MGMT 340 Chapter 15

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A buy/sell agreement can be used to make certain that funds are available to purchase the ownership interest. Select one: True False

True

Depending on the situation, some qualities or characteristics a successor should possess are more important than others. Select one: True False

True

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

True

The Oakland Scavenger Company case may have a major effect on the management succession plans of family business. Select one: True False

True

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

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

True

The liquidity event can be achieved through an initial public offering (IPO) or complete sale of the venture. Select one: True False

True

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

True

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

A

Besides the eight steps in the harvest strategy, what other implications should the entrepreneur be aware of when selling out? Select one: a. tax implications b. security interests c. home improvement implications d. interest implications

A

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

B

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

B

The entrepreneur who has to choose a successor with potential to develop the attributes necessary to run the business should consider which of the following aspects of the potential successor over the others? Select one: a. age b. drive and resourcefulness c. education d. gender

B

Which of the following statements about seeking legal advice with respect to succession planning is true? Select one: a. Legal advice from an advisor who understands succession issues is always crucial. Incorrect b. Legal advice is not critical, but beneficial. c. Legal advice is seldom beneficial. d. The more you pay, the better the advice.

B

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

B

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

C

The idea of "selling out" should be viewed in a _____ sense. Select one: a. negative b. last resort c. positive d. destructive

C

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.

D

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

D

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

D

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

False

External environmental factors do not have any effect on the succession issue. Select one: True False

False

Harvest strategies rarely involve the complete sale of a business. Select one: True False

False

The extent of overlap between the family and business systems does not vary from family business to family business. Select one: True False

False

Happenings that cause the replacement of the owner/manager of a family business are called Select one: a. unforeseen difficulties. b. abrupt happenings. c. forcing events. d. legal events.

C

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. legal advice received b. too many heirs within the company c. a desire for liquidity d. the company getting too big

C

Which of the following is a source of pressure outside the family that could prove troublesome? Select one: a. nepotism b. death c. tax rate d. illness

C

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

C

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. pressure on the owner/manager to designate an heir c. employee wanting a percentage of the business in the owner's will d. rivalry among various branches of the family

A

Once an entrepreneur decides to "harvest" the business, their challenges and responsibilities are over. Select one: True False

False


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