Question 1

A procedure through which the founder transfers ownership of her business to other people is referred to as
A) win-lose strategy.
B) exit strategy.
C) shifted strategy.
D) divested venture.
E) none of the above.

Accepted Answer

An exit strategy refers to the process through which a founder transfers ownership or control of their business to other people or entities. This might involve selling the business, going public with an IPO, or passing it on to family members or partners. The exit strategy is a vital consideration for any entrepreneur who wants to create a successful and sustainable business over the long term.

Question 2

An entrepreneur wants to sell his business. He prepares a document that contains information about the business. This document is known as a selling memorandum.

Accepted Answer

A selling memorandum, also known as an information memorandum, is a document prepared by the business owner or their advisor to provide information about the business to potential buyers. The purpose of the document is to generate interest from buyers and provide them with enough information to make an informed decision about whether to proceed with further discussions or not.

Question 3

In terms of succession in family-owned businesses,it is a general rule that the larger and more successful the company the more bitter and costly the disputes.

Accepted Answer

Family-owned businesses often face succession challenges, and as the business grows larger and more successful, family members may become more competitive and conflict may intensify. This can result in bitter and costly disputes, making it a general rule.

Question 4

The balance sheet method of calculating the net worth of a company is assets minus liabilities.

Accepted Answer

The balance sheet method of calculating net worth is based on subtracting liabilities from assets. This results in the equity or net worth of the company.

Question 5

When negotiating,it is best to "win at all costs."

Accepted Answer

It is not best to "win at all costs" in negotiation, as this can harm the long-term relationship between the parties involved and create resentment. A successful negotiation is one where both parties feel satisfied with the outcome and are willing to continue working together in the future.

Question 6

Top managers who buy out an entrepreneurship usually use a leveraged buyout.

Accepted Answer

Top managers often use a leveraged buyout to acquire an entrepreneurship, which involves borrowing a large amount of money to finance the purchase and using the assets of the business as collateral.

Question 7

A win-win approach to negotiations is never possible because everyone has to give a little a receive.

Accepted Answer

A win-win approach to negotiations is possible, as it focuses on finding solutions that benefit all parties involved. It may require compromise and some give-and-take, but ultimately, all parties should be able to benefit from the agreement reached.

Question 8

The benefits of a company going public always outweigh the costs of doing so.

Accepted Answer

Going public can be costly and time-consuming, including expenses related to compliance with regulatory requirements, investor relations, and legal fees. Additionally, becoming a public company may entail loss of control and increased scrutiny from shareholders and analysts. While there are potential benefits, such as increased visibility, access to capital, and potential for stock price appreciation, they may not always outweigh the costs for every company.

Question 9

A transfer of ownership plan is a situation where a business contributes to an Employee Stock Ownership Trust which uses the money to purchase shares of the business from existing shareholders.

Accepted Answer

In a transfer of ownership plan, a business contributes funds to an Employee Stock Ownership Trust, which then uses the money to buy shares of the business from current shareholders. This eventually leads to employees owning a portion of the company.

Question 10

Chapter 7 bankruptcy is used when a company must liquidate.

Accepted Answer

Chapter 7 bankruptcy is known as liquidation bankruptcy and is used when a company cannot pay its debts and needs to sell its assets to pay off its creditors. Therefore, statement A is true.

Question 11

Logrolling refers to both parties maximizing joint benefits due to exploring all options possible.

Accepted Answer

Logrolling typically refers to the practice of exchanging favors, especially in politics, by reciprocal voting for each other's proposed legislation, rather than exploring all options for mutual benefit.

Question 12

An entrepreneur's use of an extreme initial offer in selling her business is widely considered unethical.

Accepted Answer

An entrepreneur's use of an extreme initial offer in selling her business is not necessarily considered unethical. It may be a negotiation tactic to start high and then gradually come down, but it ultimately depends on the specific circumstances and intentions of the entrepreneur.

Question 13

No single exit strategy is best for all entrepreneurs.

Accepted Answer

Different entrepreneurs have different goals, timelines, and circumstances, so there is no one-size-fits-all approach to exiting a business. Each entrepreneur must consider their unique situation and choose the exit strategy that aligns with their personal objectives.

Question 14

Entrepreneurs can continue working productively for many decades because everyone's cycle is different. In fact,some individuals become more intelligent and creative as they age.

Accepted Answer

Everyone's cognitive abilities decline at different rates, and there is evidence that some individuals may continue to maintain and even improve their cognitive function well into old age. Therefore, entrepreneurs can continue working productively for many decades.

Question 15

When an entrepreneur sells shares of stock in the company for the first time,it is known as an initial public offering.

Accepted Answer

An initial public offering (IPO) is the first time that a privately held company offers stock to the public for sale.

Question 16

The belief that an entrepreneur has concerning whether or not there are comparable career opportunities outside the company should she leave it is known as imperative commitment.

Accepted Answer

Imperative commitment refers to an entrepreneur's belief that there are no comparable career opportunities outside the company, which makes it imperative for them to stay with the company.

Question 17

When a company has plenty of money to pay its debts,it is known to be bankrupt.

Accepted Answer

The statement is false. If a company has plenty of money to pay its debts, it is not bankrupt. Bankruptcy occurs when a company is unable to pay its debts and seeks legal protection to restructure or eliminate them.

Question 18

An entrepreneur transfers the majority of the stock in his business to an attorney who is to hold the stock until the entrepreneur's children reach age 21. At that time,the stock is transferred to the children. This is an example of a limited partnership.

Accepted Answer

This is not an example of a limited partnership. It is an example of a trust agreement or a stock transfer restriction.

Question 19

A plan to transfer ownership from an entrepreneur to employees in which an Employee Stock Ownership Trust is used to borrow money to purchase shares of stock from the business is known as a trust plan.

Accepted Answer

This description refers to an Employee Stock Ownership Plan (ESOP), not a "trust plan." ESOPs are used to allow employees to become owners of stock in the company they work for, often through the company borrowing money to purchase shares on behalf of its employees.

Question 20

A limited partnership could be used to transfer a family-owned business to others in the family..

Accepted Answer

A limited partnership can be an effective way to transfer ownership of a family business to other family members. In a limited partnership, the family members who want to retain control of the business can become general partners, while those who want a more passive ownership role can become limited partners. This allows for a smooth transition of ownership and management without disrupting the day-to-day operations of the business.

Quiz 13: Exit Strategies For Entrepreneurs: The Concluding Act

A procedure through which the founder transfers ownership of her business to other people is referred to as