ENT1000-Exam 6
In a factoring arrangement, the factor:
"buys" the accounts receivables of a firm.
Business angels typically invest what amount in the businesses they finance?
$100,000 - $500,000
During Phase II of an SBIR grant up to _______ can be awarded.
$750,000
Currently ESOPs account for___ of the private sector workforce.
10%
When passing down a family business, ________ of businesses make it to the third generation.
12 percent
Around ____ of businesses make it to the third generation
12%
Around___ of the businesses make it to the third generation.
12%
What percent of businesses make it to the third generation?
12%
When passing down a family business, ______ of businesses make it to the third generation.
12%.
All owners of ______ or more are required to personally guarantee an SBA loan.
20 percent.
All owners of ____ or more are required to personally guarantee an SBA loan.
20%
The Family Business Institute indicates that about ________ percent of successful ventures make it to the second generation of ownership.
30
The standard term of a limited liability company is:
30 years.
The Family Business Institute indicates that about ______ percent of successful ventures make it to the second generation of ownership.
30%.
In a straight commercial loan funds are typically used for what time period?
30-90 days
Venture capital firms expect returns in the range of:
40-60%.
According to the Small Business Administration, the failure rate of new businesses within the first few years is:
50%
ESOP account for____ of the nation's 10 million employees.
50%
ESOPs account for ____ of the nation's 10 million employees.
50%
A business angel's investment time horizon is usually:
7-10 years.
A bank may finance up to ______ of a company's accounts receivable.
80%
In general the SBA usually guarantees ____ of loans up to $150,000 and ____ of loans up to $5,000,000.
85%; 95%
Identify a true statement about Chapter 13 bankruptcy.
A court-appointed trustee receives money from the debtor and is liable for making scheduled payments to all creditors.
The due diligence of the venture-capital process includes:
A detailed review of the company's history.
Which of the following is an example of a franchise that offers services?
A franchisee that offers accounting and help for income tax preparation.
Which of the following is true about franchising?
A franchisee uses the brand name of the franchise that is well established.
An unproven franchise is characterized by...
A franchisor likely to make mistakes as the business expands.
Which of the following are the disadvantages of franchising for a franchisor? (Check all that apply.)
A franchisor may find it very difficult to obtain quality franchisees. The ability of a franchisor to maintain tight controls becomes more difficult as the number of franchises increases.
Selling the existing product in new locations
A market development strategy would NOT involve:
Which of the following is a true statement about the process in Chapter 11 bankruptcy?
A plan for reorganization is prepared to show how the business will be turned around.
What are the chances of further expansion of the company?
A potential franchisee should seek answers to all of the following questions while assessing the financial stability of the franchisor, except:
Which of the following statements concerning financial software is not true?
A spreadsheet program may be the easiest to use since numbers rarely change during the budget process.
With the new tax laws passed in 2017, all pass through business receive:
A temporary 20% reduction of their business income.
When the bank advances a large percentage of the invoice price of goods and is paid on a pro-rata basis when inventory is sold this is called:
A trust receipt.
An ESOP
A two or three year plan to sell a business to an employee is called
A trust receipt is a:
A type of inventory loan.
Franchising opportunities have often evolved from changes in the environment as well as important social trends. Which is not one of the factors responsible discussed in the textbook?
Acceptance of different cultures.
Identify a true statement about acquisitions.
Acquisitions can take many forms based on the goals and position of the parties involved in the transaction.
In the context of succession planning in nonfamily business situations, which of the following issues should be considered in a succession plan when there are only a small number of shareholders? (Check all that apply.)
All employees should be welcomed to participate in the transition process. Senior management of the company must be committed to any succession plan.
Which of the following combines the tax advantages of the partnership and the corporation?
An S Corporation.
Typically, debt financing requires:
An asset as collateral.
What is the means of acquisition for a bootstrap purchase of a firm's assets?
An entrepreneur acquires a small amount of the firm for cash and then purchases the remainder of the company with a long-term note that is paid off over time out of the acquired company's earnings.
What is the means of acquisition for a direct purchase of firm's entire stock or assets?
An entrepreneur often obtains funds for the purchase from an outside lender or the seller of the company being purchased.
_____ 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 are the most common means of acquisition?
An entrepreneur's direct purchase of a firm's entire stock or assets. Bootstrap purchase of a firm's assets.
Which of the following is not part of the private equity market?
An underwriter.
Using a time sheet to record usage of time is part of the principal of:
Analysis
The principle of ______ provides information to the entrepreneur about how time is currently being allocated, which will also highlight inefficient or inappropriate investments of time.
Analysis.
Entrepreneurs who have the necessary abilities for the transition to more professional management practices and the aspiration to grow the business:
Are the most likely to achieve growth
Entrepreneurs who have the necessary abilities for the transition to more professional management practices and the aspiration to grow their business
Are the most likely to achieve growth
The ______ is calculated by dividing accounts receivable by average daily sales.
Average collection period.
A computer company buys a hard-drive manufacturer. This is an example of:
Backward integration
___________ refers to a diversification strategy that involves taking a step back (up) on the value chain toward the raw materials
Backward integration
___________ refers to a diversification strategy that involves taking a step back (up) on the value chain toward the raw materials.
Backward integration
Inventory control:
Balances the cost of carrying inventory with the cost of lost sales.
The _____ (with amendments added in 1984 and 2005) was devised to ensure a fair distribution of assets to creditors, to safeguard debtors from unfair depletion of assets, and to safeguard debtors from unfair demands by creditors.
Bankruptcy Act of 1978
Identify the lessons that can be learned from entrepreneurs who have experienced bankruptcy. (Check all that apply.)
Bankruptcy safeguards entrepreneurs only from creditors. Entrepreneurs should file early when they consider that their business is going to fail.
Which of the following are the most active providers of the debt needed in leveraged buyouts?
Banks Insurance companies Venture capitalists
The ______ is the range of outcomes between the entrepreneur's reservation price and the reservation price of the other party.
Bargaining zone.
In 2014 both business & non- business bankruptcy filings were:
Below 1 million
______ financing involves using any possible methods for conserving cash.
Bootstrap.
__________ financing involves using any possible methods for conserving cash.
Bootstrapping
Which of the following statements about locating acquisition candidates is not true?
Brokers represent the acquisition buyer or the seller.
Identify a true statement about brokers in acquisitions.
Brokers represent the seller and will sometimes aggressively find buyers using referrals, advertising, or direct sales.
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
Bankruptcy may not always mean the termination of a business as it can offer an entrepreneur an option to reorganize under _____ or merge with another company.
Chapter 11
Which of the following is(are) not an advantage of an international joint venture?
Complimenting governmental policies.
Entrepreneurs in the _____ quadrant of firm growth aspire to grow their businesses but do not possess the ability to do so.
Constrained Growth
Entrepreneurs in the _________ quadrant of firm growth aspire to grow their businesses but do not possess the ability to do so.
Constrained growth
Entrepreneurs in the ______ quadrant of firm growth aspire to grow their businesses but do not possess the ability to do so.
Constrained growth.
