Deck 14: Managing the Transfer of the Business

Question 1

It is easier for to close down.

A) an unincorporated business than an incorporated business
B) a business that sells consumer products than a service business
C) a manufacturing business than a service business
D) a limited company than a partnership business

Answer 1

A

Question 2

A big shock is usually in store for entrepreneurs when:

A) banks require monthly interest payments on their loan.
B) key employees ask for a raise.
C) competitors become aggressive.
D) they receive the first offer for their business.

Answer 2

D

Question 3

In a recent survey, family businesses had no formal succession plans.

A) very few
B) less than 25 percent of well-established
C) second generation
D) 80 percent of

Answer 3

D

Question 4

Some generally recognized ways to transfer a family-owned business to family members are:

A) to hire the children as CEO's and let them assume management.
B) by selling it to a third party who will guarantee to include the children as top executives.
C) close the doors, walk away, and let the children assume operations.
D) through a gifting program or joint ownership.

Question 5

Prospective buyers are very interested in businesses that:

A) have established themselves as price leaders.
B) have consistent revenue.
C) don't rely on technology instead of people.
D) have a friendly work atmosphere.

Question 6

One of the four possible "outcomes" for a business identified by the text is:

A) go global.
B) merge with another business.
C) sell the business to an employee.
D) change its product line.

Question 7

The least desirable outcomes for a small business include:

A) closing down.
B) losing a long time employee.
C) losing the respect of competitors.
D) prepaying income taxes.

Question 8

Family-owned business leaders often represent the greatest risk to the business when they:

A) become disabled or even die.
B) become too comfortable in their life style.
C) get out of touch with modern business practices.
D) don't share authority.

Question 9

Which is not a common method of transferring the business to family members?

A) Life line
B) Purchase and sale of the business
C) Will
D) Joint ownership

Question 10

Public ownership is a good way to:

A) increase sales.
B) share liabilities.
C) raise a significant amount of capital.
D) engage a community.

Question 11

There are many people who believe that:

A) children are usually the best fit as successors in a family-owned business.
B) parents may be too passive in interesting their children in taking over the family business.
C) children always wants to succeed their parents in the family business.
D) parents would be better-off to leave their children out of the family business.

Question 12

If one tries to sell their business in a hurry:

A) it is possible to take advantage of certain income tax breaks.
B) they can usually find someone who is anxious to be an entrepreneur.
C) it is likely they will regret the move.
D) they might get much less than it is worth.

Question 13

Two principles of success for family-owned businesses are:

A) meet regularly to discuss financial details of the business with family members who are involved in the business and use capable managers even if they are not family.
B) clarify the objectives of the business and make sure that suppliers deal only with family members.
C) remember that family comes first and roles should be clearly defined.
D) recognize the importance of objectivity and provide incentives for non-family employees.

Question 14

Owners who have taken their small business public sometimes:

A) wish they had sold their shares privately.
B) avoid paying taxes on their gains.
C) end up losing their gains through poor investment decisions.
D) regret their choice of stock exchange.

Question 15

When going public, a business owner is likely to make use of:

A) their industry or trade association.
B) an investment dealer.
C) a marketing firm.
D) a business broker.

Question 16

A common reason for selling a small business is:

A) to be able to spend more time on other areas of interest.
B) to maximize the owner's return on their investment of time and capital.
C) to avoid having to repay some of the business's debt.
D) to start another small business.

Question 17

Which is not a step that should be part of a succession plan that sells the business to an employee?

A) Find a way to fund the transition
B) Make yourself irreplaceable
C) Identify the timeframe and exit strategy
D) Choose the successor

Question 18

Which is not a suggested tactic for owners in succession planning?

A) Ensure you are an irreplaceable aspect of the business
B) Get an evaluation of the firm
C) Start to prepare financial statements
D) Grow stable revenue

Question 19

An ESOP refers to an:

A) Earnings to Share Operating Procedure.
B) Employer Stock Options Plan.
C) Employee Share Ownership Plan.
D) Elevated Standardized Operational Program.

Question 20

Owners who intend to sell their business should ensure that:

A) it can run without them.
B) they don't saturate the market.
C) there is lots of cash in the bank.
D) the business is in a mature stage.

Question 21

Many small businesses go into bankruptcy because:

A) competitors have become more aggressive.
B) creditors are unfriendly.
C) the owners are tired of managing.
D) of a lack of profitability.

Question 22

When it comes to debt obligations:

A) no form of business has any protection.
B) an incorporated company has some protection.
C) business owners are always personally liable.
D) closing down a business eliminates those obligations.

Question 23

Bankruptcy is just a form of:

A) exiting a business.
B) avoiding liabilities.
C) saving money.
D) dealing with excess cash.