ENTR 321 Chapter 15

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

True

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

True

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.) knowledge of the environment is limited d.) a successor's skills are judged with greater objectivity

a successor's skills are judged with greater objectivity

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

entrepreneurial successor

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

family and business cultural issues

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

managerial successor

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

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

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

skills specifically required by the business are developed

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

technology

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

the challenges and responsibilities of the entrepreneur are over

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 True or False

True

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.) when the founder wants to give up authority d.) competition is hurting the business

when family members want to keep and manage the business

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

False

Once the decision is made to harvest the business, the way forward is easy True or False

False

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

True

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

True

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

True

There are two types of succession pressures: family and nonfamily True or False

True

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

death

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

defines when and how business owners will realize a cash return on investment

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

only 16 percent make it to a third generation

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

24 years

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

True

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

Value the business

The Oakland Scavenger case is profound to owners of family businesses in that a.) conceivably, the owner can be sued for not declaring a family member s his or her successor b.) the owner can be fined for not declaring his or her first son their heir to the business c.) 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 d.) conceivably, the owner can be sued for not giving equal treatment to a son as to a daughter

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