A ______ can raise capital through bonds, stock and debt.
Corporation.
Liability is one of the most critical reasons for establishing a:
Corporation.
Which of the following is a requirement for keeping a new venture afloat?
Create good marketing plans with clear objectives.
Identify the drawbacks to establishing an international joint venture.
Cultural differences in each company can lead to managerial issues in the new joint venture. The business objectives of the joint venture partners can be quite distinct.
The ____ is used to measure the short-term solvency of a venture.
Current ratio
Which of the following is not one of the growth strategies outlined in the text?
Customer development strategy.
Identify the warning signs of bankruptcy in a venture. (Check all that apply.)
Customers are given huge discounts to improve payments because of poor cash flow. Materials to meet supply orders are scarce.
_______________ is a form of transaction when money is obtained by a company.
Deal structure
In a leverage buyout, the entrepreneur wants to raise as much of the capital needed as possible in the form of long-term debt. This makes it particularly critical for the entrepreneur to assess the firm's.
Debt capacity.
Which of the following are the major problems that have kept industry-university joint ventures from proliferating at a fast pace?
Demands of universities to have a share in the financial returns from patents. Demands of industry partners to be given total control over the partnership. Demands of industry partners to have all proprietary rights
______ are used to characterize potential customers based upon their income, education, age, sex, and so forth.
Demographics
The ____________ frequently issues guidelines for mergers
Department of Justice
Which of the following is likely to be a fixed cost?
Depreciation.
______ is(are) added back to the pro forma sources and applications of funds statement because it does not represent and out-of-pocked expense.
Depreciation.
The most common method of harvesting a venture is through:
Direct sale of the business.
_____ strategies involve selling a new product to a new market.
Diversification
__________ strategies involve selling a new product to a new market
Diversification
Corporation distribute profits to owners through:
Dividends.
The longest stage of the venture capital process, at one to three months, is:
Due diligence.
Which of the following is true about the managerial assistance provided by franchisors?
Each new franchisee is usually required to undergo a training program on all aspects of operating the franchise.
Which of the methods of valuation of a company provides the potential investor with the best estimate of the probable return on investment?
Earnings approach
The computerized system developed by the grocery and pharmaceutical industry to link chain members is:
Efficient Computer Response (ECR)
he computerized system developed by the grocery and pharmaceutical industry to link chain members is:
Efficient Computer Response (ECR)
Identify an administrative control that can be used by an entrepreneur running a franchise maintain quality control of products and services offered by the franchise.
Ensuring that the employees are regularly trained to provide consistent service
______ financing entails obtaining funds for the company in exchange for ownership.
Equity
Which of the following is an advantage of an acquisition?
Established customer base.
Which of the following is the most significant advantage of an acquisition according to the text?
Established image and track record
Creating a positive organizational culture involves:
Establishing a we spirit and not a me spirit in meetings and memorandum
Which of the following is not an important part of a succession plan?
Evaluate potential successors based on how similar they are to you.
Which of the following is not a requirement for keeping a new venture afloat and reducing the risk of business failure?
Excess optimism is fine as long as the business is successful.
Which of the following would be an advantage of an acquisition?
Existing employees
This occurs when two or more of the largest creditors agree to postpone any claims, acting as stimulus for smaller creditors to also agree to the plan.
Extension
The occurs when two or more of the largest creditors agree to postpone any claims, acting as stimulus for smaller creditors to also agree to the plan.
Extension.
A venture capitalist would rather invest in a first-rate product and a second-rate management team than the reverse.
FALSE
About 90 percent of the value of finished goods inventory can be used as collateral for a commercial bank loan.
FALSE
About one third of all new start-ups fail in their first years.
FALSE
After the completion of the preliminary preparation, the first public offering normally requires three to six months to prepare, print, and file the registration statement with the SEC.
FALSE
All owners, regardless of percentage of ownership, are required to personally guarantee SBA loans.
FALSE
An entrepreneur contributing his or her own capital would be an example of internally generated funds.
FALSE
An extension of the earnings approach is the book value method.
FALSE
Bankruptcy protects entrepreneurs from creditors and competitors.
FALSE
Banks will lend a company up to 50% of their account receivable value.
FALSE
Business angels are members of a professionally managed group of wealthy individuals who efficiently distribute risk capital.
FALSE
By buying a franchise the entrepreneur reduces the amount of money available for advertising.
FALSE
Developing standardized forms and procedures for recurring events would be an example of the principle of reanalysis.
FALSE
Equity financing requires collateral.
FALSE
Financial reporting to shareholders, bankers, and other investors give the marketing cost for each product and highlight the performance of managers in controlling costs.
FALSE
For a company to go public, larger underwriting firms have more stringent criteria, such as sales as high as $50 million to $100 million, and a 40 to 70 percent annual growth rate.
FALSE
For the franchisor, the capital required to expand a venture quickly is more than it would be without franchising.
FALSE
Forward integration is taking a step back on the value chain toward the raw materials.
FALSE
If a franchise looks good as an investment, the entrepreneur may request a franchise package from the franchisor at no cost, which usually contains a draft franchise agreement or contract.
FALSE
If the amount of money provided by family members or friends is small and in the form of equity financing, they do not have an ownership position in the venture.
FALSE
In 2010 the number of bankruptcy filings was around 4 million.
FALSE
In most leveraged buyouts, the equity usually exceeds the debt capital equity by 5:1.
FALSE
Long-term loans from commercial banks are usually readily available to small startup firms.
FALSE
Most angel investors are individuals who accumulated their wealth through inheritance.
FALSE
Most life-style entrepreneurs eagerly pursue firm growth.
FALSE
One of the most successful diversification strategies is to diversify into unrelated products or unrelated markets to spread the risk. (TRUE OR FALSE)
FALSE
Private offerings involve more time, expense, and paperwork than public offerings.
FALSE
Private venture capital firms use both state and federal grant money to invest in other businesses.
FALSE
The SBA's Microloan program is their primary business loan program.
FALSE
The SBA's Microloan program provides short-term loans of up to $100,000 to small businesses for working capital or purchase of inventory.
FALSE
The best management style for a manager undertaking a business turnaround is a bunker mentality.
FALSE
The debt ratio is calculated by dividing total liabilities by total inventory.
FALSE
The informal investment market contains the smallest pool of risk capital in the U.S.
FALSE
The most common type of franchise is the dealership.
FALSE
The most common type of joint venture is between two or more public sector companies.
FALSE
The personal funds of the entrepreneur are the most expensive.
FALSE
The principle of reanalysis requires the entrepreneur to focus on the most important issues, even when under pressure.
FALSE
The principle of teamwork states that an entrepreneur spends too much time with employees and should try to become less accessible to them in order to increase their efficiency.
FALSE
The quiet period is a 90-day period in going public when company information that will help increase stock price should and can be released.
FALSE
The reservation price is the price at which the entrepreneur is ready to accept the agreement.
FALSE
The return on investment ratio measures the ability of the firm to repay long-term debt using current assets.
FALSE
The shorter the time before a company goes public, given that profits and sales growth occur, the less percentage of equity the entrepreneur will have to give up per dollar invested.
