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