1.

 A harvest plan defines how and when owners and investors will realize an actual cash return on their investment.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-1 Harvesting the Venture: A Focus on the Future
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.01 - LO: 15-01
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:36 AM

2. Once an entrepreneur decides to "harvest" the business, their challenges and responsibilities are over.
  a. True
  b. Fals
e
ANSWER:   False
POINTS:   1
REFERENCES:   A-Head: 15-1 Harvesting the Venture: A Focus on the Future
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.01 - LO: 15-01
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:37 AM

3. The harvest decision may come when the venture has grown to a stage where an initial public offering (IPO) is a
possibility.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-1 Harvesting the Venture: A Focus on the Future
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.01 - LO: 15-01
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:38 AM

4. Only 3 out of 10 privately held firms survive into a second generation.

  a. True
  b. Fals
e
Copyright Cengage Learning. Powered by Cognero. Page 1
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-2 The Management Succession Strategy
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:39 AM

5. Only 10 percent of all privately held enterprises make it to a third generation.

  a. True
  b. Fals
e
ANSWER:   False
POINTS:   1
REFERENCES:   A-Head: 15-2 The Management Succession Strategy
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:40 AM

6. The basic rule for privately held businesses is this: The owner should develop a succession plan.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-2 The Management Succession Strategy
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:41 AM

7. There are two types of succession pressures: family members and nonfamily employees.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   True / False
Copyright Cengage Learning. Powered by Cognero. Page 2
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:42 AM

8. External environmental factors do not have any effect on the succession issue.
  a. True
  b. Fals
e
ANSWER:   False
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:43 AM

9. Nonfamily employees sometimes put pressure on the owner/manager in an effort to protect their personal interests.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Understanding
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 8:02 AM

10. Family members who do not play an active role in the business may still want to inherit part of the business.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
Copyright Cengage Learning. Powered by Cognero. Page 3
DATE MODIFIED:   8/30/2018 9:44 AM

11. The extent of overlap between the family and business systems does not vary from family business to family business.
  a. True
  b. Fals
e
ANSWER:   False
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:45 AM

12. The forcing events that require an entrepreneur to step aside and let someone direct the operation are usually
unforeseen and create major problems for the business.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:45 AM

13. A managerial successor provides the critical ideas for new-product development and future ventures.
  a. True
  b. Fals
e
ANSWER:   False
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.03 - LO: 15-03
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:47 AM

14. When looking ahead in choosing a successor from inside the organization, the founder often trains a team of executive
managers consisting of both family and nonfamily members.
Copyright Cengage Learning. Powered by Cognero. Page 4
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.03 - LO: 15-03
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:48 AM

15. The Oakland Scavenger Company case may have a major effect on the management succession plans of family
business.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.04 - LO: 15-04
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:49 AM

16. An important issue in the Oakland Scavenger Company case was that of whether nonfamily members should be
allowed to be successors in family businesses.
  a. True
  b. Fals
e
ANSWER:   False
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.04 - LO: 15-04
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:50 AM

17. The steps in developing a succession strategy are understanding the contextual aspects, identifying successor qualities,
and developing a written succession plan.
  a. True
  b. Fals
Copyright Cengage Learning. Powered by Cognero. Page 5
 e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-4 Developing a Succession Strategy
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.05 - LO: 15-05
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:51 AM

18. Some entrepreneurs are easy to replace, and some cannot be replaced.

  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-4 Developing a Succession Strategy
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.05 - LO: 15-05
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:51 AM

19. Sometimes a successor is needed because the business environment changes and a parallel change is needed at the top.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-4 Developing a Succession Strategy
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.05 - LO: 15-05
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:52 AM

20. Depending on the situation, some qualities or characteristics a successor should possess are more important than
others.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1

Copyright Cengage Learning. Powered by Cognero. Page 6

REFERENCES:   A-Head: 15-4 Developing a Succession Strategy
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.05 - LO: 15-05
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:53 AM

21. The liquidity event stands for positioning the venture for the realization of a cash return for the owners and investors.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-5 The Exit Strategy: Liquidity Events
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.06 - LO: 15-06
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:54 AM