FALSE
The type of funds most frequently used by businesses is externally generated funds.
FALSE
The valuation approach that gives the lowest value of the business is the earnings approach.
FALSE
The value-added chain is usually available only to large national firms.
FALSE
Under Rule 504 of Regulation D, a company can sell up to $1,000,000 of securities to any number of investors, regardless of their sophistication, in any 12-month period.
FALSE
Venture capital firms are pools of equity managed by large corporations.
FALSE
Venture capital firms generally prefer a minimum funding level of $100,000.
FALSE
When a retail tire store buys a tire wholesaler this is an example of horizontal integration.
FALSE
When borrowing from friends and family, the entrepreneur should avoid putting agreements in writing to avoid future disagreements.
FALSE
A business, when it comes to selling, will be less valuable if it is on a narrow, well-defined segment.
False
A joint venture is the purchase of an entire company, or part of a company.
False
About 50 percent of family firms successfully make the transition to the second generation.
False
All bankruptcies are handled by the U.S supreme court
False
An ESOP is a five- to six-year plan to sell a business to its employees.
False
An ideal way to start the process of building trust in a negotiation between an entrepreneur and a growth partner is by sharing one's reservation price with the other party.
False
An unproven franchise will be a less expensive investment with a low risk.
False
As soon as bankruptcy warning signs begin appearing, bankruptcy is inevitable.
False
ESOPs account for about 20% of the nation's 10 million employees.
False
Entrepreneurs should plan an exit strategy at the expansion stage of their venture.
False
Entrepreneurs that have a high ability to institute professional management practices but have low growth aspirations have "little potential" for growth.
False
Management buyouts usually involve an indirect sale of the venture for a bid price.
False
More than 50 percent of firms filing for Chapter 11 bankruptcy emerge from the process.
False
Most leveraged buyouts use the same standardized financial package.
False
Often, when a business changes hands, key employees move into the acquiring company.
False
One important advantage of buying a franchise is that the entrepreneur incurs no risk.
False
The Principal of teamwork states that an entrepreneur spends too much time with employees and should try to becomes less accessible to them in order to increase their efficiency.
False
The bargaining zone approach in a negotiation between an entrepreneur and the growth partner focuses on the integrative stage.
False
The degree of symmetry in a joint venture is limited to the chemistry between the companies involved.
False
The methods used for valuing an acquisition candidate are different from those used to determine the value of a merger candidate.
False
The results of each bankruptcy filing is mostly similar.
False
Under Chapter 13, meeting with groups of creditors to amicably solve issues is usually a good idea.
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
When negotiating, the entrepreneur should only make one offer and stick to it.
False
When seeking venture capital for a new company, investors only look at the business plan for that venture and previous business failures are irrelevant.
False
an ESOP is five to six year plan to sell a business to its employees.
False
one important advantage of buying a franchise is that the entrepreneur incurs no risk
False
the Bankruptcy Act of 1978 was designed to protect creditors from receiving nothing on bankruptcy.
False
the best management style for a manager undertaking a business turnaround is a bunker mentality.
False
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.
Suggestions for surviving bankruptcy include all of the following except
File only after cash runs out
Which of the following are not factors in the success of joint ventures according to the text
Finance and education
Which of the following are not factors in the success of joint ventures according to the text?
Finance and education.
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.
Identify the different reasons why companies do not successfully come out of Chapter 11 bankruptcy. (Check all that apply.)
Firms wait for too long before filing for bankruptcy. Unstable global economy.
Equipment would be included on the balance sheet in which section?
Fixed assets.
______ refers to a diversification strategy that involves taking a step forward (down) on the value-added chain toward the customers.
Forward integration.
The person who purchased the franchise is the:
Franchisee
Which of the following is not an exit strategy?
Franchising
_____ is an arrangement whereby the manufacturer or sole distributor of a trademarked product or service gives exclusive rights of local distribution to independent retailers in return for their payment of royalties and conformance to standardized operating procedures.
Franchising
________ is an arrangement whereby the manufacturer or sole distributor of a trademarked product or service gives exclusive rights of local distribution to independent retailers in return for their payment of royalties and conformance to standardized operating procedures.
Franchising
_________ is an arrangement whereby the manufacturer or sole distributor of a trademarked product or service gives exclusive rights of local distribution to independent retailers in return for their payment of royalties and conformance to standardized operating procedures
Franchising
__________ is a way by which an entrepreneur may grow his or her firm by having others pay for the use of the firm's name, process, product, service, and so on.
Franchising
__________ is an arrangement whereby the manufacturer or sole distributor of a trademarked product or service gives exclusive rights of local distribution to independent retailers in return for their payment of royalties and conformance to standardized operating procedures.
Franchising
Person offering the franchise
Franchisor
Which factor in valuing your company is the most important?
Future earnings capacity
Which factor is valuing your company is the most important?
Future earnings capacity.
In a private venture capital firm, the ______ manages the fund in exchange for a management fee and a percentage of profits.
General partner.
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.
The board of directors:
Has responsibilities to represent all shareholders.
Identify the suggestions that an entrepreneur should follow for surviving bankruptcy. (Check all that apply.)
Have a clear understanding of how the protection against creditors works and what is necessary to keep it in place. Be ready to have creditors examine all financial transactions for the last 12 months.
Most ventures that are available for sale:
Have a marginal or unprofitable track record.
A board of directors should not:
Have members with unlimited terms.
Sole proprietorships:
Have no time limit on how long they may exist.
Venture capital firms prefer to invest in:
High-potential ventures.
Which of the following was NOT a recommended method of evaluating the potential market for a new franchise in the text?
Hire a marketing firm to survey foot traffic near the proposed location
Which of the following was not a recommended method of evaluating the potential market for a new franchise in the text?
Hire a marketing firm to survey foot traffic near the proposed location
A firm that manufactures washing machines starts to manufacture detergent illustrates _______ integration.
Horizontal
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.
What are the characteristics of an SUBSTITUTION decision made in a reorganization plan in Chapter 11 bankruptcy?
If the future potential of a venture looks encouraging, it may be possible to exchange stock or something else for the existing debt.
Identify the disadvantages of franchising to a franchisee.
Inability of the franchisor to keep promises made in the franchise agreement. Failure of the franchisor to offer services, advertising, and location.
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.
The most effective use of the interim ______ is to establish cost standards and compare the actual amount with the budgeted amount for that time period.
Income statement.
Using the ______ method of projecting cash flow, adjustments are made to net income based on the fact that cash may not actually be received or disbursed.
Indirect.
_____ refers to exploring possible mutual benefits from a business relationship so that the "size of the pie" can be increased.
Integration task
Balances the cost of carrying inventory with the cost of lost sales.
Inventory control
Research and development limited partnerships provide funds for entrepreneurs in high-tech fields through:
Investors looking for tax shelters.
Identify the advantages of an employee stock option plan. (Check all that apply.)
It acts as a mechanism to pay back those employees who have been faithful to the venture. It offers a unique incentive to employees that can boost their motivation to put in extra time or effort.
