Deck 14: Family Businesses

Question 1

than 20 percent of the businesses in the country are family owned.

Answer 1

False

Question 2

Entrepreneurial couples should share the same goals and vision for the company.

Answer 2

True

Question 3

issues do not affect business operations of family businesses.

Answer 3

False

Question 4

of the advantages of entrepreneurial couples is that spouses can take shifts with chores at work and home.

Question 5

divorce of an entrepreneurial couple can result in the financial ruin of the company.

Question 6

than half of all family businesses are successfully transferred to the second generation.

Question 7

Businesses often do not survive into the second generation because many children do not want to own the family business.

Question 8

Businesses often do not survive into the second generation because of sibling rivalry.

Question 9

process of transferring leadership to the next generation is known as family sequencing.

Question 10

The process of transferring leadership to the next generation is known as succession.

Question 11

The entrepreneur's succession plan should not be made known to the children until the entrepreneur is ready to retire.

Question 12

An Employee Stock Ownership Plan is often used when company ownership is transferred to the entrepreneur's children.

Question 13

With an Employee Stock Ownership Plan, the company buys employees stock in major corporations as an employee benefit.

Question 14

A succession plan would address stock ownership of active and inactive family members.

Question 15

The low-entry strategy recommends that children begin working at the family business in an entry-level position.

Question 16

The delayed-entry strategy recommends that children work outside the family business to learn new ideas.

Question 17

If there are several children who want to manage the company, the entrepreneur must decide if one child will be made president or if power will be shared equally.

Question 18

Family businesses account for what percent of the businesses in the United States?

A) Less than ten percent
B) Approximately one-third
C) Approximately half
D) Over 80 percent

Question 19

The number of entrepreneurial couples _____________ during the 1980s.

A) increased
B) decreased
C) remained constant
D) was not measured

Question 20

Family-owned businesses account for what percent of the nation's employment?

A) Ten percent
B) Twenty percent
C) Thirty percent
D) Sixty percent

Question 21

Which of the following is true of family-owned businesses?

A) There is often more trust among family members than with outside employees.
B) The success of a family and the success of a business are based on different criteria.
C) Family issues often spill over into business operations.
D) All of the above.

Question 22

Family businesses have a unique set of problems because

A) the success of a family and the success of a business are based on different criteria.
B) family members can rarely work together harmoniously.
C) there is less trust among family members than with employees.
D) all of the above

Question 23

Which of the following is true?

A) Advantages of family businesses include stability, trust, and resilience.
B) Advantages of family businesses include positive public perception and the ability to sacrifice for the long haul.
C) Family issues often spill over into business operations.
D) All of the above.

Question 24

In order for entrepreneurial couples to avoid problems with power and decision making, it is best to

A) appoint a non-family employee as manager.
B) work different hours in the business.
C) have a written agreement detailing what type of decisions need both partners' approval.
D) use a non-family employee as mediator.

Question 25

Advantages of entrepreneurial couples include

A) both spouses will work long hours to make the business succeed.
B) spouses can take shifts with chores at work and home.
C) marriage and careers are intertwined.
D) all of the above

Question 26

In order for entrepreneurial couples to succeed, they should

A) have the same personalities.
B) have the same goals and vision for the company.
C) take equal pay.
D) minimize benefits.

Question 27

Esprit de Corp., the clothing company, experienced financial problems because the owners

A) took excessive salaries.
B) did not care about the future of the company.
C) did not have the same goals and vision for the company.
D) had different personalities.

Question 28

Disadvantages of entrepreneurial couples include

A) too much togetherness.
B) conversation at home may be dominated by business issues.
C) divorce may cause the loss of the business for at least one of the partners.
D) All of the above.

Question 29

Which of the following is true?

A) Sharing power and decision making is a special concern for husband/wife entrepreneurial teams.
B) Entrepreneurial couples must have the same goals and share the same vision for the company.
C) The divorce of an entrepreneurial company can result in the financial ruin of the company.
D) All of the above.

Question 30

If an equitable distribution state, the courts divide assets and liabilities of a marriage

A) 50-50 between husband and wife.
B) according to family circumstances and state guidelines.
C) according to earnings generated by each spouse.
D) according to the agreement between husband and wife.

Question 31

If a divorce occurs in a community property state, all assets and liabilities acquired during a marriage are

A) split according to family circumstances.
B) split according to federal laws.
C) split 50-50 between husband and wife.
D) always left in joint names.

Question 32

If a divorce occurs in an equitable distribution state, all assets and liabilities acquired during a marriage are

A) split according to family circumstances and state guidelines.
B) split according to federal laws.
C) split 50-50 between husband and wife.
D) always left in joint names.

Question 33

The percentage of family-owned businesses that are transferred to the second generation is approximately

A) ten percent.
B) twenty percent.
C) fifty percent.
D) ninety percent.

Question 34

Businesses often do not survive into the second generation because

A) the children do not want the long hours of work and commitment required by the business.
B) of sibling rivalry.
C) it is difficult for the entrepreneur to relinquish management.
D) all of the above.