22. The liquidity event can be achieved through an initial public offering (IPO) or complete sale of the venture.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-5 The Exit Strategy: Liquidity Events
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.06 - LO: 15-06
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:55 AM

23. It is not necessary for the entrepreneur to seek professional advice and legal counsel when liquidating the firm.
  a. True
  b. Fals
e
ANSWER:   False
POINTS:   1
REFERENCES:   A-Head: 15-5 The Exit Strategy: Liquidity Events
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.06 - LO: 15-06
Copyright Cengage Learning. Powered by Cognero. Page 7
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:56 AM

24. A buy/sell agreement can be used to make certain that funds are available to purchase the ownership interest.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-5 The Exit Strategy: Liquidity Events
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.06 - LO: 15-06
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:57 AM

25. Nepotism policies are lawful unless they have an "adverse impact" on women or minority groups (as in the Oakland
Scavenger Company case).
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.04 - LO: 15-04
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 9:59 AM

26. An exit strategy is defined as that component of the business plan where an entrepreneur describes a method by which
investors can realize a tangible return on their investment.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-5 The Exit Strategy: Liquidity Events
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.06 - LO: 15-06
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM

Copyright Cengage Learning. Powered by Cognero. Page 8

DATE MODIFIED:   8/30/2018 9:59 AM

27. Loss of ownership control is often attributable to one of the "Four Ds": disability, death, dissolution, and debtorship.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-5 The Exit Strategy: Liquidity Events
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.06 - LO: 15-06
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:00 AM

28. The prospectus for an initial public offering (IPO) must disclose fully all pertinent information about a company and
must present a fair representation of the firm's true prospects.
  a. True
  b. Fals
e
ANSWER:   True
POINTS:   1
REFERENCES:   A-Head: 15-5 The Exit Strategy: Liquidity Events
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.06 - LO: 15-06
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:01 AM

29. Harvest strategies rarely involve the complete sale of a business.

  a. True
  b. Fals
e
ANSWER:   False
POINTS:   1
REFERENCES:   A-Head: 15-6 Complete Sale of the Venture
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.07 - LO: 15-07
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:02 AM

30. Timing considerations generally do not impact decisions to sell a business because triggering events are unanticipated.
  a. True
Copyright Cengage Learning. Powered by Cognero. Page 9
  b. Fals
e
ANSWER:   False
POINTS:   1
REFERENCES:   A-Head: 15-6 Complete Sale of the Venture
QUESTION TYPE:   True / False
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.07 - LO: 15-07
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:03 AM

31. A harvest plan

  a. is similar to a will.
  b. defines when and how owners and investors will realize an actual cash return on their
investment.
  c. leaves the business to the next generation.
  d. is simple to implement.
ANSWER:   b
POINTS:   1
REFERENCES:   A-Head: 15-1 Harvesting the Venture: A Focus on the Future
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.01 - LO: 15-01
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:13 AM

32. "Harvest" does not mean that

  a. family members agree about the business.
  b. all the profits have been reaped.
  c. the firm continues to exist.
  d. the challenges and responsibilities of the entrepreneur are
over.
ANSWER:   d
POINTS:   1
REFERENCES:   A-Head: 15-1 Harvesting the Venture: A Focus on the Future
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.01 - LO: 15-01
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 12:05 PM

33. Research shows that many privately held firms go out of business within _____ year(s).
  a. 1
Copyright Cengage Learning. Powered by Cognero. Page 10
  b. 25
  c. 2
  d. 10
ANSWER:   d
POINTS:   1
REFERENCES:   A-Head: 15-2 The Management Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:16 AM

34. The average life expectancy of a privately held business is _____ years.

  a. 24
  b. 10
  c. an indefinite number of
  d. 50
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-2 The Management Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:18 AM

35. Research on family firms demonstrates which of the following facts?

  a. Only 16 percent make it to a third generation.
  b. Many family firms cease to exist after one month.
  c. Only 9 out of 10 make it to a second generation.
  d. Only 3 percent make it to the next generation.
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-2 The Management Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:19 AM

36. Barriers to successful succession planning, discussed in the text, include which of the following?
  a. nobody wanting to own the firm