Identify the advantages of franchising to franchisors.
It helps the venture to grow quickly using little capital. It helps them achieve economies of scale by buying supplies in large quantities.
A proven franchise is characterized by...
It offers lower risk to the franchisee but requires more financial investment.
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.
Identify a true statement about a franchise agreement.
It should contain details about the exclusivity of territory coverage.
A ______ is a separate entity that involves a partnership between two or more active participants.
Joint venture.
The deregulatory legislation that allows companies to be more active in their intent to raise money through crowdfunding was the:
Jump Start Our Business Act (JOBS Act).
Which franchise below is an example of the most popular type of franchise
KFC
Which franchise below is an example of the most popular type of franchise?
KFC
Which franchise below is an example of the most popular type of franchise: KFC, A Ford Dealership, H&R Block, or Real Estate Franchises.
KFC.
In 2017, the largest percentage of venture capital dollars raised was invested in which stage of company development?
Later-stage.
Which of the following types of credit does not require the pledging of an individual's collateral or a cosigner?
Line of credit
A "commitment fee" is used in arranging for a:
Line of credit.
A common procedure to determine the value of a merger candidate is to estimate the present value of discounted cash flows and the expected after-tax earnings attributable to the merger. This can be done on all of the following levels except:
Logical scenarios.
What type of cash flow financing loan can make funds available for up to 10 years?
Long-term loans
Product innovation, diversification, protection against market encroachment are some of the reasons why a company would opt out of this:
Merger
Product innovation, diversification, protection against market encroachment are some of the reasons why a company would opt for this:
Merger.
Protection against an unwarranted takeover, technical obsolescence, or protection against market encroachment, are some of the reasons why a company would opt for:
Merger.
Which of the following is true about mergers?
Mergers can safeguard against market encroachment, product innovation, or an unwarranted takeover.
Acquisitions are so similar to ______ that at times the two terms are used interchangeably.
Mergers.
Which of the following is not true about the costs and benefits of R&D limited partnerships?
Most take less than three months to establish.
Which of the following are the disadvantages of acquisition for an entrepreneur?
Most ventures that are up for acquisition have a marginally successful or even unprofitable track record. The actual purchase price may be inflated due to the established image, existing customer base, channel members, or suppliers.
An ESOP:
Motivates employees because they realize they are working for themselves.
Identify the advantages of acquisition for an entrepreneur.
New customers of the acquired firm are already familiar with the customer location. The acquired firm has an established image and track record.
Which statement about capital requirements in franchising is not true?
Newsletters and other publications reflecting new ideas and developments are continuously sent to franchisees.
Which of the following is not an advantage of franchising?
No entry cost
______ is the amount owners have invested and/or retained from the venture operations.
Owner's equity.
Which of the following should be an application of funds?
Paying dividends.
The strategy for growth in which the entrepreneur encourages existing customers to buy more of the firm's current product is
Penetration strategy
The strategy for growth in which the entrepreneur encourages existing customers to buy more of the firm's current product is a
Penetration strategy
In which phase of the SBIR grant process are funds used to create a prototype of a product or service?
Phase II
In designing the organization:
Poor design is a significant cause for business failure since the entrepreneur often performs all organization functions themselves.
Which of the following would be a quantitative way to ascertain the fairness of an LBO's asking price?
Present value of future earnings, price-earnings ration, book value
Which of the following is not a qualitative technique an entrepreneur can use to evaluate the asking price of an LBO?
Price-earnings ratio
Which of the following is not a subjective technique an entrepreneur can use to evaluate the asking price of an LBO?
Price-earnings ratio.
The _________ requires that the entrepreneur recognize that he or she is a time waster, that time is an important resource, and that there is a need to change personal attitudes and habits regarding the allocation of time.
Principal of desire
Which principal requires the entrepreneur to focus on the most important issues, even when under pressure?
Principal of effectiveness
The _______ requires that the entrepreneur recognize that he or she is a time waster, that time is an important resource, and that there is a need to change personal attitudes and habits regarding the allocation of time.
Principle of desire
Which principle requires the entrepreneur to focus on the most important issues, even when under pressure?
Principle of effectiveness.
Which principle states that the most important issues should be attended to during the time of day that an entrepreneur is most efficient?
Principle of prioritized planning
Reviewing meetings to make sure they are being run effectively illustrates which of the following principles?
Principle of reanalysis
Strategies involve developing and selling new products to people who are already purchasing the firms existing products
Product development
Pro forma cash flow is:
Projected cash inflow and outflow.
Which type of risk-capital market is available as a funding source only for high-potential ventures?
Public equity market
Our text tells us that much of an entrepreneur's time during start-up is spent:
Putting out fires.
The penetration growth strategy:
Relies on taking market share from competitors.
Cash flow:
Results from the differences between cash receipts and cash payments.
Dividing net profit by total assets shows a firm's:
Return on investment.
The top area of venture capital investment in 2011 was in:
SOFTWARE
As the business grows:
Salaries and wages will go up as output increases.
Under the ________, reporting requirements are increased and due dates of reports to the SEC are accelerated.
Sarbanes-Oxley Act
Conducting a(n)______ on cash flow involves assigning a + or a - probability to the estimated value
Sensitivity Analysis
______ is the increase in value of the organization during a specific period of time.
Significant capital appreciation.
Which grant program requires partners at universities or other non-profit institutions?
Small Business Technology Transfer
________ were authorized in 1958 to marry private capital and government funds for investment in small companies.
Small business investment companies (SBICs)
Which type of ownership is the latest expensive to start?
Sole proprietorship
Which of the following ensures that an entrepreneur running a franchise will keep up the required quality standards of the products and services?
Standardizing the supplies, products, and services provided
An exit strategy should be put in place during the ______ stage of the business.
Start-up.
Joint ventures are sometimes called
Strategic Alliances
Which of the following would not be a current asset?
Supplier bills payable in 30 days.
The concept that "the whole is greater than the sum of its parts" is known as:
Synergy
A key concern in any merger or acquisition is the legality of the purchase.
TRUE
A short-term, internal source of funds can be obtained by reducing short-term assets such as inventory, cash, and other working-capital items.
TRUE
All ventures have some equity.
TRUE
An employee stock option plan establishes a new legal entity.
TRUE
Angel investors typically finance firms that are close to their homes.
TRUE
Angel investors usually expect to play an active role in the businesses they invest in.
TRUE
Bankruptcy should be a last resort for the entrepreneur.
TRUE
Bootstrap financing involves using any possible method, such as discounts for volume purchasing, to conserve cash
TRUE
Cultural differences between international joint venture partners can create management difficulties.
TRUE
Effective time management can increase an entrepreneur's job satisfaction.
TRUE
Endowment and pension funds can be part of venture capital equity pools.
TRUE
Entrepreneurs who possess both the necessary abilities to make the transition to a more professional management approach and the aspiration to grow their businesses are the most likely to achieve firm growth.
TRUE
External investors generally require the entrepreneur to commit a large percentage of his or her personal assets.
TRUE
Financial ratios are control mechanisms to test the financial strengths of a new venture.
