MGT 3360 CH. 20

Walkaways

Business terminations in which the entrepreneur ends the business with its obligations met

Resource maturity

Characterized by a stable level of sales and profits over several years. At this stage, the functional areas, the market, and the products or services are all being dealt with consistently and efficiently

Slack resources

Profits that are available to be used to satisfy the preferences of the owner in how the business is run

Harvest

Recover value through a sale of a firm or its assets

Supplemental profits

Returns above cost intended as a secondary income for entrepreneurs (where self-employment is secondary to their main job)

Success profits

Returns at levels higher than the entrepreneur could make working for others

Substitution profits

Returns intended to equal and replace the salary or wages the entrepreneur could draw working for someone else

Liquidation

The popular name for a chapter 7 bankruptcy in which a bankrupt firm's assets are sold by the bankruptcy trustee and the proceeds used to pay the firm's debts

Reorganization

The popular name for chapter 13 bankruptcy in which a bankruptcy firm continues to operate while paying off debts identified by the bankruptcy trustee

Business life cycle

The sequence or pattern of developmental stages any business goes through during its life span

Liability of newness

The set of risks faced by firms early in their life cycles that comes from lack of knowledge by the owners about the business they are in and by customers about the new business

Initial public offering (IPO)

Transfer method describing the first-time public sale of a stock listed on a public stock exchange

Workout

A form of business termination in which the firm's legal or financial obligations are not fully met at closing

Employee stock ownership plan

A formalized legal method to transfer some or all of the ownership of a business to its employees

Consolidation

A transfer method in which a small business is bought by a larger firm for the purpose of quickly growing the larger firm

Transfer

An endgame strategy in which ownership is moved from one person or group to another

Termination

An endgame strategy in which the owner closes down the business

Liquidity enhancement

An estate planning strategy which focuses on generating cash to cover likely estate taxes

Tax management

An estate planning strategy which focuses on minimizing estate tax payments

Estate freeze

An estate planning strategy which focuses on transferring assets to heirs when the asset costs are low

Bankruptcy

An extreme form of business termination which uses a legal method for closing a business and paying off creditors when debts are substantially greater than assets

Emergence

In which a person thinks about and takes actions toward starting a firm

Success

Occurs once the firm is established in its market

Serial entrepreneurs

People who open multiple businesses throughout their career

Existence

Which is defined by having the business in operation, but not yet stable in terms of markets, operations, and finances