Deck 13: Exit Strategies For Entrepreneurs: The Concluding Act

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.

Answer 1

B

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.

Answer 2

True

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.

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

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

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.

Question 10

Chapter 7 bankruptcy is used when a company must liquidate.

Question 11

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

Question 12

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

Question 13

No single exit strategy is best for all entrepreneurs.

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.

Question 15

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

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.

Question 17

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

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.

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.

Question 20

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

Question 21

Steve Luster,founder of Chems Laboratories,wants to be prepared for every type of negotiation that he might encounter as president of his company. With which of the following parties might Steve have to negotiate?

A) Venture capitalists.
B) Cofounders.
C) Customers and suppliers.
D) Potential purchasers.
E) All of the Above.

Question 22

Which of the following is not a common exit strategy?

A) Managers buying out the company
B) ESOPs
C) Limited partnerships
D) Trusts
E) All of the above are common exit strategies.

Question 23

A student confronts his teacher because he is unsatisfied with the grade he received on his paper. The teacher believes that there are too many grammatical errors to get a good grade. However,with the best interests of the student at hand,the teacher allowed him to redo the paper and correct all the mistakes and then she will reevaluate his score. This agreement is referred to as

A) Logrolling.
B) Win-lose.
C) Integrative agreement.
D) Negotiation.
E) All of the Above.

Question 24

Which of the following are earnings-based methods for valuing businesses?

A) Excess earnings, capitalized earnings, market earnings.
B) Excess earnings, net worth earnings, capitalized earnings.
C) Market earnings, excess earnings, discounted future earnings.
D) Discounted future earnings, excess earnings, capitalized earnings.
E) Net worth, discounted future earnings, excess earnings.

Question 25

In exiting the business,an entrepreneur transfers the majority of the shares of stock to family members,but retains control of the operations of the business for the next five years. This is an example of a (an)

A) trust.
B) intangible strategy.
C) limited partnership.
D) balance sheet partnership.
E) positive affect partnership.

Question 26

Which of the following entrepreneurs would be the most likely to choose the exit strategy that yields a significant amount of cash on closing rather than a smaller amount on closing and payments over some time?

A) Emma Cornell, 50, looking to retire and maintain her current lifestyle.
B) Margie Clampet, 49, manager of her company for the past 25 years.
C) David Leonard, 29, planning to invest in a cosmetics firm.
D) Don Ritters, 41, looking for a career in acting while enjoying life.
E) All of the above

Question 27

Adidas (athletic shoes)recently bought out Mennen Deodorant Lavatories in an attempt to expand its product line to deodorant. This is an example of transfer of ownership to

A) direct competitors.
B) non-direct competitors.
C) noncompetitors.
D) business brokers.
E) none of the above.

Question 28

Money received today is worth more than money that will be received in the future. This principle is known as

A) inflation.
B) time value of money.
C) depreciation.
D) decreased worth.
E) minimizing value.

Question 29

Lisa DuPrey,founder of Cute Children Clothing,told one of her shoe vendors that the business was going to shutdown if the vendor couldn't offer a lower price for the shoes supplied. Since this vendor relies on the business from Lisa,it decided to give Lisa a large discount on her purchase order. However,Lisa had no intentions or reasons to shut down her operations because profits were steady. This unethical negotiation tactic is known as

A) Positive affect.
B) False commitments.
C) Misrepresentation.
D) Inappropriate information gathering.
E) All of the Above.

Question 30

Which of the following might be a disadvantage (or challenge)of an initial public offering?

A) It can be expensive.
B) The entrepreneur will lose some control..
C) It may be difficult to properly value the company.
D) Public companies are subject to more scrutiny.
E) All of the Above

Question 31

Which of the following is an example of an intangible asset?

A) Money.
B) Office chair.
C) Outstanding employee.
D) Lost inventory.
E) Sales revenues.

Question 32

According to research findings,which of the following negotiation tactics do many people consider to be unethical?

A) False promises.
B) "Big lie" technique.
C) Convincing the other side you have an "out."
D) All of the Above.
E) None of the Above.

Question 33

When Nike bought out Converse Shoes,it was an example of a transfer of ownership to

A) direct competitors.
B) non-direct competitors.
C) noncompetitors.
D) horizontal integration.
E) None of the Above.

Question 34

Which of the following is not an important step when calculating earnings using the excess earnings method?

A) Calculate adjusted tangible net worth.
B) Estimate value of intangibles.
C) Compute extra earning power.
D) Calculate the pay of the Chief Executive Officer.
E) Estimate the opportunity cost of investing in the business.

Question 35

Which of the following is not related to ESOP?

A) Leverage plan
B) Transfer of ownership plan.
C) ESOTs.
D) ESOKs.
E) Employee Stock Ownership Trust.

Question 36

Which of the following factors is not included when calculating the opportunity costs of investing in a business when using the excess earnings method?

A) Rate of risk-free return.
B) Risk free return
C) An adjustment for inflation.
D) Risk allowance.
E) All of the above are part of opportunity costs.

Question 37

Which of the following balance sheet methods takes the actual market value of assets into account?

A) Altered.
B) Adjusted.
C) Market Value.
D) Master.
E) Fluctuated.