TRUE
Growing a venture through franchising allows the venture to expand quickly using little capital.
TRUE
If an entrepreneur recognizes the warning signs of bankruptcy early, he or she may be able to prevent it from occurring.
TRUE
If employees are involved in the decision-making process, they are more motivated to implement the decided course of action.
TRUE
In 2011 venture capital deals were concentrated in the three areas of software, biotechnology, and industrial energy.
TRUE
In evaluating the potential profit for a new franchise the entrepreneur should request data from the franchisor so that they can develop pro forma income and cash flow statements.
TRUE
In private venture capital firms, limited partners provide the funding and the general partner manages the fund.
TRUE
Installment loans are typically given for a period of 30-40 days.
TRUE
It is best for the entrepreneur to have any litigation in existence transferred to the bankruptcy court.
TRUE
It is common for a buyer to purchase a business using notes based on future profits.
TRUE
Lack of synergy is one of the most frequent causes of an acquisition's failure to meet its objectives.
TRUE
Making long-term decisions can be difficult in publicly traded companies where sales and profit evaluations indicate the capability of management via stock values.
TRUE
Many entrepreneurs find that as they grow they need to change their management style.
TRUE
Most R&D limited partnerships are not successful
TRUE
Most R&D limited partnerships are not successful.
TRUE
Most entrepreneurs could benefit from implementing time management techniques.
TRUE
Negotiating parties will often focus on the distribution task and ignore the integration task.
TRUE
One advantage to an acquisition is that there is an established customer base.
TRUE
Outside capital should be sought only after all possible internal sources of funds have been explored.
TRUE
Passing the business to an employee ensures the new principal is familiar with the business and the market.
TRUE
Product development strategies use customers' experiences to develop new products for existing customers.
TRUE
Regulation D regulates private placements.
TRUE
Replacement value is used only by insurance companies and in very unique circumstances.
TRUE
SBA 7(a) loans can be used for such things as equipment and land.
TRUE
Small Business Innovation Research grants are funded by federal agencies which provide a portion of their R&D funds to small businesses.
TRUE
Terminating a franchise results in more lawsuits than any other issue in franchising.
TRUE
The Small Business Investment Company Act of 1958 married the use of private capital with government funds to finance small businesses.
TRUE
The U.S. Department of Justice frequently issues guidelines for different types of mergers.
TRUE
The costs of establishing R&D limited partnerships are greater than conventional financing.
TRUE
The future earnings capacity of the company is the most important factor in valuation.
TRUE
The inventory turnover ratio measures the efficiency of the venture in managing its inventory.
TRUE
The public equity market is available only for high-potential ventures.
TRUE
There is more risk involved in financing a business' early operations: therefore, higher rates of return are expected.
TRUE
Time management is the process of improving an individual's productivity through more efficient use of time.
TRUE
To attract venture capital funding, an investment must have significant capital appreciation potential.
TRUE
To improve the chances of being approved for a bank loan, the entrepreneur should prepare a "mini" business plan for the loan committee.
TRUE
Two major disadvantages of going public are the increased reporting requirements and potential loss of control.
TRUE
Under Chapter 13, the key to enhancing the bankruptcy process is by stressing the significance of the creditors' support during the process.
TRUE
Under the Small Business Technology Transfer (STTR) program, federal agencies with budgets over $1 billion are required to set aside 0.3 percent for small businesses.
TRUE
Using a penetration strategy, the entrepreneur attempts to encourage existing customers to buy more of the firm's current products.
TRUE
When new equipment is being purchased or presently owned equipment is used as collateral, usually 50 to 80 percent of the value of the equipment can be financed depending on its salability.
TRUE
With the enactment of the Sarbanes-Oxley Act in 2002, the expense and administrative responsibilities of being a public company, as well as the liability risks of officers and directors, are significantly greater.
TRUE
Which is NOT a strategy that is used to elicit information about the other party in a negotiation
Take up a new negotiation at the end of the first
Which is not a strategy that is used to elicit information about the other party in a negotiation?
Take up a new negotiation at the end of the first.
Venture capitalists:
Tend to put more time and effort into business plans that were referred to them.
Which of the terms in a franchise agreement is the most likely cause of a lawsuit
Termination
Which of the terms in a franchise agreement is the most likely cause of a lawsuit?
Termination
Which of the following is an advantage of franchising to a franchisor?
The ability to spend larger sums of money on advertising
The difference between a board of directors and a board of advisors is that:
The board of advisors meets less frequently.
Synergy
The concept that the whole is greater than the sum of its parts.
Which of the following statements is not true of a cost benefit analysis?
The cost benefit analysis considers the cash flows and the value of money over a period of time.
Identify a true statement about Chapter 11 bankruptcy.
The courts try to give the venture in this situation time to pay its debts.
What are the characteristics of an COMPOSITION SETTLEMENT decision made in a reorganization plan in Chapter 11 bankruptcy?
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 the disadvantages of acquisition for an entrepreneur.
The entrepreneur may have overconfidence in his or her ability. The key employees of the acquired company may often leave when the business changes hands.
Which of the following should an entrepreneur use to determine whether a specific company is a good candidate for a leveraged buyout?
The entrepreneur must evaluate the firm's debt capacity. The entrepreneur must analyze whether the present owner's asking price is reasonable.
Which of the following should an entrepreneur do when assessing the opportunity of investing in a franchise?
The entrepreneur should assess the profit potential for the franchise.
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.
The most frequently used source of funds for start-ups is:
The entrepreneur's personal funds.
Identify the internal problems that are created when a business is transferred to a family member who has not been involved in the business. (Check all that apply.)
The family member may be entrusted with the responsibility of running the business without adequate training. Employees who have been with the firm since startup may resent the younger family member's assuming control of the venture.
Joint ventures can involve a wide variety of partners, which can include:
The federal gov't, business rivals, & traditional businesses.
Identify a true statement about the capital requirements of franchisees.
The franchisor may finance the initial investment to start the franchise operation in some cases.
Identify a true statement about the features of a leveraged buyout.
The interest rates are consistent with the present yields of comparable risk investment.
Which of the following are true about joint venture arrangements between two or more private-sector companies? (Check all that apply.)
The joint venture can be formed to perform cooperative research. There is a detailed cost-sharing arrangement between the different entities of the partnership.
Which of the following is true about the process of a merger of two companies?
The merger objectives must be clearly listed with the resulting gains for the owners of both companies delineated.
Owner's equity represents:
The net worth of the business.
_____ is the primary reason why acquisitions fail to generate the expected synergies and future benefits.
The problem of integrating the new organization's culture with the existing organizational culture
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.
Identify the factors that should be considered by an entrepreneur when choosing a franchise. (Check all that apply.)
The purchase of a franchise should involve an assessment of the financial stability of the franchisor. It is important for the entrepreneur to assess the market that the franchise will attract.
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.
Identify a true statement about the third and the last step, or principle, in a business turnaround process.
The step involves aggressive corrective action.
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
Identify the factors involved in a joint venture success.
The timing of the venture must be right. The assessment of the parties involved should be accurate to best manage the new entity in light of the ensuing relationships.