Question 35

Arnold Daniels, president of Praendex, had trouble giving control to his sons because

A) they would not listen to him.
B) he was looking for someone to do things exactly as he had done them.
C) he had no hiring and compensation policy.
D) there were active and inactive family members.

Question 36

Children may not want to take over the ownership of their parents' business because

A) the business requires long hours and a commitment that they choose not to assume.
B) the children have different interests.
C) the children may want to go in a different direction in order to prove themselves.
D) all of the above.

Question 37

The process of transferring leadership to the next generation is known as

A) strategy.
B) succession.
C) stock option planning.
D) delayed-entry strategy.

Question 38

If a company was founded by a partnership, transition to the next generation may fail if the children of the partners

A) don't get along.
B) are not the same sex.
C) are different ages.
D) all of the above.

Question 39

A successful transfer to the next generation requires the transfer of

A) company assets.
B) leadership.
C) values.
D) all of the above.

Question 40

A succession plan

A) details how succession will occur.
B) details how to know when the successor is capable of taking over the company management.
C) helps the entrepreneur and the second generation plan for the future.
D) all of the above

Question 41

If an entrepreneur wishes to transfer company ownership to employees, this can be accomplished through a(an)

A) Employee Stock Ownership Plan.
B) Employee Stock Review Plan.
C) Employee Stock Liquidation Plan.
D) Employee Stock Management Plan.

Question 42

Ownership of a family business can legally be transferred

A) while the owner is still living.
B) as a gift to the children.
C) by selling the business to the children.
D) all of the above.

Question 43

When and how a family business is transferred may affect

A) which child can legally inherit the business.
B) taxes that must be paid.
C) which assets can be transferred.
D) all of the above.

Question 44

The low-entry strategy recommends that children

A) work long hours to understand what business ownership will require.
B) be paid less than market rates to eliminate friction with other employees.
C) begin working at the company in an entry-level position.
D) all of the above

Question 45

With the low-entry strategy,

A) children begin working in the company in an entry-level position.
B) the children learn all aspects of the business.
C) the children develop relationships with customers and employees.
D) all of the above.

Question 46

One disadvantage of the low-entry strategy is

A) the children will not have an adequate education for the job they hold.
B) the children do not have outside experience on which to draw in developing new ideas.
C) the parents will not have time to train the children.
D) all of the above.

Question 47

The delayed-entry strategy recommends that

A) children enter the family business only when the parents are ready to retire.
B) children work outside the family business to learn new ideas and establish their careers.
C) children enter the family business only after training by the entrepreneur.
D) nonfamily employees take over ownership from an entrepreneur.

Question 48

One disadvantage of a delayed-entry strategy is

A) employee morale may suffer when children are brought in at a higher level than long-time employees.
B) the parents will not have time to train the children.
C) the children will be less interested in the future of the company.
D) the children will always wish they had stayed outside the family business.

Question 49

If children work outside the family business and then enter the family business in a management position, this is known as the

A) low-entry method.
B) delayed-entry method.
C) management entry method.
D) succession method.

Question 50

The two strategies for children entering a family business are the

A) career strategy and job strategy.
B) low-entry and delayed-entry strategies.
C) succession method and compensation method.
D) entrepreneurial and managerial strategies.

Question 51

Most experts advise that family members should not be hired unless

A) they meet the same criteria as outside employees.
B) they have a genuine interest in the company.
C) they make genuine contributions in a real, well-defined job.
D) all of the above.

Question 52

Most experts advise that family members

A) should not be hired unless they meet the same criteria as outside employees.
B) should not be given "false" jobs'it should be real and well-defined.
C) be paid based on market rates.
D) all of the above.

Question 53

A succession plan for a family business would address

A) the hiring and compensation policy for family members.
B) whether a low-entry or delayed-entry strategy will be used.
C) stock ownership of active and inactive family members.
D) all of the above.

Question 54

Problems may arise if there are several children who want to take over a company from the parents because

A) hurt feelings may develop when the parent chooses one child as manager over the others.
B) only one child should work in the business.
C) only one should know the true financial picture of the company.
D) all of the above

Question 55

If all of the children in a family are given an equal portion of the company stock, this may cause problems because

A) children who are not active in daily company activities still have decision-making power.
B) the children will not understand the value the stock.
C) only one child should own stock.
D) all of the above.

Question 56

A succession plan for a family business should state

A) if the business is to remain in the family or if it will be sold to an outsider.
B) which child, if any, will take over the top position.
C) the hiring and compensation policy for family members.
D) all of the above.

Question 57

An entrepreneur's plans regarding succession

A) should only be told to the child who will be the new manager.
B) should be made clear to all family members.
C) should not be stated until the entrepreneur is near retirement.
D) cannot be developed until shortly before retirement.

Question 58

A clear succession plan helps the entrepreneur's children

A) plan their own careers.
B) learn social skills.
C) develop entrepreneurial personalities.
D) all of the above

Question 59

A meeting of family members to discuss business issues and problems is known as a(an)

A) advisory board.
B) family council.
C) Board of Directors.
D) quality committee.

Question 60

An advisory board may include

A) family members.
B) nonfamily employees.
C) outsiders.
D) all of the above.