Deck 14: Managing the Transfer of the Business

Question 1

A common reason for selling a small business is

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

Answer 1

C

Question 2

Owners who have taken their small business public sometimes

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

Answer 2

D

Question 3

It is easier for ________ to close down

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

Answer 3

C

Question 4

There are many people who believe that

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

Question 5

Public ownership is a good way to

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

Question 6

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

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

Question 7

Prospective buyers are very interested in businesses that

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

Question 8

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

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

Question 9

Bankruptcy is just a form of

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

Question 10

Two principles of success for family owned businesses are

A)recognize the importance of objectivity and provide incentives for non-family employees
B)remember that family comes first and roles should be clearly defined
C)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
D)clarify the objectives of the business and make sure that suppliers deal only with family members

Question 11

When going public a business owners is likely to make use of

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

Question 12

A big shock is usually in store for entrepreneurs when

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

Question 13

The least desirable outcomes for a small business include

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

Question 14

when it comes to debt obligations

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

Question 15

If one tries to sell their business in a hurry

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

Question 16

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

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

Question 17

Many small businesses go into bankruptcy because

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

Question 18

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

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

Question 19

An ESOP refers to an

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

Question 20

Owners who intend to sell their business should ensure that

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