5e SupplementaryChapter The Family Business Alternative

SUPPLEMENTARY CHAPTER: THE FAMILY BUSINESS ALTERNATIVE

TEST BANK

A) MULTIPLE CHOICE

Select the "most correct" option:

1. Which of the following is a family business?

a. A woman owns a small garage where her four sons work as mechanics.

b. A man owns a delivery service where the five children of his dispatcher work.

c. A woman is self-employed as a writer and is the only earner in her family.

d. None of the above are family businesses.

2. Which of the following is not a typical family business problem?

a. incompetent family members in positions of responsibility.

b. theft of the assets by family members.

c. battles for control among family members.

d. attempts to use the business as a weapon in family feuds.

3. Family businesses can be used to sponsor qualified relatives as immigrants when:

a. the relative is economic distress.

b. when the business cannot find a skilled Canadian for the job.

c. when the relative is required for a position of trust.

d. when quotas for that country have not been filled.

4. A well-run family business has:

a. a single family member in control.

b. formal lines of authority.

c. competitive industry pay rates.

d. all of the above.

5. History has shown that family firms are more successful when:

a. the business is seen as a long-term trust of the family.

b. it is seen as disloyal to not work for the business.

c. personal issues are given priority over business issues.

d. all of the above.

6. The key advisors for a retiring business owner are:

a. consultant, lawyer, doctor, insurance agent.

b. financial planner, doctor, real estate agent, lawyer.

c. accountant, financial planner, lawyer, personal advisor.

d. lawyer, doctor, accountant, estate planner.

7. Which of the following is not one of the plans for retiring business owners?

a. retirement plan.

b. estate plan.

c. succession plan.

d. tax plan.

8. The increase in value of an investment is subject to:

a. capital gain tax.

b. retirement tax.

c. estate tax.

d. probate tax.

9. Creating two classes of shares, only one of which will grow in value is called:

a. probate.

b. estate freeze.

c. bequeathing.

d. share succession.

10. Family businesses are successfully transferred to the next generation in:

a. ninety percent of all cases.

b. more than two thirds of all cases.

c. less than one third of all cases.

d. less than ten percent of all cases.

11. Which of the following is not a benefit of a family firm:

a. a greater focus on long-term sustainability and maintaining a strong corporate culture

b. the opportunity to provide secure and sustainable employment for family members

and a legacy for future generations

c. there are considerable tax incentives when working with family members

d. the chance to be involved with an organization that holds shared values above the

need for profit

B) TRUE OR FALSE

1. T F A second-generation owner of a family business is not a true entrepreneur.

2. T F Parents generally find it easy to delegate to their offspring.

3. T F There are no formal educational requirements for taking over a family

business.

4. T F Customer loyalty is more likely to be retained when there is an abrupt

transition of power.

5. T F Siblings close in age and of the same gender are more likely to continue

rivalries into adulthood.

6. T F A family council carries the same authority as a board of directors.

7. T F "Family Business" is not available as a field of study in any major

North American business school.

8. T F On retirement, the main advisor for a family business owner should be

the family member taking over the business.

9. T F Business owners are most likely to commit to a succession plan when they

are in their fifties.

10. T F Leading the family business requires a deep involvement with family

politics.

C) FILL IN THE BLANKS

1. When life partners are partners in a small business, they are likely to have none of

the that would be provided by an employer.

2. refers to a training program where the trainee gets increasing

responsibility over a long period of time.

3. The ability to experience the feelings and motives of others is called

.

4. Generally, the most advantageous legal form, for passing a business to the next

generation is .

5. The process of making contacts and building relationships for mutual support is

called .

6. A group of family members who meet regularly to receive information about and discuss concerns relating to the family business is called a ____________________.

D) SHORT ANSWER

1. Define the term "family business" and use examples to show that this could cover a wide

assortment of ownership and employment arrangements.

2. Explain several basic approaches to reducing conflict within family businesses.

3. Discuss four techniques for developing a successor to a family business.

E) ESSAY

1. Outline the process of planning for retirement and identify the major advisors involved,

specifying the roles of each. (1 page max).

2. Discuss the major advantages and disadvantages of a career in the family business.

(1 page max).

3. Outline four common problems as a next-generation leader of a family business.