Identify a true statement about joint venture agreements between two or more private-sector companies.
These types of joint venture agreements are the most common.
Identify a true statement about employee stock option plans.
They are a way to award employees and clarify the succession process.
When using equity financing from family and friends:
They can be more patient than other investors in when they expect a return on investment.
Identify a true statement about joint ventures.
They have occurred between rival companies.
HYA Mobiles Inc. is a multinational manufacturer of smartphones and tablets. It starts franchises in several cities around the world. These franchises act as retail stores for the manufacturer. Identify a true statement about the franchise.
This is a type of dealership franchise.
Current liabilities are:
Those liabilities due for payment within a year.
A common procedure for determining a merger's value is to estimate the present value of discounted cash flows and the expected after-tax earnings attributable to the merger.
True
A franchise provides an opportunity to establish a new venture with up-front support that could save the entrepreneur significant time and capital.
True
A key concern in any merger or acquisition of the legality of the purchase.
True
A new franchisee can be expected to be required to undergo considerable training on operating the business.
True
As a firm grows, higher volume increases production efficiency and increases in bargaining power with suppliers.
True
Bankruptcy should be shared with employees and everybody else involved in an organization.
True
Franchising allows the franchisor to benefit from economies of scale in purchasing.
True
In evaluating an LBO's asking price, an entrepreneur can use subjective measures such as evaluating the abilities of key personnel remaining with the firm.
True
It is best for the entrepreneur to have any litigation in existence transferred to the bankruptcy court
True
One advantage of franchising is that the entrepreneur usually enters into a business that has an accepted name and product.
True
One key advantage of an ESOP is that it enhances employee motivation.
True
Only 60 percent of businesses have a succession plan in place.
True
Product development strategies use customers experiences to develop new products for existing customers:
True
Regardless of the mode used for the growth of a firm, entrepreneurs need to be good negotiators.
True
Suppliers demanding payment in cash and materials to meet orders is lacking are two warning signs of bankruptcy.
True
The Family Business Institute indicates that about 12 percent of successful ventures survive into the third generation of ownership.
True
The bargaining zone is the range of outcomes between the entrepreneur's reservation price and the reservation price of the other party.
True
The first principle in any successful turnaround is aggressive hands-on management.
True
The principle of prioritized planning required the entrepreneur to categorize his or her tasks by their degree of importance and then to allocate time to tasks based on this categorization
True
To be successful the partners in a joint venture should have symmetry.
True
When a venture is in trouble and facing bankruptcy, the entrepreneur should first sit down with his or her spouse and explain what is happening.
True
When business failure looks probable, the entrepreneur should seek outside advice
True
When business failure looks probable, the entrepreneur should seek outside advice.
True
a new franchisee can be expected to be required to undergo considerable training on operating the business
True
an employee stock option plan establishes a new legal entity.
True
bankruptcy can be used as a bargaining chip with the creditors to allow the venture to voluntarily reorganize.
True
one advantage of an ESOP is that the company can obtain a tax benefit by deducting ESOP contributions.
True
the Family Business Institute indicates that about 12 percent of successful ventures survive into the third generation of ownership.
True
the bankruptcy type that is most common is Chapter 7 bankruptcy.
True
under Chapter 13, the key to enhancing the bankruptcy process is by stressing the significant of the creditors' support during the process.
True
when business failure looks probable, the entrepreneur should seek outside advice.
True
Identify the true statements about industry-university joint ventures.
University researchers want to make the research knowledge available through research papers. Profit corporations want to obtain tangible results, such as a patent, from their research investment and want to acquire all proprietary rights.
Entrepreneurs in the ______________ quadrant of firm growth possess the abilities to grow but do not aspire to grow their business.
Unused potential for growth
Entrepreneurs in the ______ quadrant of firm growth possess the abilities to grow but do not aspire to grow their businesses.
Unused potential for growth.
The factor approach:
Uses earnings, dividend capacity, and book value to determine value.
According to the work of Bazerman and Neale (1992), identify the different strategies that may work best for the negotiation between an entrepreneur and the growth partner. (Check all that apply.)
Using differences to create trade-offs that are a source of mutually beneficial outcomes. Building trust and sharing information.
What units are involved with banks and a leveraged buyout?
Utilize senior-debt issues
What units are involved with venture capitalists and a leveraged buyout?
Utilize subordinated debt issues with warrants or options
The ______ captures the steps it takes to develop raw materials into a product and get it into the hands of customers.
Value chain.
Which of the following statements is true?
Venture capitalists desire the limited liability company.
A common reason why companies do not come out successfully from a Chapter 11 bankruptcy is because they_____.
Wait too long to file for protection.
A potential franchisee should seek answers to all of the following questions while assessing the financial stability of the franchisor except:
What are the chances of further expansion of the company
In the venture-capital process, ______ is(are) absolutely essential for preliminary screening.
a business plan
The due diligence phase of the venture-capital process includes:
a detailed review of the company's history.
An entrepreneur's best alternative to a negotiated agreement helps determine _____.
a reservation price for the negotiation
The key to a successful leveraged buyout is the _____.
ability of the entrepreneur taking over to cover the principal and interest payments through higher sales and profits
Franchising opportunities have often evolved from changes in the environment as well as important social trends. This is not one of the factors responsible:
acceptance of different cultures.
one advantage of franchising is that the entrepreneur usually enters into a business that has an ____________ name and product
accepted
A(n) __________ is the purchase of an entire company, or part of a company.
acquisition
one method of expanding a business is the purchase of an entire company or part of it so that the entity is completely absorbed and no longer exists as a separate company. This is called an ____________
acquisition
Joint ventures can involve a wide variety which include:
all of the above.
Most established R&D limited partnerships:
allow a minimum amount of equity dilution.
A two to three year plan to sell a business to employees is:
an ESOP
A two- or three-year plan to sell a business to employees is:
an ESOP.
A two- to three-year plan to sell a business to employees is:
an ESOP.
One method of expanding a business is the purchase of an entire company or part of it so that the entity is completely absorbed and no longer exists as a separate company:
an acquisition
One method of expanding a business is the purchase of an entire company or part of it so that the entity is completely absorbed and no longer exists as a separate company. This is called:
an acquisition.
using a time sheet to record usage of time is part of the principle of _____________
analysis
The ____ is calculated by dividing accounts receivable by average daily sales.
average collection period
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
Refers to a diversification strategy that involves taking a step back (up) the value chain toward raw materials
backward integration
A computer company buys a hard-drive manufacturer:
backwards integration
inventory control
balances the cost of carrying inventory with the cost of lost sales
Inventory control __________ the cost of carrying inventory with the cost of lost ________
balances, sales
The __________ __________ refers to the range of outcomes between an entrepreneur's reservation price and the reservation price of the other party.
bargaining zone
The ______________ is the range of outcomes between the entrepreneur's reservation price of the other party
bargaining zone
The most common type of joint venture is:
between two or more private sector companies.
Sales of stock within an individual state are regulated by:
blue sky examiners
People who sell companies are known as _____.
brokers
Early stage financing is typically:
called seed or start-up capital.
