Chapter 12_AVOIDING OR EMBRACING THE END OF A
VENTURE
Student: ___________________________________________________________________________
1. As discussed in the Opening Profile to Chapter 12, a large percentage of small to medium-sized business
owners in Canada do not have a formal succession plan for their business, despite having plans to retire
within the next five years.
True False
2. As discussed in the Opening Profile to Chapter 12, Gerald Schwartz is an example of a very successful
entrepreneur who likes to buy distressed businesses, improve them, and then keep them.
True False
3. As discussed in the text, between 35% to 50% of all businesses started in Canada do not last three years,
while only 20% of businesses reach year 10.
True False
4. One of the major causes that lead to business failure is the entrepreneur's inability to identify and deal
with problems quickly.
True False
5. The most common reason cited for bankruptcy among young Canadian companies is lack of working
capital.
True False
6. Starting a business based on an idea or hobby rather than a true opportunity is rarely a factor in business
failure as the enthusiasm and drive of the owner easily compensates for a weak market.
True False
7. Trying to grow too quickly can be a serious problem for a young company that is not capable of handling
the large volume of business that a major order would bring.
True False
8. The most common reason for companies that fail after surviving their first five years is management
inexperience.
True False
9. An over-reliance on debt as their main source of capital is a problem for many businesses due to the
effect it has on monthly cash flow.
True False
10. Approximately 68% of businesses that fail in Canada say that some form of external shock impacted their
business.
True False
11. External shocks that may hurt a business include running out of cash, key employee turnover, and lack of
profitability.
True False
12. A company in a crisis situation is usually facing some type of cash-related problem, such as an inability
to make a loan payment or to pay staff or creditors.
True False
13. As discussed in the text, the first step for an entrepreneur with a business in a crisis situation is to prepare
a revised business plan.
True False
,14. The purpose of preparing a revised business plan for an entrepreneur with a business in a crisis situation
is to show employees and other interested stakeholders why the business is closing and how it will be
done.
True False
15. Bankruptcy can be used as a bargaining chip with creditors to allow the venture to voluntarily
reorganize.
True False
16. As mentioned in the text, Statistics Canada has found that when in a crisis situation, the hesitation of
entrepreneurs to use outside consultants is one of the main reasons that companies go bankrupt.
True False
17. The essential step to filing for protection under the Bankruptcy and Insolvency Act is to contact a
bankruptcy trustee.
True False
18. Generally, the first step in a bankruptcy proceeding is to work with the trustee to make a formal proposal
to the creditors.
True False
19. In a bankruptcy proceeding in Canada, all creditors must vote to accept the formal proposal or the
business will have no choice but to declare bankruptcy immediately.
True False
20. Once a company is declared bankrupt, a receiver is appointed by the courts to take possession of all of the
company's assets, which will be sold to pay the creditors in order of priority.
True False
21. As discussed in the Opening Profile to Chapter 12, a large percentage of small to medium-sized business
owners in Canada __________.
A. are planning to retire and leave their businesses to their children to run
B. do not have a formal succession plan for their business, despite having plans to retire within the next
five years.
C. have no plans to ever retire from their business
D. are waiting for someone outside of their family to offer to buy their business
E. None of the answers apply.
22. As discussed in the Opening Profile to Chapter 12, Gerald Schwartz is an example of a very successful
entrepreneur who __________.
A. likes to buy distressed businesses, improve them, and then sell them
B. having made his money, has now retired to a life of leisure to enjoy it
C. likes to buy distressed businesses, improve them, and then keep them
D. is more interested in the social benefits his companies provide than the money they make
E. None of the answers apply.
23. As discussed in the text, research has shown that the failure rate of new businesses within the first three
years is __________.
A. less than 35%
B. between 35% and 50%
C. between 50% and 75%
D. over 75%
E. None of the answers apply.
,24. Which of the following is not one of the three general categories of pitfalls that an entrepreneur needs to
be aware of to ensure the survival of their business?
A. external shocks
B. financial and accounting problems
C. internal pressures
D. management problems
25. As discussed in the text, the most common reason cited for bankruptcy among young Canadian
companies is (are) __________.
A. mistakes associated with a growing company
B. inexperienced management
C. inadequate cash flow
D. external shocks
E. None of the answers apply.
26. As discussed in the text, starting a business based on an idea or hobby can prove to be a problem for a
young company for which of the following reasons?
A. The owner spends too much time enjoying the hobby and not enough time working.
B. The owner's love for the hobby overshadows the lack of a true opportunity for the business to succeed.
C. The owner spends too much time working and not enough time enjoying the hobby.
D. The hobby becomes too much like work and the owner gets tired of it.
E. None of the answers apply.
27. Common pitfalls of young companies include which of the following?
A. starting a business based on an idea or hobby rather than a true opportunity
B. failure to anticipate or control costs
C. human resource problems
D. failing to execute the business plan
E. All of the answers are correct.
28. Which of the following is not a common pitfall of young companies, as discussed in the text?
A. failing to execute the business plan
B. inability of the entrepreneur to become a manager
C. failure to anticipate or control costs
D. starting a business based on a hobby rather than a true opportunity
E. human resource problems such an inability to hire good people
29. "It is easy to design a cost control system on paper, but it is much tougher to execute one, especially if
you have not done this in the past" - this is the description of which Management Problem
A. Failure to anticipate or control costs.
B. Starting a business based on an idea or hobby
C. Human resource problems.
D. Failing to execute a business plan.
E. Trying to grow too quickly.
30. "Rather than creating a true opportunity, they assume that since they love something and they want
to work in a related business, they can make money." - this is the description of which Management
Problem
A. Failure to anticipate or control costs.
B. Starting a business based on an idea or hobby
C. Human resource problems.
D. Failing to execute a business plan.
E. Trying to grow too quickly.
, 31. "an inability to hire people, problems attracting excellent employees" - this is the description of which
Management Problem
A. Failure to anticipate or control costs.
B. Starting a business based on an idea or hobby
C. Human resource problems.
D. Failing to execute a business plan.
E. Trying to grow too quickly.
32. "some entrepreneurs can write a great business plan, they may actually lack the skills to implement the
plan properly." - this is the description of which Management Problem
A. Failure to anticipate or control costs.
B. Starting a business based on an idea or hobby
C. Human resource problems.
D. Failing to execute a business plan.
E. Trying to grow too quickly.
33. "results of quick expansion often cause businesses to borrow additional funds, expand operations, and/or
act without planning." - this is the description of which Management Problem
A. Failure to anticipate or control costs.
B. Starting a business based on an idea or hobby
C. Human resource problems.
D. Failing to execute a business plan.
E. Trying to grow too quickly.
34. "spending two to three years researching their idea prior to starting their company, and then work 50- to
80-hour weeks during the early years" - this is the description of which Management Problem
A. Failure to anticipate or control costs.
B. Entrepreneur burnout.
C. Human resource problems.
D. Failing to execute a business plan.
E. Trying to grow too quickly.
35. A human resource problem common to a young business that the entrepreneur has relatively little control
over is (are) __________.
A. hiring mistakes due to poor interviewing skills
B. lack of motivation by employees
C. poorly defined roles and responsibilities
D. difficult in attracting top performing sales people to join an unproven company
E. None of the answers apply.
36. As discussed in the text, Canadian companies that manage to survive their first five years are more prone
to fail due to __________.
A. external shocks
B. failing to execute the business plan
C. mistakes associated with managing a growing company
D. poor capital structure
E. None of the answers apply.
37. As discussed in the text, mature firm management problem(s) include which of the following?
A. not using outside advisors effectively
B. poorly planned or executed expansion
C. human resource issues such as losing key employees
D. inability of the entrepreneur to become a manager
E. All of the answers are correct.
VENTURE
Student: ___________________________________________________________________________
1. As discussed in the Opening Profile to Chapter 12, a large percentage of small to medium-sized business
owners in Canada do not have a formal succession plan for their business, despite having plans to retire
within the next five years.
True False
2. As discussed in the Opening Profile to Chapter 12, Gerald Schwartz is an example of a very successful
entrepreneur who likes to buy distressed businesses, improve them, and then keep them.
True False
3. As discussed in the text, between 35% to 50% of all businesses started in Canada do not last three years,
while only 20% of businesses reach year 10.
True False
4. One of the major causes that lead to business failure is the entrepreneur's inability to identify and deal
with problems quickly.
