Final

_______ refers to conducting a thorough analysis of every facet of an existing business.

Due Diligence

Which of the following would be considered fatal mistakes in strategic planning, according to researcher Michael E. Porter? a. no real competitive advantage b. pursuing a solid competitive position c. compromising strategy for growth d. a and c only

a and c only

The idea of "selling out" should be viewed in

a positive sense

A harvest plan

defines when and how owners and investors will realize an actual cash return on their investment

Goodwill, family members on the payroll, and planned losses are examples of

establishing the value of a firm

Emotional bias is likely to have what effect on a seller's valuation of a business?

increase the valuation

Which of the following is not a reason for the lack of planning in new ventures? a. time scarcity b. lack of trust c. lack of dominance d. lack of knowledge

lack of dominance

A reason for lack of strategic planning has been found to be a. lack of preference. b. time sharing. c. lack of expertise. d. lack of dominance.

lack of expertise

Which of the following factors would not be considered a key dimension that shapes the strategic management activities of a growing firm? a. speed of decision making b. internal political problems c. environmental uncertainty d. lack of knowledge

lack of knowledge

When considering management, the entrepreneur should be concerned about

ownership positions

Formation of long-range plans for effective management in light of a venture's strengths and weaknesses is referred to as a. dimensional planning. b. tactical planning. c. strategic planning. d. operational planning.

strategic planning.

Adjusted tangible book value is a popular method of valuation.

true

Succession pressure inside the firm exists

when family members want to keep and manage the business themselves

Book value of a firm is also known as the

balance sheet method

The managerial successor typically is not interested in

creativity

Small business owners are often guarded about their businesses, which leads to a. distrust of others when formulating a strategic plan b. a myopic viewpoint c. misunderstanding of the economic environment d. lack of attention to the competition

distrust of others when formulating a strategic plan

"Why is the business being sold?" is not an important question to ask when analyzing the viability of buying a business

false

An entrepreneur does not need to know how to calculate the value of a competitor's operation

false

Which of the following is not a shortcoming that many closely held ventures possess?

high equity and low debt

Price/earnings ratio is a method of valuation that is

mostly used with publicly held corporations

Analysis of a firm's external and internal environments provides the firm with the information to develop a. a degree of uncertainty b. administrative experience c. competitive strengths d. strategic intent and strategic mission

strategic intent and strategic misson

A "SWOT" analysis refers to a. strength, weaknesses, opportunities, threats b. small, weak, ordinary, tact c. sound warnings of takeovers d. none of the above

strength, weaknesses, opportunities, threats

A "SWOT" analysis refers to analyzing strengths, weaknesses, opportunities, and threats.

true

An entrepreneurial successor is someone who is interested in efficiency and the effective use of resources.

false

Emotional bias is not an underlying issue in valuing a business.

false

External environmental factors do not have any effect on the succession issue.

false

Insufficient controls signify strength when analyzing the business being valued.

false

Lack of expertise has never been considered a reason for the lack of strategic planning in new ventures.

false

Only ten percent of all privately held enterprises make it to a third generation.

false

Participation by subordinates in a strategic plan is never appropriate.

false

Replacement value of a business is based upon the value of each asset if it had to be replaced at current cost..

true

Some entrepreneurs are easy to replace, and some cannot be replaced.

true

The "timing" of projected income or cash flows is not a critical factor in establishing the value of a firm.

false

Tangible assets as well as intangible assets of a business need to be assessed for proper venture evaluation.

true

The "best" strategic plan will be influenced by the abilities of the entrepreneur, the complexity of the venture, and the nature of the industry.

true

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

true

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

true

The entrepreneurial strategy matrix measures risk and innovation.

true

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

true

The price/earnings ratio (multiple of earnings) method is determined by dividing the market price of common stock by retained earnings.

false

Sometimes a successor is needed because the business environment changes and a parallel change is needed at the top.

true

The real value of any venture is its potential earning power.

true

When looking ahead in choosing a successor from inside the organization, the founder often trains a team of executive managers consisting of both family and nonfamily members.

true

What does a post-money valuation include that a pre-money valuation does not?

venture capital investment

Weaknesses in small, closely held businesses do not call for careful analysis of the business being valued.

false

When a company is liquidated, preferred stockholders received a certain fixed amount after assets are distributed to common stockholders.

false

Buyers and sellers assign different values to a business.

true

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

forcing events

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

true

The extent of overlap between the family and business systems does not vary from family business to family business.

false

A reason new venture managers lack knowledge in the strategic planning process is because a. they refuse to learn new things. b. they have minimal exposure to the planning process. c. they attempt to implement actions too quickly. d. they are overconfident.

they have minimal exposure to the planning process

Emerging ventures that are rapidly expanding with constantly increasing personnel size and market operations will need a. less formal planning because of constant changes. b. to formalize planning because there is a great deal of complexity. c. to establish a pattern of subordinate participation. d. to evaluate company strengths and weaknesses.

to formalize planning because there is a great deal of complexity.

Although family members may not play an active role in the business, they still may want to inherit part of the business.

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.

true

Avoiding start-up costs is a factor to consider when valuing a business.

true

Depending on the situation, some qualities or characteristics a successor should possess are more important than others.

true

During the growth stage of a venture, entrepreneurs shift into a managerial style.

true

Entrepreneurs should try to be as objective as possible in determining the fair market value for their enterprise.

true

In administrative cultures, there is a need for clearly defined authority and responsibility.

true

In some cases, entrepreneurs may be in violation of the law if they employ too many family members.

true

Increasing market share by acquiring a firm in the company's industry is one reason for the acquisition.

true

Many research studies suggest that strategic planning influences a venture's survival.

true

Misunderstanding industry attractiveness can be a fatal flaw in strategic planning

true

One of the most common reasons for acquiring a business is developing more growth-phase products.

true

Research has shown a distinct lack of planning on the part of new ventures.

true

One reason to keep projections in perspective is

fluctuating markets