ch 15

A harvest plan a. defines when and how business owners will realize a cash return on investment. b. is similar to a will. c. leaves the business to the next generation. d. is simple to implement.

a

A harvest plan defines how and when the owners and investors will realize an actual cash return on their investment. a. True b. False

a

A type of successor who is high in ingenuity, creativity, and drive would be considered a(n) a. entrepreneurial successor. b. all of these. c. managerial successor. d. opportunistic successor.

a

A typical example of a forcing event is a. death. b. a slow business year. c. an IRS audit. d. a natural disaster.

a

An exit strategy is defined as that component of the business plan where an entrepreneur describes a method by which investors can realize a tangible return on their investment. a. True b. False

a

Nonfamily members sometimes bring pressure on the owner-manager in an effort to protect their personal interests. a. True b. False

a

Succession pressure inside the firm exists a. when family members want to keep and manage the business. b. nonfamily employees don't want the business. c. competition-is hurting the business. d. when the founder wants to give up authority.

a

The Oakland Scavenger case is profound to owners of family businesses in that a. conceivably, the owner can be sued by an employee of a different ethnic origin based upon not being accorded the same treatment as a son or daughter. b. conceivably, the owner can be sued for not declaring a family member his or her successor. c. conceivably, the owner can be sued for not giving equal treatment to a son as to a daughter. d. the owner can be fined for not declaring his or her first son the heir to the business.

a

The forcing events that require an entrepreneur to step aside and let someone direct the operation are usually unforeseen and create major problems for the business. a. True b. False

a

The harvest decision may come when the venture has grown to a stage where an IPO is a possibility. a. True b. False

a

The liquidity event stands for positioning the venture for the realization of a cash return for the owners and investors. a. True b. False

a

The steps in developing a succession strategy are understanding the contextual aspects, identifying successor qualities, and carrying out the succession plan. a. True b. False

a

There are two types of succession pressures: family and nonfamily. a. True b. False

a

An entrepreneurial successor is someone who is interested in efficiency and the effective use of resources. a. True b. False

b

Once the decision is made to harvest the business, the way forward is easy. a. True b. False

b

Which is an influencing factor in succession? a. current economic conditions b. family and business cultural issues c. the competition d. government regulation

b

"Harvest" does not mean a. that the firm continues to exist. b. family members agree about the business. c. the challenges and responsibilities of the entrepreneur are over. d. that any profits will be reaped.

c

A type of successor who is interested in efficiency, internal control, and effective use of resources would be considered a(n) a. family successor. b. opportunistic successor. c. managerial successor. d. entrepreneurial successor.

c

One advantage of the delayed-entry strategy for the younger generation succeeding the older generation of a family business is that a. strong relationships are readily established. b. normal mistakes are viewed as incompetence. c. a successor's skills are judged with greater objectivity. d. knowledge of the environment is limited.

c

Research on family firms demonstrates which of the following facts? a. only 3 percent make it to the next generation b. only nine out of ten make it to a second generation c. only 16 percent make it to a third generation d. many family firms cease to exist after one month

c

The average life expectancy of a privately held firm is a. and indefinite number of years. b. 50 years. c. 24 years. d. 10 years.

c

Which of the following is not an example of pressures or interests from within a firm that affect succession issues? a. rivalry among various branches of the family b. pressure on the owner/manager to designate an heir c. pressure from a family member to start his/her own business d. employee wanting a percentage of the business in the owner's will

c

One advantage of an early-entry strategy for the younger generation succeeding the older generation of a family business is a. normal mistakes are viewed as incompetence. b. successor's skills are judged with more objectivity. c. perspective of the environment is broadened. d. skills specifically required by the business are developed

d

Which of the following is not a contextual aspect to be considered in an effective succession plan? a. time b. type of venture c. environmental factors d. technology

d

Which of the following steps should be carried out third when deciding to sell a business? a. Publicize the offer to sell. b. Finalize the prospective buyers. c. Time the sale appropriately. d. Value the business.

d