Copyright Cengage Learning. Powered by Cognero. Page 11

  b. lack of a final will
  c. death anxiety
  d. lack of profits
ANSWER:   c
POINTS:   1
REFERENCES:   A-Head: 15-2 The Management Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:20 AM

37. Most privately held firms

  a. lack a succession plan.
  b. pass the firm to a child.
  c. don't view succession as a major issue.
  d. leave the succession decision to the executor of the owner's
will.
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-2 The Management Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:21 AM

38. Which of the following is not an example of pressures or interests from within a firm that affect succession issues?
  a. rivalry among various branches of the family
  b. pressure from a family member to start his or her own business
  c. employee wanting a percentage of the business in the owner's
will
  d. pressure on the owner/manager to designate an heir
ANSWER:   b
POINTS:   1
REFERENCES:   A-Head: 15-2 The Management Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Apply
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:22 AM

39. Which of the following is an event that would require an entrepreneur to step aside and let someone else direct the
Copyright Cengage Learning. Powered by Cognero. Page 12
operation?
  a. nonterminal physical incapacitation
  b. divorce
  c. age
  d. disagreements with children or business partners
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Apply
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:23 AM

40. When considering financial difficulties, which of the following statements constitutes a forcing event?
  a. The business has a loss for one quarter.
  b. A lender demands the removal of an owner/manager before lending the necessary
funds.
  c. The business does not make a substantial profit for the first year of business.
  d. The business has record losses over a holiday season.
ANSWER:   b
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Analyze
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:23 AM

41. Succession pressure inside the firm exists

  a. when the founder wants to give up authority.
  b. if family members want to keep and manage the business
themselves.
  c. if nonfamily employees don't want the business.
  d. if competition is hurting the business.
ANSWER:   b
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:25 AM
Copyright Cengage Learning. Powered by Cognero. Page 13
42. Which of the following is a source of pressure outside the family that could prove troublesome?
  a. tax rate
  b. nepotism
  c. death
  d. illness
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Apply
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:26 AM

43. Happenings that cause the replacement of the owner/manager of a family business are called
  a. abrupt happenings.
  b. forcing events.
  c. legal events.
  d. unforeseen difficulties.
ANSWER:   b
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:27 AM

44. The Oakland Scavenger Company case is profound to owners of family businesses in that

  a. conceivably, the owner can be sued for not giving equal treatment to a son as to a
daughter.
  b conceivably, the owner can be sued by an employee of a different ethnic origin based
.  upon not being accorded the same treatment as a son or daughter.
  c. conceivably, the owner can be sued for not declaring a family member his or her
successor.
  d the owner can be fined for not declaring his or her first son the heir to the business.
. 
ANSWER:   b
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.04 - LO: 15-04

Copyright Cengage Learning. Powered by Cognero. Page 14

KEYWORDS:   Bloom's: Analyze
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:29 AM

45. One of the most recent legal challenges to management succession came from the _____ case.
  a. Anderson Manufacturing Corporation 
  b. Johnson Brothers 
  c. Oakland Scavenger Company 
  d. Willy & Willy Inc. 
ANSWER:   c
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.04 - LO: 15-04
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:30 AM

46. Under U.S. law, which of the following is the first step in the initial public offering (IPO) process?
  a. Present the proposal to the board.
  b. Select a financial printer.
  c. Draft a prospectus.
  d. Perform a road show.
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-5 The Exit Strategy: Liquidity Events
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.06 - LO: 15-06
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:31 AM

47. A type of successor who is high in ingenuity, creativity, and drive would be considered a(n) _____ successor.
  a. managerial
  b. entrepreneurial
  c. opportunistic
  d. innovative
ANSWER:   b
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.03 - LO: 15-03

Copyright Cengage Learning. Powered by Cognero. Page 15

KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 12:08 PM

48. A type of successor who is interested in efficiency, internal control, and effective use of resources would be
considered a(n) _____ successor.
  a. managerial
  b. entrepreneurial
  c. opportunistic
  d. family
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.03 - LO: 15-03
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:58 AM

