.

They are a way to award employees and clarify the succession process.

Which of the following are true about entrepreneurs of firms with constrained growth? (Check all that apply.)

They are the most likely to be frustrated by the firm's lack of growth. They are in the most danger of failure.

Identify a characteristic of entrepreneurs of firms with constrained growth.

They aspire to grow their businesses but do not possess sufficient abilities to successfully satisfy this aspiration.

Identify a true statement about joint ventures.

They have occurred between rival companies.

Identify the characteristics of entrepreneurs in firms with actual growth.

They possess both the ability to transition to a more professional management approach and the aspiration to grow their businesses.

Julia is an entrepreneur whose venture is rapidly growing and expanding. She faces a problem of time management. According to the principle of analysis in time management, identify the step that Julia should take to manage her time better.

Track her time using a time sheet with 15-minute intervals

Identify the correct statement regarding the transfer of a business from an owner to an employee:

Transferring a business from an owner to an employee usually takes longer than transferring to a family member, which makes for a more smooth transition.

True or false: A franchise provides an opportunity to establish a new venture with up-front support that could save the entrepreneur significant time and capital.

True

True or false: Bankruptcy should be shared with employees and everybody else involved in an organization.

True

True or false: Effective time management depends on an entrepreneur's willpower and self-discipline.

True

True or false: Regardless of the mode used for the growth of a firm, entrepreneurs need to be good negotiators.

True

Identify the true statements about industry-university joint ventures. (Check all that apply.)

University researchers want to make the research knowledge available through research papers. Profit corporations want to obtain tangible results, such as a patent, from their research investment and want to acquire all proprietary rights.

Match the types of franchises (in the left column) with their characteristics (in the right column). Instructions

Unproven franchise A franchisor likely to make mistakes as the business expands. Proven franchise It offers lower risk to the franchisee but requires more financial investment.

Which of the following are the most active providers of the debt needed in leveraged buyouts? (Check all that apply.)

Venture capitalists Banks Insurance companies

Which of the following is true about backward integration as a diversification strategy for a firm?

Which of the following is true about backward integration as a diversification strategy for a firm?

An entrepreneur's best alternative to a negotiated agreement helps determine

a reservation price for the negotiation

Entrepreneurs who possess the ability to make the transition to a more professional management approach and the aspiration to grow their businesses are the most likely to Blank______.

achieve firm growth

A(n) ___ is the purchase of an entire company, or part of a company.

acquisition

The first principle in any successful business turnaround is

aggressive hands-on management

The final consideration when an entrepreneur is faced by the prospect of failure of a venture is to Blank______.

avoid hanging on to a venture that will continually drain resources

The ___ ___ is the range of outcomes between an entrepreneur's reservation price and the reservation price of the other party.

bargaining zone

People who sell companies are known as

brokers

An advantage of using the product development strategy for growth is the chance to

capitalize on existing distribution systems and on the corporate reputation a firm has with its customers

When faced with the prospect of failure, the entrepreneur should first

consult with his or her family

When faced with the prospect of failure, the entrepreneur should first Blank______.

consult with his or her family

Under Chapter 13 bankruptcy, the individual who has filed for bankruptcy

creates a five-year repayment plan under court supervision

A franchise where manufacturers use franchises to distribute their product lines is called a

dealership

In the context of primary tasks for an entrepreneur negotiating with another party for access to an external growth mechanism, the ___ ___ refers to negotiating how the benefits of a business relationship will be allocated between the parties.

distribution task

In the context of growth strategies, Blank______ involve selling a new product to a new market.

diversification strategies

The need or magnitude of the new resources required by an entrepreneur for his or her firm can be reduced through

effective management of existing resources

A(n) Blank______ refers to a two- to three-year plan to sell the business to employees.

employee stock option plan

According to the penetration strategy, an entrepreneur tries to penetrate his or her firm's product or market further by

encouraging existing customers to buy more of the firm's current products

An advantage of expansion and growth for a new firm is that an increase in size Blank______.

enhances the legitimacy of the firm

True or false: Comparison of the actual and budgeted expenses in the income statement can be helpful for new ventures where there are multiple products or services.

false

True or false: Diversification strategies are completely unrelated to an entrepreneur's and a firm's knowledge.

false

Growth may not be pursued by entrepreneurs because they may have a belief that in doing so

firm profitability or the firm's chances of survival will be sacrificed

The ___ is the person who purchases a franchise and is given the opportunity to enter a new business with a better chance to succeed than if he or she were to start a new business from scratch.

franchisee

is a way by which an entrepreneur may grow his or her firm by having others pay for the use of the firm's name, process, product, service, and so on.

franchising

The person offering a franchise is known as the

franchisor

The second principle in any successful business turnaround is that the management must

have a turnaround plan created using the questions required to be addressed in a planning process

______ refers to exploring possible mutual benefits from a business relationship so that the "size of the pie" can be increased.

integration task

It is important for an entrepreneur to have confidence in their abilities because:

it allows them to meet changing market conditions by implementing new strategies to lead their firms to achieve future success.