Growth of the venture:
causes pressures on human resources.
Entrepreneurs in the _____ quadrant of firm growth aspire to grow their business but do not posses the ability to do so:
constrained growth
Entrepreneurs in the ________ quadrant of firm growth aspire to grow their businesses but do not possess the ability to do so.
constrained growth
entrepreneurs in the ___________ quadrant of firm growth aspire to grow their business but do not possess the ability to do so:
constrained growth
When faced with the prospect of failure, the entrepreneur should first _____.
consult with his or her family
From the chapter on the characteristics of an entrepreneur we know that after the failure of a business entrepreneurs are likely to
continue starting new ventures
From the chapter on the characteristics of an entrepreneur, we know that after the failure of a business entrepreneurs are likely to:
continue starting new ventures.
In order to further investigate a franchise opportunity an entrepreneur can request a franchise package from the franchisor which:
costs between $400 - $600 and is usually refundable.
In order to further investigate a franchise opportunity an entrepreneur can request a franchise package from the franchisor, which:
costs between $400 and $600 and is usually refundable.
Under Chapter 13 bankruptcy, the individual who has filed for bankruptcy _____.
creates a five-year repayment plan under court supervision
The type of franchise where manufacturers use franchises to distribute their product lines is referred to as __________.
dealership
In a leveraged buyout, the entrepreneur wants to raise as much of the capital needed as possible in the form of long-term debt. This makes it particularly critical for the entrepreneur to assess the firm's
debt capacity
requires that the entrepreneur recognize that he or she is a time waster, that time is an important resource, and that there is a need to change personal attitudes and habits regarding the allocation of time is the principle of ____________
desire
The bootstrap purchase of assets:
direct purchase of the entire assets of a firm (wrong)
Management buyouts usually involve a ________ of the venture for some predetermined price.
direct sale
The most common method of harvesting a venture is through
direct sale of the business
In the context of primary tasks for an entrepreneur negotiating with another party for access to an external growth mechanism, the __________ __________ refers to negotiating how the benefits of a business relationship will be allocated between the parties.
distribution task
In negotiations the _____________ task involves how the benefits of the relationship will be allocated between the parties
distributive
Given the cultural climate of the U.S., business failure and bankruptcy:
do not have to be the end for the entrepreneur.
Given the cultural climate of the United States, business failure and bankruptcy:
do not have to be the end for the entrepreneur.
The longest stage of the venture capital process, at 1-3 months, is:
due diligence
which principle requires the entrepreneur to focus on the most important issue even when under pressure?
effectiveness
A(n) _____ refers to a two- to three-year plan to sell the business to employees.
employee stock option plan
which of the following is the most sig. advantage of an acquisition according to the text?
est. image and track record
Creating a Positive Organizational Culture
establishing a "we" not "me" spirit
_____ 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
In most cases, the venture capitalist:
expects the management team to run the daily operations.
product development strategies use customers' __________ to develop new products for ________ customers
experiences, existing
A "management buyout" is the same thing as an "ESOP."
false
A product development strategy relies on taking market share from competitors.
false
All bankruptcies are handles by the US Supreme Court
false
Brokers for acquisitions represent the buyer, not the seller.
false
If the existing product is being sold to teenagers in one country and new entry involves selling the existing product to teenagers in a new country then this represents a new product use.
false
In managing fixed assets, the entrepreneur should buy, instead of lease, whenever possible.
false
Most new ventures need a human resource department from the first day of operations.
false
One of the most successful diversification strategies is to diversify into unrelated products or unrelated markets to spread the risk.
false
Synergy is defined as "the intangible benefits of mergers and acquisitions."
false
The best way to "increase the size of the pie" in negotiation is to use a conflict resolution approach.
false
The four growth strategies outlined in the text are: penetration strategy, customer development strategy, service development strategy, and diversification strategy
false
To prevent pressures on the financial resources created by growth, the venture should avoid resource slack.
false
When compared to the costs of carrying excess inventory, the cost of lost sales is insignificant and should be ignored.
false
entrepreneurs that have a high ability to institute professional management practices but have low growth aspirations have "little potential" for growth
false
one of the most successful diversification strategies is to diversify into unrelated products or unrelated markets to spread the risk
false
the principle of teamwork states that an entrepreneur spends too much time with employees and should try to become less accessible to them in order to increase their efficiency
false
when negotiation the entrepreneur should make only one offer and stick to it
false
The __________ is the person who purchases a franchise and is given the opportunity to enter a new business with a better chance to succeed than if he or she were to start a new business from scratch.
franchisee
The person who purchases the franchise is the:
franchisee
the person who purchases the franchise is the ____________
franchisee
An arrangement whereby the manufacturer or sole distributor of a trademarked product or service gives exclusive rights of local distribution to independent retailers in return for their payment of royalties and conformance to standardized operating procedures:
franchising
__________ is an arrangement whereby the manufacturer or sole distributor of a trademarked product or service gives exclusive rights of local distribution to independent retailers in return for their payment of royalties and conformance to standardized operating procedures
franchising
The person offering the franchise is known as the:
franchisor
the person offering the franchise is known as the:
franchisor
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 majority of bankruptcies are:
individual bankruptcies.
Which of the following would not be a recommended diversification strategy?
integration into markets unrelated to existing products
n the ________ task, the mutual benefits from the relationship are explored, making the "size of the pie" larger.
integrative
Health Kure Pharma Inc. is a pharmaceutical company that filed for Chapter 11 bankruptcy. However, even after reemergence, the company fails to achieve considerable sales because of the availability of cheaper drugs in the market from generic drug manufacturers. Due to consistent losses, the company faces bankruptcy. Which of the following reasons is responsible for the company not being able to successfully come out of Chapter 11 bankruptcy?
intense competition
The early signs of bankruptcy are most often:
interrelated.
The least liquid current asset, _____, is eliminated when calculating the acid test ratio.
inventory
he most effective use of the interim ________ is to establish cost standards and compare the actual amount with the budgeted amount for that time period.
inventory analysis (w)
__________ __________ refers to a petition of bankruptcy filed by creditors without consent of entrepreneur.
involuntary bankruptcy
Obtaining funds from private investors:
is covered by Regulation D.
The integrative aspect of negotiation:
is more beneficial than a conflict resolution approach.
The disclosure document provided by the franchisor:
is required by the FTC.
An advantage of an international joint venture is that _____.
it has a low requirement for cash if the knowledge or patents are capitalized as a contribution to the venture
All of the following are benefits of an ESOP except:
it is relatively simple to establish.