49. One advantage of an early entry strategy for the younger generation succeeding the older generation of a family
business is that
  a. normal mistakes are viewed as incompetence.
  b. the perspective of the environment is broadened.
  c. the successor's skills are judged with more objectivity.
  d. the skills specifically required by the business are
developed.
ANSWER:   d
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.03 - LO: 15-03
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:36 AM

50. One advantage of the delayed entry strategy for the younger generation succeeding the older generation of a family
business is that
  a. a successor's skills are judged with greater
objectivity.
  b. strong relationships are readily established.
  c. normal mistakes are viewed as incompetence.
  d. knowledge of the environment is limited.
ANSWER:   a
POINTS:   1

Copyright Cengage Learning. Powered by Cognero. Page 16

REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.03 - LO: 15-03
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:37 AM

51. The first source for succession often is

  a. nonfamily outsiders.
  b. professional managers.
  c. family and in-house personnel.
  d. friends of the family.
ANSWER:   c
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.04 - LO: 15-04
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:37 AM

52. An entrepreneurial successor is someone who  

  a. is ingenious, creative, and driven.
  b. is loyal.
  c. has a profit orientation.
  d. has an administrative orientation.
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.03 - LO: 15-03
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:39 AM

53. The managerial successor typically is not interested in

  a. efficiency.
  b. internal control.
  c. effective use of resources.
  d. creativity.
ANSWER:   d
POINTS:   1

Copyright Cengage Learning. Powered by Cognero. Page 17

REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.03 - LO: 15-03
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:40 AM

54. The Oakland Scavenger Company case resulted in a(n)

  a. favorable ruling by the court for the plaintiffs.
  b. favorable ruling by the court for the
defendants.
  c. out-of-court settlement.
  d. appeal to the U.S. Supreme Court.
ANSWER:   c
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.04 - LO: 15-04
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:41 AM

55. Which of the following is not a contextual aspect to be considered in an effective succession plan?
  a. time
  b. managerial ability
  c. entrepreneurial
vision
  d. cost
ANSWER:   d
POINTS:   1
REFERENCES:   A-Head: 15-4 Developing a Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.05 - LO: 15-05
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 10:42 AM

56. In the initial public offering (IPO) process, which of the following discloses all of the company’s pertinent
information and presents a fair representation of the firm’s true prospects?
  a. prospectus
  b. audits
  c. proposal
  d. underwriting arrangement
Copyright Cengage Learning. Powered by Cognero. Page 18
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-5 The Exit Strategy: Liquidity Events
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.06 - LO: 15-06
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:15 AM

57. Which of the following is not a step in developing a succession strategy?

  a. Identify successor qualities.
  b. Develop a written succession plan.
  c. Undertaking forcing events.
  d. Understand contextual aspects.
ANSWER:   c
POINTS:   1
REFERENCES:   A-Head: 15-4 Developing a Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.05 - LO: 15-05
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:16 AM

58. A key aspect to be considered in an effective succession is the

  a. entrepreneur's vision.
  b. family's wants and needs.
  c. profitability of the venture.
  d. marital status of the replacement.
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-4 Developing a Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.05 - LO: 15-05
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:18 AM

59. Which of the following is not one of the four strategies that can be used in preparing a management succession policy?
  a. The owner's family controls the management continuity strategy entirely.
  b. The owner controls the management continuity strategy entirely.
  c. The owner works with a professional advisor on the management continuity strategy.
  d. The owner works with his or her family on the management continuity strategy.

Copyright Cengage Learning. Powered by Cognero. Page 19

ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-4 Developing a Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.05 - LO: 15-05
KEYWORDS:   Bloom's: Analyze
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:19 AM

60. The entrepreneur who has to choose a successor with potential to develop the attributes necessary to run the business
should consider which of the following aspects of the potential successor over the others?
  a. drive and resourcefulness
  b. age
  c. education
  d. gender
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-4 Developing a Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.05 - LO: 15-05
KEYWORDS:   Bloom's: Analyze
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:23 AM

61. A written succession strategy

  a. is part of an entrepreneur's will.
  b. prepares the entrepreneur for developing a management continuity strategy and
policy.
  c. must be reviewed by the government.
  d. must be reviewed by the family.
ANSWER:   b
POINTS:   1
REFERENCES:   A-Head: 15-4 Developing a Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.05 - LO: 15-05
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:24 AM

