MGMT440 ch15

A buy/sell agreement can be used to make certain that funds are available to purchase the ownership interest. T/F

True

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. T/F

True

Family members who do not play an active role in business may still want to inherit part of the business. T/F

True

Nepotism policies are lawful unless they have an "adverse impact" on women or minority groups (as in the Oakland Scavenger Company case). T/F

True

The Oakland Scavenger Company case may have a major effect on the management succession plans of family business. T/F

True

The basic rule for privately held businesses is this: The owner should develop a succession plan. T/F

True

One advantage of the delayed entry strategy for the younger generation succeeding the older generation of a family business is that

a successor's skills are judged with greater objectivity

The managerial successor typically is not interested in

creativity

The entrepreneur who has to choose a successor with potential to develop the attruibutes necessary to run the business should consider which of the following aspects of the potential successor over the others?

drive and resourcefulness

Happenings that cause the replacement of the owner/manager of a family business are called

forcing events

Which of the following statements about seeking legal advice with respect to succession planning is true?

legal advice is not critical, but beneficial

A typical example of a forcing event is a(n)

mental breakdown

Under US law, which of the following is the first step in the initial public offering (IPO) process?

present the proposal to the board

"Harvest" does not mean that

the challenges and responsibilities of the entrepreneur are over

Which of the following steps should be carried out third when deciding to sell a business?

value the business

Once an entrepreneur decides to "harvest" the business, their challenges and responsibilities are over. T/F

False

In a survey of 1,000 business owners, which of the following was a motivation for an entrepreneur to sell a venture?

a desire for liquidity

The first source for succession often is

family and in-house personnel

An entrepreneurial successor is someone who

is ingenious, creative, and driven

Whcih of the following is not an example of pressures or interests from within a firm that affect succession issues?

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

Which of the following steps should be carried out second when deciding to sell a business?

segregate the assets

Research shows that many privately held firms go out of business within ___ years.

10

Timing considerations generally do not impact decisions to sell a business because triggering events are unanticipated. T/F

False

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. T/F

True

The liquidity event can be achieved through an initial public offering (IPO) or complete sale of the venture. T/F

True

The steps in developing a succession strategy are understanding the contextual aspects, identifying successor qualities, and developing a written succession plan. T/F

True

There are two types of succession pressures: family members and nonfamily employees. T/F

True

The Oakland Scavenger Company case resulted in a(n)

out-of-court settlement

A written succession strategy

prepares the entrepreneur for developing a management continuity strategy and policy

Nonfamily employees sometimes put pressure on the owner/manager in an effort to protect their personal interests. T/F

True