A _________ is a separate entity that involves a partnership between two or more active participants.
joint venture
A __________ __________ is a separate entity that involves a partnership between two or more active participants to form a company.
joint venture
A ____________ is a separate entity that involves a partnership between two or more active participants
joint venture
The key to enhancing the bankruptcy process is _____.
keeping creditors informed of how the business is doing
The early signs of bankruptcy include all of the following:
key personal leave the company, payroll taxes are not paid, suppliers demand payment in cash
which franchise below is an ex. of the most popular type of franchise?
kfc
An advantage of acquisition for an entrepreneur is that the employees of the acquired company _____.
know how to run the business
a key concern in any merger or acquisition is the ___________ of the purchase
legality
A ________ occurs when an entrepreneur or an employee group uses borrowed funds to purchase an existing venture for cash.
leveraged buyout
A __________ occurs when an entrepreneur or an employee group uses borrowed funds to purchase an existing venture for cash
leveraged buyout
A(n) ________ occurs when an entrepreneur or an employee group uses borrowed funds to purchase an existing venture for cash
leveraged buyout
A(n) ________ occurs when an entrepreneur or an employee group uses borrowed funds to purchase an existing venture for cash.
leveraged buyout
Occurs when an entrepreneur or an employee group uses borrowed funds to purchase an existing venture for cash:
leveraged buyout
In most ________, the debt capital usually exceeds the equity by a ratio of 5:1
leveraged buyouts
The debt to capital ratio for most _____ usually exceeds the equity by a factor of 5:1.
leveraged buyouts
The valuation approach that gives the lowest value of the business is:
liquidation value.
In a leveraged buyout, capital is acquired in the form of _____.
long-term debt financing
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
Suggestions for surviving bankruptcy include all of the following
maintain good records, focus efforts on preparing a realistic reorganization plan, understand how the protection against creditors works
An advantage to a franchisee in franchising is the _____.
managerial support provided by the franchisor
The penetration growth strategy relies on taking ___________ share from ___________
market, competitors
Protection against an unwarranted takeover, technical obsolescence, or protection against market encroachment, are some of the reasons why a company would opt for
merger
The joining of two or more companies into a single company is referred to as a(n) __________.
merger
entrepreneurs who have the necessary abilities for the transition to more professional management practices and the aspiration to grow their business are the _________ likely to __________ their business
most, growth
a market development strategy would not involve selling ______ products to consumer's purchasing the firm's ___________ products
new, existing
which of the following is not an advantage of franchising?
no entry cost
In a horizontal diversification strategy, growth:
occurs at the same level of the value-added chain.
An unproven franchise:
offers more excitement and challenge than a proven one.
In an S corporation:
only one class of stock is permitted.
The key issue in passing the business on to an employee is
ownership
In the ______________ strategy for growth the entrepreneur encourages existing customers to buy more of the firm's current product
penetration
The strategy for growth in which the firm encourages existing customers to buy more of the firm's current product is...
penetration strategy
Ideally, an acquisition should _____.
positively influence the bottom line, impacting both long-term gains and future growth
Using the __________ method of evaluating the firm, cash flow is adjusted for the time value of money.
present value of future cash flow
review meetings to make sure they are being run effectively illustrates which of the following principles
principle of reanalysis
the principle of _____________ ___________ requires the entrepreneur to categorize his or her tasks by their degree of importance and then to allocate time to tasks based on this categorization
prioritized planning
Strategies that involve developing and selling new product to people who are already purchasing the firm's existing products:
product development
strategies involve selling a new product to a new market.
product development (w)
Which of the following is not a purpose of the Bankruptcy Act of 1978?
protect creditors from undue delay of money.
Using a large proportion of part-time workers:
provides the firm with flexibility.
An increase in supplier prices may require:
raising the price of products/services.
Mortgage financing is another term for:
real-estate asset-based financing.
The preliminary prospectus is also called as:
red herring.
Business angels usually find their deals through:
referral sources.
Chapter 11 is the type of bankruptcy that results in:
reorganization
The __________ __________ is the price (the bundle of resources from an agreement) at which an entrepreneur is indifferent about whether to accept the agreement or choose an alternative.
reservation price
The __________ is the price at which the entrepreneur is indifferent about whether to accept the agreement or choose an alternative
reservation price
Recognizing the relative importance of the issues during a negotiation allows an entrepreneur to _____.
sacrifice equity but obtain control
A market development strategy would not involve:
selling new products to consumer's purchasing the firm's existing products.
A market development strategy would not include:
selling the existing product in new locations
Conducting a ______ on cash flow involves assigning a + or - probability to the estimated value
sensitivity analysis
Conducting a(n) ____ on cash flow involves assigning a + or - probability to the estimated value.
sensitivity analysis
Entrepreneurs who usually build a business, sell it or go public, and then move on to a different idea or venture are referred to as _____.
serial entrepreneurs
One of the types of franchise offers _____, which include personnel agencies, income tax preparation companies, and real estate agencies.
services
An exit strategy should be put in place during the ________ stage of the business.
start-up
Joint ventures are sometimes called:
strategic alliances.
Exchanging stock or something else for existing debt under Chapter 11 bankruptcy is called:
substitution.
as a firm grows, higher volume increases production efficiency and increases its bargaining power with __________
suppliers
the concept that "the whole is greater than the sum of its parts" is known as ____________
synergy
During the reorganization period, the entrepreneur can speed up the process by _____.
taking the initiative in creating a plan
_____ is the last step in establishing a franchise arrangement.
the contract agreement
Funds obtained from ____ are the least expensive in terms of cost and control.
the entrepreneur's personal resources
In order for a joint venture to be successful:
the expectations of the results must be reasonable. there should be symmetry between the partners. the timing must be right. ALL OF THE ABOVE****
Which statements about capital requirements in franchising is NOT true?
the franchisee has to spend resources to establish the credibility of the business
In the context of negotiation, if the information about the issues important to each party is known to both parties and they use it, then it is likely that _____.
the outcome will be mutually beneficial
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
A recognition of the need to change personal attitudes and habits regarding the allocation of time is known as the principle of desire.
true
An acquisition is the purchase of a company, or part of a company, in which the acquired company ceases to exist independently.
true
Bankruptcy can be used as a bargaining chip with creditors to allow the venture to voluntarily reorganize.
true
Cash flow is one of the major causes for an entrepreneur to have to declare bankruptcy.
true
Franchising involves payment of royalties in exchange for exclusive distribution rights.
true
The sale of the company to employees is an exit strategy.
true
The two most common means of acquisition are the entrepreneur's direct purchase of the firm's entire stock or assets or the bootstrap purchase of these assets.
true
n evaluating an LBO's asking price, an entrepreneur can use subjective measures such as evaluating the abilities of key personnel remaining with the firm.
true
Joint ventures can involve a wide variety which includes:
universities, not-for-profit organizations, traditional businesses
entrepreneurs in the ____________ quadrant of firm growth possess the abilities to grow but do not aspire to grow their businesses
unused potential for growth
The ________ captures the steps it takes to develop raw materials into a product and get it into the hands of customers.
value chain
As long as the selling price is greater than the ______ cost per unit, some contribution can be made to cover ______.
variable; fixed costs.
If an entrepreneur files a __________ __________ petition under Chapter 7, it constitutes a determination that his or her venture is bankrupt.
voluntary bankruptcy
A common reason why companies do not come out successfully from a Chapter 11 bankruptcy is because they
wait too long to file for protection
A franchisee usually enters into a business that has a(n)_____.
well-known name, product, or service