62. Which of the following statements about the characteristics that successors should possess is true?
  a. There are only a few characteristics needed.
  b. Situation does not matter.
  c. Knowledge of the firm is not a desirable characteristic or quality.
Copyright Cengage Learning. Powered by Cognero. Page 20
  d. Some characteristics will be more important than others, depending on the situation.
ANSWER:   d
POINTS:   1
REFERENCES:   A-Head: 15-4 Developing a Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.05 - LO: 15-05
KEYWORDS:   Bloom's: Analyze
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:25 AM

63. Which of the following statements about seeking legal advice with respect to succession planning is true?
  a. Legal advice is seldom beneficial.
  b. Legal advice from an advisor who understands succession issues is always
crucial.
  c. Legal advice is not critical, but beneficial.
  d. The more you pay, the better the advice.
ANSWER:   c
POINTS:   1
REFERENCES:   A-Head: 15-4 Developing a Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.05 - LO: 15-05
KEYWORDS:   Bloom's: Analyze
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:26 AM

64. Promotion from within is

  a. seldom effective.
  b. usually a bad idea.
  c. a morale-building philosophy.
  d. a sure way to measure profitability.
ANSWER:   c
POINTS:   1
REFERENCES:   A-Head: 15-4 Developing a Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.05 - LO: 15-05
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:27 AM

65. A typical example of a forcing event is a(n)

  a. mental breakdown.
  b. natural disaster.
  c. IRS audit.
Copyright Cengage Learning. Powered by Cognero. Page 21
  d. slow business year.
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors in Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Apply
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:28 AM

66. Outside help in succession planning should be considered when

  a. the entrepreneur's ego gets in the way of a succession plan.
  b. the family doesn't want the business.
  c. the government requires it.
  d. market competition is heating up.
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-4 Developing a Succession Strategy
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.05 - LO: 15-05
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:29 AM

67. Which of the following is an influencing factor in succession?

  a. family and business cultural issues
  b. government regulation
  c. current economic conditions
  d. the competition
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-3 Key Factors of Succession
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.02 - LO: 15-02
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:30 AM

68. Which of the following is not considered a step in the harvest strategy?

  a. Look for a new venture to start up.
  b. Publicize the offer to sell.
  c. Value the business.

Copyright Cengage Learning. Powered by Cognero. Page 22

  d. Segregate the assets.
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-6 Complete Sale of the Venture
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.07 - LO: 15-07
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:43 AM

69. Besides the eight steps in the harvest strategy, what other implications should the entrepreneur be aware of when
selling out?
  a. tax implications
  b. interest implications
  c. security interests
  d. home improvement
implications
ANSWER:   a
POINTS:   1
REFERENCES:   A-Head: 15-6 Complete Sale of the Venture
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.07 - LO: 15-07
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:34 AM

70. The idea of "selling out" should be viewed in a _____ sense.

  a. destructive
  b. negative
  c. positive
  d. last resort
ANSWER:   c
POINTS:   1
REFERENCES:   A-Head: 15-6 Complete Sale of the Venture
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.07 - LO: 15-07
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:35 AM

71. In a survey of 1,000 business owners, which of the following was a motivation for an entrepreneur to sell a venture?
  a. too many heirs within the company
  b. the company getting too big
Copyright Cengage Learning. Powered by Cognero. Page 23
  c. a desire for liquidity
  d. legal advice received
ANSWER:   c
POINTS:   1
REFERENCES:   A-Head: 15-6 Complete Sale of the Venture
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.07 - LO: 15-07
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 12:12 PM

72. Which of the following is not a suggestion a tax accountant or lawyer might make concerning tax reduction?
  a. Place real estate in a separate corporation.
  b. Increase management's salaries and fringe
benefits.
  c. Establish a leasing subsidiary.
  d. Give some or all of the owner's shares to heirs.
ANSWER:   b
POINTS:   1
REFERENCES:   A-Head: 15-6 Complete Sale of the Venture
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.07 - LO: 15-07
KEYWORDS:   Bloom's: Analyze
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:38 AM

