Chapter 11 and 15 Entrepreneurship

Personal funds are also termed

blood equity

Identify the correct statement regarding the transfer of a business from an owner to an employee:

usually takes longer than transferring to a family member, which makes for a more smooth transition.

If an entrepreneur files a ______ petition under Chapter 7, it constitutes a determination that his or her venture is bankrupt.

voluntary bankruptcy

Identify a true statement about management buyout of a venture.

Financing the sale of the venture can be achieved through a bank, or the entrepreneur could also agree to carry the note.

Which of the following are suggestions that can be followed for survival from bankruptcy? (Check all that apply.)

Focus efforts on developing a reasonable financial reorganization plan. File before the venture exhausts cash or has no incoming revenue.

Which of the following are eligibility factors for all 7(a) loans offered by the Small Business Administration? (Check all that apply.)

Repayment ability from the cash flow of the business Management capability

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.)

Role of the owner in the transition stage Income for working family members and shareholders

Which of the following bases need to be evaluated by an entrepreneur for choosing alternative sources of external funding for his or her venture? (Check all that apply.)

The terms of the contract The costs involved The length of time the funds are available

Identify a true statement about employee stock option plans.

They are a way to award employees and clarify the succession process.

Identify a true statement about personal funds.

They are vital in attracting outside funding.

To ensure repayment, bank loans are based on the

assets or the cash flow of the venture

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

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

What type of bankruptcy requires a venture to liquidate, either voluntarily or involuntarily.

Chapter 7 bankruptcy

Which of the following are conventional bank loans? (Check all that apply.)

Character loans Lines of credit Straight commercial loans

______ are most often the source of short-term funds commonly used by entrepreneurs when collateral is available.

Commercial banks

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

True or false: Bank lending decisions are solely based on quantifiable information.

False

True or false: Entrepreneurs should plan an exit strategy at the expansion stage of their venture.

False

Identify the strategies that an entrepreneur should follow when he or she has decided to sell the business but does not need to sell immediately. (Check all that apply.)

Get nondisclosures from important employees Ensure all financial statements are in order, including budgets and cash flow projections

Identify a true statement about debt financing.

It is also termed asset-based financing.

Identify a true statement about Chapter 11 bankruptcy.

The courts try to give the venture in this situation time to pay its debts.

Which of the following is true about limited partners in a research and development partnership?

The limited partners share in the profits when the technology is successfully developed in the later years.

Identify a true statement about lines of credit financing.

The loan must be repaid or reduced to a certain agreed-upon level on a periodic basis.

The Blank______ refers to the tangible collateral valued higher than the amount of money borrowed.

asset base for loans

The financing method that involves an interest-bearing instrument, usually a loan, the payment of which is not directly related to the sales and profits of the venture is referred to as

debt financing

The key issue in passing a business on to an employee is

ownership

During the reorganization period, the entrepreneur can speed up the process by

taking the initiative in creating a plan