Question 1

Match the term with its definition.
-Taxation of income that occurs twice-first as corporate earnings and then as stockholder dividends

Accepted Answer

A) build-up LBO 
B) business broker 
C) bust-up LBO 
D) double taxation 
E) employee stock ownership plan (ESOP)
F)harvesting (exiting)
G)initial public offering (IPO)
H)leveraged buyout (LBO)
I)management buyout (MBO)
J)opportunity cost of funds
K)private equity recapitalization
L)seller financing 
A) build-up LBO 
B) business broker 
C) bust-up LBO 
D) double taxation 
E) employee stock ownership plan (ESOP)
F)harvesting (exiting)
G)initial public offering (IPO)
H)leveraged buyout (LBO)
I)management buyout (MBO)
J)opportunity cost of funds
K)private equity recapitalization
L)seller financing

Question 2

After harvesting, many entrepreneurs who remain with their firm as an employee experience _____ conflicts.

Accepted Answer

A)  financial 
B)  practical 
C)  cultural 
D)  tactical 
A)  financial 
B)  practical 
C)  cultural 
D)  tactical

Question 3

In a harvest situation, the exiting owners are usually paid in cash or

Accepted Answer

A)  tangible assets. 
B)  imputed goodwill. 
C)  favorable publicity. 
D)  stock. 
A)  tangible assets. 
B)  imputed goodwill. 
C)  favorable publicity. 
D)  stock.

Question 4

Match the term with its definition.
-A leveraged buyout involving the purchase of a group of similar companies with the intent of making the firms into one larger company for eventual sale or to be taken public

Accepted Answer

A) build-up LBO 
B) business broker 
C) bust-up LBO 
D) double taxation 
E) employee stock ownership plan (ESOP)
F)harvesting (exiting)
G)initial public offering (IPO)
H)leveraged buyout (LBO)
I)management buyout (MBO)
J)opportunity cost of funds
K)private equity recapitalization
L)seller financing 
A) build-up LBO 
B) business broker 
C) bust-up LBO 
D) double taxation 
E) employee stock ownership plan (ESOP)
F)harvesting (exiting)
G)initial public offering (IPO)
H)leveraged buyout (LBO)
I)management buyout (MBO)
J)opportunity cost of funds
K)private equity recapitalization
L)seller financing

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

A build-up leveraged buyout involves

Accepted Answer

A)  developing the business to make it an attractive takeover target. 
B)  acquiring businesses that occupy a higher level in the market channel. 
C)  a longer time horizon than a bust-up leveraged buyout. 
D)  constructing a larger enterprise to be taken public via an IPO. 
A)  developing the business to make it an attractive takeover target. 
B)  acquiring businesses that occupy a higher level in the market channel. 
C)  a longer time horizon than a bust-up leveraged buyout. 
D)  constructing a larger enterprise to be taken public via an IPO.

Question 7

Match the term with its definition.
-A leveraged buyout in which the firm's top managers become significant shareholders in the acquired firm

Accepted Answer

A) build-up LBO 
B) business broker 
C) bust-up LBO 
D) double taxation 
E) employee stock ownership plan (ESOP)
F)harvesting (exiting)
G)initial public offering (IPO)
H)leveraged buyout (LBO)
I)management buyout (MBO)
J)opportunity cost of funds
K)private equity recapitalization
L)seller financing 
A) build-up LBO 
B) business broker 
C) bust-up LBO 
D) double taxation 
E) employee stock ownership plan (ESOP)
F)harvesting (exiting)
G)initial public offering (IPO)
H)leveraged buyout (LBO)
I)management buyout (MBO)
J)opportunity cost of funds
K)private equity recapitalization
L)seller financing

Question 8

Investors in a startup company are mainly interested in the new firm's growth and are not particularly interested in an exit plan.

Accepted Answer

A) True 
 B)False

Question 9

Harvesting owners can be paid in cash or in the stock of the acquiring firm, with stock generally being preferred over cash.

Accepted Answer

A) True 
 B)False

Question 10

The harvesting of a business should cause the entrepreneur to ask for advice from the experts who helped build the company.

Accepted Answer

A) True 
 B)False

Question 11

The availability of a company's harvest options is an important determinant of the firm's appeal to

Accepted Answer

A)  suppliers. 
B)  investors. 
C)  employees. 
D)  management. 
A)  suppliers. 
B)  investors. 
C)  employees. 
D)  management.

