Exam 13: Planning for the Harvest

Jacob has worked for the past five years to build his business but wants to travel more,so he is thinking it is time to harvest.Harvesting refers to

A strategic buyer is most interested in the stand-alone,cash-generating potential of a business.

Entrepreneurs frequently do not appreciate the difficulty of selling or exiting a business.

Match the term with its definition. a.Build-up LBO b.Business broker c.Bust-up LBO d.Double taxation e.Employee Stock Ownership Plan f.Harvesting g.Initial public offering h.Leveraged buyout i.Management buyout j.Opportunity cost of funds k.Private equity recapitalization l.Seller financing -Taxation of income that occurs twice--first as corporate earnings and then as stockholder dividends

One of the drawbacks of harvesting by withdrawing cash flows slowly is that the owner must seek out a buyer for the eventual sale of the business.

Valerie is beginning to think of harvesting her company.Which question should be asked first?

Match the term with its definition. a.Build-up LBO b.Business broker c.Bust-up LBO d.Double taxation e.Employee Stock Ownership Plan f.Harvesting g.Initial public offering h.Leveraged buyout i.Management buyout j.Opportunity cost of funds k.Private equity recapitalization l.Seller financing -A professional who assists in the buying and selling of a business

A financial buyer of a small business is most interested in the firm as a stand-alone,cash-generating business.

The boost to employee motivation and effort that results from an ESOP will vary significantly from firm to firm.

A build-up leveraged buyout involves

A management buyout can contribute significantly to a firm's operating performance.

The harvesting process encompasses more than just selling and leaving a business.

One of the big financial questions associated with selling a business is:

What are professional and personal issues an entrepreneur may face in the period of time from when the harvest is announced and it is completed?

An employee stock ownership plan represents

Leonard wants to sell his business but the bank will not lend the buyer enough money.Between personal savings and the bank loan,the buyer has about 70% of the asking price.Which of the following options would be best for Steve in this situation?

Match the term with its definition. a.Build-up LBO b.Business broker c.Bust-up LBO d.Double taxation e.Employee Stock Ownership Plan f.Harvesting g.Initial public offering h.Leveraged buyout i.Management buyout j.Opportunity cost of funds k.Private equity recapitalization l.Seller financing -Financing in which the seller accepts a note from the buyer in lieu of cash in partial payment for a business

Having publicly traded stock can be beneficial to owners in that a public market offers

Arthur's company is doing well but he has grown a bit tired of the daily grind.The idea of selling is appealing to him.What would you recommend Arthur do next?

Pat,owner of Pat's Welding,LLC,would like to let someone else run the day to day operations while he continues to draw an income from the business.Because the business is an LLC,Pat will not have to be concerned about: