bmgt ch.15
Which of the following are suggestions that can be followed for survival from bankruptcy? (Check all that apply.)
-File before the venture exhausts cash or has no incoming revenue. -Focus efforts on developing a reasonable financial reorganization plan.
Identify a true statement about the third and the last step, or principle, in a business turnaround process.
The step involves aggressive corrective action.
During the reorganization period, the entrepreneur can speed up the process by
taking the initiative in creating a plan
______ has become a more common and frequently used exit strategy in the current economic environment.
An entrepreneur selling out to a larger company
Which of the following is a stress point that an entrepreneur should be aware of when managing a venture in its early stages?
Change in the size of the venture
What type of bankruptcy requires a venture to liquidate, either voluntarily or involuntarily.
Chapter 7 bankruptcy
Which of the following is a requirement for keeping a new venture afloat?
Create good marketing plans with clear objectives.
______ involve an initial public offering, private sale of stock, succession by a family member or a nonfamily member, merger with another company, or liquidation of a company.
Exit strategies
Substitution
If the future potential of a venture looks encouraging, it may be possible to exchange stock or something else for the existing debt.
______ refers to a petition of bankruptcy filed by creditors without consent of entrepreneur.
Involuntary bankruptcy
Which of the following is a disadvantage of the employee stock option plan (ESOP)?
It requires a total valuation of the venture to estimate the amount of the ESOP package.
Identify a feature of an effective succession plan for a business.
It should be clearly communicated to all employees.
Composition settlement
The debt is prorated to the creditors as a settlement for any debt.
An entrepreneur decides to transfer his business to his family member. How can the family member who is a successor and is in the transition stage be helped in making business decisions?
The entrepreneur can act as an advisor for the successor during the transition stage.
Identify a feature of the succession process in nonfamily business situations.
The process may be precisely defined in a partnership agreement and could involve a predetermined choice.
Extension
This happens when two or more of the largest creditors agree to postpone any claims.
The first principle in any successful business turnaround is
aggressive hands-on management
The final consideration when an entrepreneur is faced by the prospect of failure of a venture is to
avoid hanging on to a venture that will continually drain resources
When faced with the prospect of failure, the entrepreneur should first
consult with his or her family
Under Chapter 13 bankruptcy, the individual who has filed for bankruptcy
creates a five-year repayment plan under court supervision
A(n) Blank______ refers to a two- to three-year plan to sell the business to employees.
employee stock option plan
True or false: Entrepreneurs should plan an exit strategy at the expansion stage of their venture.
false
True or false: Management buyouts usually involve an indirect sale of the venture for a bid price.
false
True or false: The results of each bankruptcy filing is mostly similar.
false
True or false: When deciding to sell his or her business, an entrepreneur should project the business as having a smaller share in a large market than a larger share in a small market niche.
false
The second principle in any successful business turnaround is that the management must
have a turnaround plan created using the questions required to be addressed in a planning process
The key to enhancing the bankruptcy process is
keeping creditors informed of how the business is doing
When an entrepreneur notices any of the warning signs of bankruptcy in his or her venture, he or she should immediately
look for advice from a CPA or an attorney
Identify the lessons that can be learned from entrepreneurs who have experienced bankruptcy.
-Bankruptcy safeguards entrepreneurs only from creditors. -Entrepreneurs should file early when they consider that their business is going to fail.
Identify the factors that can reduce the risk of business failure. (Check all that apply.)
-Identify stress points that can cause the business to be in danger. -Ensure relatively accurate cash projections are made.
Which of the following are critical factors to be considered for an effective succession plan for a business when family members are involved? (Check all that apply.)
-Income for working family members and shareholders -Role of the owner in the transition stage
Identify the warning signs of bankruptcy in a venture. (Check all that apply.)
-Materials to meet supply orders are scarce. -Customers are given huge discounts to improve payments because of poor cash flow.
Identify the true statements about the reforms in the Bankruptcy Code that were signed into law in April 2005. (Check all that apply.)
-The reforms made it more challenging to walk away from all debt by filing for Chapter 7 bankruptcy. -Under the law, individuals have to necessarily obtain credit counseling within six months of filing.
According to the reforms in the Bankruptcy Code that were signed into law in April 2005, the means test used to ascertain eligibility for Chapter 7 or Chapter 13 states that individuals may not file for Chapter 7 bankruptcy if
their income is at or above the state income median level
Which of the following should an entrepreneur do when managing a venture in its early stages?
The entrepreneur should set sales values that may represent key decision marks in terms of major capital investment.
Shoptop Retail Inc. is a new retail corporation that has established retail stores in different cities in the United States. The company has completed six months. Which of the following would most likely be a warning sign of bankruptcy for the company?
The stores giving large discounts to customers to increase cash flow