Question 12

Jill is purchasing a web design company that has patented a new form of technology. Which of the following options would be best for her in relation to the web design company's liabilities?

Accepted Answer

A)  Buy the firm's assets 
B)  Buy the firm's stock 
C)  Merge the company with her present company 
D)  Any of the three would be acceptable. 
A)  Buy the firm's assets 
B)  Buy the firm's stock 
C)  Merge the company with her present company 
D)  Any of the three would be acceptable.

Question 13

More recently, the bust-up leveraged buyout has been replaced by the build-up leveraged buyout.

Accepted Answer

A) True 
 B)False

Question 14

Marvin is planning to sell his company to his management team. Marvin will be financing part of the purchase. This type of arrangement is a form of

Accepted Answer

A)  ESOP. 
B)  IPO. 
C)  PPO. 
D)  LBO. 
A)  ESOP. 
B)  IPO. 
C)  PPO. 
D)  LBO.

Question 15

Which of the following groups is always concerned about how to exit a business?

Accepted Answer

A)  Investors 
B)  Entrepreneurs 
C)  Employees of the firm 
D)  Investment bankers 
A)  Investors 
B)  Entrepreneurs 
C)  Employees of the firm 
D)  Investment bankers

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Owing to the formulas for determining the price of a private company, business valuation has become an exact science.

Accepted Answer

A) True 
 B)False

Question 18

Harvey has invested all of his money in his thriving business. He would like to recoup some of his investment but not completely sell off his business. This might be a good time for him to consider selling stock to the public in a(n)

Accepted Answer

A)  ESOP. 
B)  IPO. 
C)  MBO. 
D)  LBO. 
A)  ESOP. 
B)  IPO. 
C)  MBO. 
D)  LBO.

Question 19

An IPO occurs when a company offers its stock to

Accepted Answer

A)  investment practitioner organizations. 
B)  family. 
C)  intrastate private investors. 
D)  the general public. 
A)  investment practitioner organizations. 
B)  family. 
C)  intrastate private investors. 
D)  the general public.

Question 20

Strategic buyers evaluate acquisition candidates according to the

Accepted Answer

A)  stand-along, cash-generating potential of a target business. 
B)  synergies the buyer thinks the target business will create. 
C)  potential of the target business to preserve employment. 
D)  quality of the business strategy of the target firm. 
A)  stand-along, cash-generating potential of a target business. 
B)  synergies the buyer thinks the target business will create. 
C)  potential of the target business to preserve employment. 
D)  quality of the business strategy of the target firm.

Exam 13: Planning for the Harvest

Match the term with its definition. -Taxation of income that occurs twice-first as corporate earnings and then as stockholder dividends

After harvesting, many entrepreneurs who remain with their firm as an employee experience _____ conflicts.

In a harvest situation, the exiting owners are usually paid in cash or

Match the term with its definition. -A leveraged buyout involving the purchase of a group of similar companies with the intent of making the firms into one larger company for eventual sale or to be taken public

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.

A build-up leveraged buyout involves

Match the term with its definition. -A leveraged buyout in which the firm's top managers become significant shareholders in the acquired firm

Investors in a startup company are mainly interested in the new firm's growth and are not particularly interested in an exit plan.

Harvesting owners can be paid in cash or in the stock of the acquiring firm, with stock generally being preferred over cash.

The harvesting of a business should cause the entrepreneur to ask for advice from the experts who helped build the company.

The availability of a company's harvest options is an important determinant of the firm's appeal to

Jill is purchasing a web design company that has patented a new form of technology. Which of the following options would be best for her in relation to the web design company's liabilities?

More recently, the bust-up leveraged buyout has been replaced by the build-up leveraged buyout.

Marvin is planning to sell his company to his management team. Marvin will be financing part of the purchase. This type of arrangement is a form of

Which of the following groups is always concerned about how to exit a business?

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

Owing to the formulas for determining the price of a private company, business valuation has become an exact science.

Harvey has invested all of his money in his thriving business. He would like to recoup some of his investment but not completely sell off his business. This might be a good time for him to consider selling stock to the public in a(n)

An IPO occurs when a company offers its stock to

Strategic buyers evaluate acquisition candidates according to the

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Starting a Small Business

Franchises and Buyouts

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The Business Plan: Visualizing the Dream

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Understanding a Firms Financial Statements

Forecasting Financial Requirements

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Building Customer Relationships

Product Development and Supply Chain Management

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