73. When selling a business, which of the following is not good advice?

  a. Sell when the timing is right.
  b. Sell when sales are peaking.
  c. Sell when profits are low.
  d. Sell when inventory is high.
ANSWER:   c
POINTS:   1
REFERENCES:   A-Head: 15-6 Complete Sale of the Venture
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.07 - LO: 15-07
KEYWORDS:   Bloom's: Analyze
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:40 AM

74. Which of the following would not be a participant at a due diligence meeting?

  a. management representatives
  b. company counsel
Copyright Cengage Learning. Powered by Cognero. Page 24
  c. SEC staff
  d. underwriters
ANSWER:   c
POINTS:   1
REFERENCES:   A-Head: 15-5 The Exit Strategy: Liquidity Events
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.06 - LO: 15-06
KEYWORDS:   Bloom's: Apply
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:41 AM

75. Which of the following steps should be carried out second when deciding to sell a business?
  a. Publicize the offer to sell.
  b. Finalize the prospective
buyers.
  c. Segregate the assets.
  d. Value the business.
ANSWER:   c
POINTS:   1
REFERENCES:   A-Head: 15-6 Complete Sale of the Venture
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.07 - LO: 15-07
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:42 AM

76. Which of the following steps should be carried out third when deciding to sell a business?
  a. Publicize the offer to sell.
  b. Value the business.
  c. Finalize the prospective
buyers.
  d. Time the sale appropriately.
ANSWER:   b
POINTS:   1
REFERENCES:   A-Head: 15-6 Complete Sale of the Venture
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.07 - LO: 15-07
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:43 AM

77. Segregating the assets is the _____ step in selling a business.

  a. sixth
Copyright Cengage Learning. Powered by Cognero. Page 25
  b. fifth
  c. eighth
  d. second
ANSWER:   d
POINTS:   1
REFERENCES:   A-Head: 15-6 Complete Sale of the Venture
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.07 - LO: 15-07
KEYWORDS:   Bloom's: Remember
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:45 AM

78. Which of the following statements regarding communication after the sale is true?
  a. Communication should end at least 10 days prior to signing a buy agreement.
  b Communication is a key step between the seller and the buyer and between the buyer
.  and the current management personnel.
  c. Continued communication through the transition to new ownership is not critical.
  d Communication should end at the time the buy agreement is signed.
. 
ANSWER:   b
POINTS:   1
REFERENCES:   A-Head: 15-6 Complete Sale of the Venture
QUESTION TYPE:   Multiple Choice
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.07 - LO: 15-07
KEYWORDS:   Bloom's: Analyze
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:46 AM

79. Bill and James Raymond have worked for their father's company for 15 years. Their father, who is president and now
plans to retire, wants his sons jointly to take over the company. Bill and James have never agreed on anything. Should
their father try another succession plan?
ANSWER:   For the sake of the company, another succession plan would be needed. The sons
disagree already on nonbusiness topics. When Bill and James take over the
company, arguments will only get worse. The performance of the firm will
probably decline. This may send the company into bankruptcy. The best thing for
the father to do would be to hire an outsider to take the place of president. The
father can still maintain control of the company, and at a later date he can give
control to one of the sons. Rivalry can lead to the sale or bankruptcy of the
business in the future.
POINTS:   1
REFERENCES A-Head: 15-3 Key Factors in Succession
:  
QUESTION TY Subjective Short Answer
PE:  
HAS VARIABL False
ES:  
Copyright Cengage Learning. Powered by Cognero. Page 26
LEARNING O ENTR.KRTK.20.15.02 - LO: 15-02
BJECTIVES:  
KEYWORDS:   Bloom's: Apply
DATE CREAT 6/14/2018 9:43 AM
ED:  
DATE MODIF 8/30/2018 11:48 AM
IED:  