Question 38

Amie Cosmetology decided to sell its company to outsiders. In order to get a good bid,executives put together a marketing document that is designed to attract interest in their business. This document is known as a

A) succession plan.
B) marketing advertisement.
C) selling enhancement tool.
D) selling memorandum.
E) multi-purpose tool.

Question 39

Positive Affect is very successful when negotiating. Which of the following is not a component of creating a positive affect on your opponent?

A) Calm discussions prior to negotiations.
B) A welcoming environment.
C) Refreshments served throughout the process.
D) Treating opponents with respect and courtesy.
E) All of the above are components of creating a positive affect.

Question 40

Representatives for Morgan Enterprises met with managers from Ride Park,Inc.to discuss Ride Park's purchase of equipment. The two sides began exchanging offers,counteroffers,and concessions in order to obtain an agreement over the size and price of the next purchase order. These two companies are experiencing which business process?

A) Arbitration.
B) Negotiation.
C) Leveraged buyout.
D) Decisive meeting.
E) None of the Above.

Question 41

Explain what leveraged buyout means.

Question 42

One way to value a business includes comparing its price/earnings ratio to the price/earnings ratios of similar publicly traded companies in the same industry. This method is known as

A) price method.
B) market value method.
C) fixed assets method.
D) balance sheet method.
E) primary earnings method.

Question 43

Assume that an entrepreneur signs an agreement with a bank wherein the bank holds title and ownership of the entrepreneur's business and will transfer that title and ownership to the entrepreneur's child when the child reaches the age of 21. This kind of an arrangement is known as

A) a limited partnership.
B) a corporation.
C) a trust.
D) a business valuation plan.
E) None of the above.

Question 44

Assume that you work for a business in which the entrepreneur/owner wants to transfer ownership of the business to the employees. The entrepreneur sets up an Employee Stock Ownership Trust which borrows money and buys shares of stock from the business. These shares will later be transferred to the employees. This form of transfer is known as

A) bonus transfer plan.
B) leveraged plan.
C) transfer of ownership plan.
D) limited partnership plan.
E) None of the above.

Question 45

A business is valued by estimating the present value of the company's estimated earnings over a specified time. This method of valuing a business is known as

A) balance sheet method.
B) discounted future earnings method.
C) income statement method.
D) succession method.
E) ESOT method.

Question 46

An entrepreneur is preparing to sell her business and is attempting to place a value on it. In addition to everything else in the business,she has hired some of the very best people over the years and believes that these people add considerable value to the business. These valuable people are known as

A) the family trust.
B) fixed assets.
C) variable assets.
D) intangible assets.
E) prospectus.

Question 47

Explain what is involved in an ordinary Employee Stock Ownership Plan (ESOP).

Question 48

An entrepreneur sells the business to a group of venture capitalists who want to buy the business because they believe it is a good investment and because they do not own a business in the same industry yet. This is known as a sale to

A) nondirect competitors.
B) financial competitors.
C) direct competitors.
D) noncompetitors.
E) None of the above.

Question 49

What does "win-win" mean?

Question 50

When a company enters bankruptcy to reorganize and try to recover,it is known as which type of bankruptcy?

A) Chapter 7.
B) Chapter 11.
C) Chapter 13.
D) Chapter 21.
E) None of the above.

Question 51

Several investors are negotiating to purchase a business. To finance the purchase,they make a loan from a major bank and pledge the assets of the company that they want to buy as collateral for the loan. This is known as a

A) trust buyout.
B) stock ownership program.
C) noncompetitors buyout.
D) leveraged buyout.
E) selling memorandum.

Question 52

Explain the "market method" of determining the value of a business.

Question 53

Assets minus liabilities (as stated on the balance sheet)is equal to

A) adjusted balance sheet valuation.
B) new worth.
C) opportunity cost.
D) capitalized earnings.
E) future earnings.

Question 54

Which of the following is a good reason for an entrepreneur to "take the company public?"

A) Makes it easier to buy and sell ownership in the company.
B) Valuing the company is easier.
C) Raises new equity capital.
D) All of the above are correct.
E) Only a and c are correct.

Question 55

An entrepreneur wants to transfer ownership of the business to her employees. She sets up an Employee Stock Ownership Trust which borrows money to buy shares of stock which will eventually be passed on to the employees. This type of transfer of ownership is known as

A) liabilities plan.
B) trusted plan.
C) noncompetitors plan.
D) earnings method plan.
E) leveraged plan.

Question 56

Why do entrepreneurs typically use the exit strategy of handing down the business to a family member?

Question 57

Discuss the steps that an entrepreneur should take to make the company attractive to potential buyers.

Question 58

Which of the following is associated most directly with the time value of money?

A) Book value of assets.
B) Discounted future earnings.
C) Net worth.
D) Sales revenue for last month.
E) Initial public offering.

Question 59

Entrepreneurs tend to have feelings of commitment to the businesses that they started. The type of commitment that is defined as the possible lose of a valuable investment should they leave the business is known as

A) calculative commitment.
B) affective commitment.
C) normative commitment.
D) imperative commitment.
E) business commitment.

Question 60

When a company goes public (wants to sell shares of stock),it must prepare a document that describes the company and lists such things as potential risks,how the raised money will be used,the company's dividend policy,etc. This document is known as

A) a balance sheet.
B) the comment letter.
C) a prospectus.
D) a trust agreement.
E) an exit letter.