Ch. 15

entrepreneurial

A type of successor who is high in ingenuity, creativity, and drive would be considered a(n) _____ successor. Select one: a. innovative b. opportunistic c. managerial d. entrepreneurial

24

The average life expectancy of a privately held business is _____ years. Select one: a. 24 b. 10 c. 50 d. an indefinite number of

True

The basic rule for privately held businesses is this: The owner should develop a succession plan. Select one: True False

True

Nonfamily employees sometimes put pressure on the owner/manager in an effort to protect their personal interests. Select one: True False

d. the skills specifically required by the business are developed.

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

Oakland scavenger company

One of the most recent legal challenges to management succession came from the _____ case. Select one: a. Johnson Brothers b. Anderson Manufacturing Corporation c. Willy & Willy Inc. d. Oakland Scavenger Company

True

There are two types of succession pressures: family members and nonfamily employees. Select one: True False

False

Timing considerations generally do not impact decisions to sell a business because triggering events are unanticipated. Select one: True False

Present the proposal to the board

Under U.S. law, which of the following is the first step in the initial public offering (IPO) process? Select one: a. Perform a road show. b. Present the proposal to the board. c. Draft a prospectus. d. Select a financial printer.

True

When looking ahead in choosing a successor from inside the organization, the founder often trains a team of executive managers consisting of both family and nonfamily members. Select one: True False

SEC Staff

Which of the following would not be a participant at a due diligence meeting? Select one: a. underwriters b. management representatives c. company counsel d. SEC staff

True

The harvest decision may come when the venture has grown to a stage where an initial public offering (IPO) is a possibility. Select one: True False

Creativity

The managerial successor typically is not interested in Select one: a. efficiency. b. internal control. c. creativity. d. effective use of resources.

Undertaking forcing events

Which of the following is not a step in developing a succession strategy? Select one: a. Undertaking forcing events. b. Understand contextual aspects. c. Develop a written succession plan. d. Identify successor qualities.

Increase management's salaries and fringe benefits.

Which of the following is not a suggestion a tax accountant or lawyer might make concerning tax reduction? Select one: a. Increase management's salaries and fringe benefits. b. Place real estate in a separate corporation. c. Give some or all of the owner's shares to heirs. d. Establish a leasing subsidiary.

pressure from a family member to start his or her own business

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

Communication is a key step between the seller and the buyer and between the buyer and the current management personnel.

Which of the following statements regarding communication after the sale is true? Select one: a. Communication should end at least 10 days prior to signing a buy agreement. b. Continued communication through the transition to new ownership is not critical. c. Communication should end at the time the buy agreement is signed. d. Communication is a key step between the seller and the buyer and between the buyer and the current management personnel.

Mental breakdown

A typical example of a forcing event is a(n) Select one: a. natural disaster. b. IRS audit. c. slow business year. d. mental breakdown.

True

A harvest plan defines how and when owners and investors will realize an actual cash return on their investment. Select one: True False

A desire for liquidity

In a survey of 1,000 business owners, which of the following was a motivation for an entrepreneur to sell a venture? Select one: a. a desire for liquidity b. too many heirs within the company c. legal advice received d. the company getting too big

the challenges and responsibilities of the entrepreneur are over.

Question text "Harvest" does not mean that Select one: a. the firm continues to exist. b. all the profits have been reaped. c. family members agree about the business. d. the challenges and responsibilities of the entrepreneur are over.

False

Question text A managerial successor provides the critical ideas for new-product development and future ventures. Select one: True False

True

Question text Some entrepreneurs are easy to replace, and some cannot be replaced. Select one: True False

Only 16 percent make it to a third generation.

Research on family firms demonstrates which of the following facts? Select one: a. Only 3 percent make it to the next generation. b. Many family firms cease to exist after one month. c. Only 16 percent make it to a third generation. d. Only 9 out of 10 make it to a second generation.

. if family members want to keep and manage the business themselves.

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

Out of court settlement

The Oakland Scavenger Company case resulted in a(n) Select one: a. favorable ruling by the court for the plaintiffs. b. out-of-court settlement. c. appeal to the U.S. Supreme Court. d. favorable ruling by the court for the defendants.

Entrepreneurs vision

A key aspect to be considered in an effective succession is the Select one: a. profitability of the venture. b. marital status of the replacement. c. family's wants and needs. d. entrepreneur's vision.

Sell when profits are low

When selling a business, which of the following is not good advice? Select one: a. Sell when inventory is high. b. Sell when profits are low. c. Sell when sales are peaking. d. Sell when the timing is right.

Family and business cultural issues

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

Segregate the assets

Which of the following steps should be carried out second when deciding to sell a business? Select one: a. Finalize the prospective buyers. b. Segregate the assets. c. Publicize the offer to sell. d. Value the business.