80. The employees at Donnelly and Associates have noticed a case of favoritism toward the president's son, Jim. Jim
constantly breaks company policy. The president is planning to retire in a few years. What should be done about the
growing unrest in the company?
ANSWER:   Before the president retires he must discipline his son. If the son was to take over
the company now, the business would surely fail. The employees feel mistreated
because Jim gets more privileges than they do. Jim must go along with company
policy or else the employees might do as Jim does. The company could also lose
employees who feel they are not treated fairly.
POINTS:   1
REFERENCES A-Head: 15-3 Key Factors in Succession
:  
QUESTION TY Subjective Short Answer
PE:  
HAS VARIABL False
ES:  
LEARNING O ENTR.KRTK.20.15.02 - LO: 15-02
BJECTIVES:  
KEYWORDS:   Bloom's: Apply
DATE CREAT 6/14/2018 9:43 AM
ED:  
DATE MODIF 8/30/2018 11:49 AM
IED:  

81. Describe the legal concerns over family business succession, citing the Oakland Scavenger Company case.
ANSWER:   Traditions of succession practices in privately held businesses were challenged in
the Oakland Scavenger Company case. This suit was brought in 1984 by a group
of black and Hispanic workers at the California-based Oakland Scavenger
Company (a garbage collection firm), who complained of employment
discrimination because of their race. The U.S. District Court of Northern
California dismissed the suit on the basis that it had no relation to
antidiscrimination laws. However, the U.S. Court of Appeals for the Ninth
Circuit reviewed the decision and held that "nepotistic concerns cannot supersede
the nation's paramount goal of equal economic opportunity for all." According to
Oakland Scavenger's legal brief, the question focused on the Fifth Amendment
versus Title VII of the 1964 Civil Rights Act: If discrimination overrides the
protection of life, liberty, and property from unreasonable interference from the
state, then the rights of parents to leave their property and business to anyone can
be abolished. This decision can have a major effect on the management
succession plans of privately held businesses. The case was appealed to the
Supreme Court. However, before the Court could make a ruling, the Oakland
Scavenger Company was purchased by Waste Management Corporation, and an
out-of-court $8 million settlement was reached.
POINTS:   1

Copyright Cengage Learning. Powered by Cognero. Page 27

REFERENCES A-Head: 15-3 Key Factors in Succession
:  
QUESTION TY Subjective Short Answer
PE:  
HAS VARIABL False
ES:  
LEARNING O ENTR.KRTK.20.15.04 - LO: 15-04
BJECTIVES:  
KEYWORDS:   Bloom's: Understand
DATE CREAT 6/14/2018 9:43 AM
ED:  
DATE MODIF 8/30/2018 11:51 AM
IED:  

82. List the steps for selling a business.

ANSWER:    Step 1: Prepare a financial analysis.
 Step 2: Segregate the assets.
 Step 3: Value the business.
 Step 4: Identify the appropriate timing.
 Step 5: Publicize the offer to sell.
 Step 6: Finalize the prospective buyers.
 Step 7: Remain involved through the closing.
 Step 8: Communicate after the sale.

POINTS:   1
REFERENCES:   A-Head: 15-6 Complete Sale of the Venture
QUESTION TYPE:   Subjective Short Answer
HAS VARIABLES:   False
LEARNING OBJECTIVES:  ENTR.KRTK.20.15.07 - LO: 15-07
KEYWORDS:   Bloom's: Understand
DATE CREATED:   6/14/2018 9:43 AM
DATE MODIFIED:   8/30/2018 11:54 AM

83. What are the three critical steps in developing a succession strategy in a family business?
ANSWER:   The three critical steps to consider are (1) understanding the contextual forces of
time, type of venture, capabilities of managers, entrepreneur's vision, and
environmental factors; (2) identifying successor qualities such as energy,
enthusiasm, perseverance, maturity, and resourcefulness; and (3) developing a
written succession plan.
POINTS:   1
REFERENCES A-Head: 15-4 Developing a Succession Strategy
:  
QUESTION TY Subjective Short Answer
PE:  
HAS VARIABL False
ES:  
LEARNING O ENTR.KRTK.20.15.05 - LO: 15-05
BJECTIVES:  
KEYWORDS:   Bloom's: Understand
Copyright Cengage Learning. Powered by Cognero. Page 28
DATE CREAT 6/14/2018 9:43 AM
ED:  
DATE MODIF 8/30/2018 11:55 AM
IED:  

Copyright Cengage Learning. Powered by Cognero. Page 29