This preview has intentionally blurred parts. Sign up to view the full document

View Full Document

Unformatted Document Excerpt

Chapter 13Planning for the Harvest TRUE/FALSE 1. Harvesting is the method entrepreneurs and investors use to grow their firms. ANS: F Harvesting is the method entrepreneurs and investors use to exit a business and, hopefully, reap the value of their investment in the firm. PTS: 1 REF: p. 387 OBJ: 13-1 TYPE: D NAT: Analytic | Finance 2. Many entrepreneurs successfully grow their firms, but fail to develop an effective exit plan. ANS: T PTS: 1 REF: p. 387 OBJ: 13-1 TYPE: C NAT: Analytic | Dynamics 3. Investors in a startup company are mainly interested in the new firms growth and are not particularly interested in an exit plan. ANS: F The harvest (exit plan) is vitally important to investors. PTS: 1 REF: p. 387 OBJ: 13-1 TYPE: C NAT: Analytic | Finance 4. The harvesting process encompasses more than just selling and leaving a business. ANS: T PTS: 1 REF: p. 387 OBJ: 13-1 TYPE: C NAT: Analytic | Finance 5. The sale of a firm is solely about determining the value of a company. ANS: F The sale of a firm is concerned with not only how to value a company, but also how to structure the payment overlaid with the entrepreneurs motivation for selling the company. PTS: 1 REF: p. 387 OBJ: 13-2 TYPE: C NAT: Analytic | Finance 6. A financial buyer of a small business is most interested in the firm as a stand-alone, cash-generating business. ANS: T PTS: 1 REF: p. 388 OBJ: 13-2 TYPE: C NAT: Analytic | Finance 7. A strategic buyer is most interested in the stand-alone, cash-generating potential of a business. ANS: F A strategic buyer is most interested in the synergies that can be achieved via an acquisition. PTS: 1 REF: p. 388 OBJ: 13-2 TYPE: C NAT: Analytic | Finance 8. More recently, the bust-up leveraged buyout was replaced with the build-up leveraged buyout. ANS: T PTS: 1 REF: p. 390 OBJ: 13-2 TYPE: C NAT: Analytic | Finance 9. The build-up leveraged buyout is typically used in industries that are dominated by large firms. ANS: F The build-up leveraged buyout is typically used in industries that are dominated by small business, such as funeral services and automobile dealerships. PTS: 1 REF: p. 390 OBJ: 13-2 TYPE: C NAT: Analytic | Finance 10. ESOPs may require educating the buyer about the companys operations for continued company growth. ANS: T PTS: 1 REF: p. 390 OBJ: 13-2 TYPE: C NAT: Analytic | Finance 11. The boost to employee motivation and effort that results from an ESOP will vary significantly from firm to firm. ANS: T PTS: 1 REF: p. 390 OBJ: 13-2 TYPE: C NAT: Analytic | Dynamics 12. For value-creating firms, owners who decide to harvest by withdrawing cash flows should accelerate the process as much as possible for a company with growth needs.... View Full Document

End of Preview

Sign up now to access the rest of the document