A ___ ___ is a separate entity that involves a partnership between two or more active participants to form a company.

joint venture

The key to enhancing the bankruptcy process is Blank______.

keeping creditors informed of how the business is doing

An advantage of acquisition for an entrepreneur is that the employees of the acquired company

know how to run the business

___ refers to purchasing an existing venture by any employee group.

leveraged buyout

A relatively large proportion of all Blank______ are represented by entrepreneurs who possess the necessary abilities for transition but do not aspire to do so.

lifestyle firms

The most common type of business bankruptcy is Blank______, which accounted for about two-thirds of the total in 2017.

liquidation

Fixed assets generally involve Blank______ for a new venture.

long-term commitments

In a leveraged buyout, capital is acquired in the form of

long-term debt financing

When an entrepreneur notices any of the warning signs of bankruptcy in his or her venture, he or she should immediately Blank______.

look for advice from a CPA or an attorney

An advantage to a franchisee in franchising is the

managerial support provided by the franchisor

An amusement park in the United States caters to the kids and youths segment. It plans to enter the market in countries such as India and China. It also plans to have new rides that will allow senior citizens to enjoy their visit to the park. This growth strategy of the park is an example of the Blank______.

market development strategy

The joining of two or more companies into a single company is referred to as a(n)

merger

The key issue in passing a business on to an employee is

ownership

The key issue in passing a business on to an employee is

ownership.

In the context of growth strategies, the Blank______ focuses on a company's existing product in its existing market.

penetration strategy

Ideally, an acquisition should _____.

positively influence the bottom line, impacting both long-term gains and future growth

An entrepreneur with exceeding cash outflow trying to have an up-to-date assessment of his or her cash position can accomplish that by

preparing monthly cash flow statements

The Blank______ provides information to an entrepreneur about how time is currently being allocated, highlighting inefficient or inappropriate investment of time.

principle of analysis

According to the principles of time management, the Blank______ requires that an entrepreneur recognizes that they are a time waster, that time is a valuable resource, and that there is a requirement to change personal attitudes and habits concerning the allocation of time.

principle of desire

According to the principles of time management, the Blank______ requires an entrepreneur to focus on the most important issues, even when under pressure.

principle of effectiveness

The Blank______ acknowledges the increasing importance of delegation for an entrepreneur of a growing firm; that is, the entrepreneur must require others to take responsibility for the completion of tasks previously undertaken by the entrepreneur.

principle of teamwork

A Chapter 11 ___ occurs when a venture has cash flow problems and creditors begin to pressure the firm with lawsuits. The courts try to give a venture "breathing room" to pay its debts.

reorganization

The ___ is the price at which an entrepreneur is indifferent about whether to accept the agreement or choose an alternative.

reservation price

Recognizing the relative importance of the issues during a negotiation allows an entrepreneur to

sacrifice equity but obtain control

Entrepreneurs who usually build a business, sell it or go public, and then move on to a different idea or venture are referred to as

serial entrepreneurs

One of the types of franchise offers Blank______, which include personnel agencies, income tax preparation companies, and real estate agencies

services

During the reorganization period, the entrepreneur can speed up the process by Blank______.

taking the initiative in creating a plan

In the context of negotiation, if the information about the issues important to each party is known to both parties and they use it, then it is likely that

the outcome will be mutually beneficial

According to the reforms in the Bankruptcy Code that were signed into law in April 2005, the means test used to ascertain eligibility for Chapter 7 or Chapter 13 states that individuals may not file for Chapter 7 bankruptcy if Blank______.

their income is at or above the state income median level

The process of improving an individual's productivity through more efficient use of time is referred to as

time management

If an entrepreneur files a ___ ___ petition under Chapter 7, it constitutes a determination that his or her venture is bankrupt.

voluntary bankruptcy

A franchisee usually enters into a business that has a(n)

well-known name, product, or service