True False
5. The most common reason cited for bankruptcy among young Canadian companies is lack of working
capital.
True False
6. Starting a business based on an idea or hobby rather than a true opportunity is rarely a factor in business
failure as the enthusiasm and drive of the owner easily compensates for a weak market.
True False
7. Trying to grow too quickly can be a serious problem for a young company that is not capable of handling
the large volume of business that a major order would bring.
True False
8. The most common reason for companies that fail after surviving their first five years is management
inexperience.
True False
9. An over-reliance on debt as their main source of capital is a problem for many businesses due to the
effect it has on monthly cash flow.
True False
10. Approximately 68% of businesses that fail in Canada say that some form of external shock impacted their
business.
True False
11. External shocks that may hurt a business include running out of cash, key employee turnover, and lack of
profitability.
True False
12. A company in a crisis situation is usually facing some type of cash-related problem, such as an inability
to make a loan payment or to pay staff or creditors.
True False
13. As discussed in the text, the first step for an entrepreneur with a business in a crisis situation is to prepare
a revised business plan.
True False
,14. The purpose of preparing a revised business plan for an entrepreneur with a business in a crisis situation
is to show employees and other interested stakeholders why the business is closing and how it will be
done.
True False
15. Bankruptcy can be used as a bargaining chip with creditors to allow the venture to voluntarily
reorganize.
True False
16. As mentioned in the text, Statistics Canada has found that when in a crisis situation, the hesitation of
entrepreneurs to use outside consultants is one of the main reasons that companies go bankrupt.
True False
17. The essential step to filing for protection under the Bankruptcy and Insolvency Act is to contact a
bankruptcy trustee.
True False
18. Generally, the first step in a bankruptcy proceeding is to work with the trustee to make a formal proposal
to the creditors.
True False
19. In a bankruptcy proceeding in Canada, all creditors must vote to accept the formal proposal or the
business will have no choice but to declare bankruptcy immediately.
True False
20. Once a company is declared bankrupt, a receiver is appointed by the courts to take possession of all of the
company's assets, which will be sold to pay the creditors in order of priority.
True False
21. As discussed in the Opening Profile to Chapter 12, a large percentage of small to medium-sized business
owners in Canada __________.
A. are planning to retire and leave their businesses to their children to run
B. do not have a formal succession plan for their business, despite having plans to retire within the next
five years.
C. have no plans to ever retire from their business
D. are waiting for someone outside of their family to offer to buy their business
E. None of the answers apply.
22. As discussed in the Opening Profile to Chapter 12, Gerald Schwartz is an example of a very successful
entrepreneur who __________.
A. likes to buy distressed businesses, improve them, and then sell them
B. having made his money, has now retired to a life of leisure to enjoy it
C. likes to buy distressed businesses, improve them, and then keep them
D. is more interested in the social benefits his companies provide than the money they make
E. None of the answers apply.
23. As discussed in the text, research has shown that the failure rate of new businesses within the first three
years is __________.
A. less than 35%
B. between 35% and 50%
C. between 50% and 75%
D. over 75%
E. None of the answers apply.
,24. Which of the following is not one of the three general categories of pitfalls that an entrepreneur needs to
be aware of to ensure the survival of their business?
A. external shocks
B. financial and accounting problems
C. internal pressures
D. management problems
25. As discussed in the text, the most common reason cited for bankruptcy among young Canadian
companies is (are) __________.
A. mistakes associated with a growing company
B. inexperienced management
C. inadequate cash flow
D. external shocks
E. None of the answers apply.
26. As discussed in the text, starting a business based on an idea or hobby can prove to be a problem for a
young company for which of the following reasons?
A. The owner spends too much time enjoying the hobby and not enough time working.
B. The owner's love for the hobby overshadows the lack of a true opportunity for the business to succeed.
C. The owner spends too much time working and not enough time enjoying the hobby.
D. The hobby becomes too much like work and the owner gets tired of it.
E. None of the answers apply.
27. Common pitfalls of young companies include which of the following?
A. starting a business based on an idea or hobby rather than a true opportunity
B. failure to anticipate or control costs
C. human resource problems
D. failing to execute the business plan
E. All of the answers are correct.
28. Which of the following is not a common pitfall of young companies, as discussed in the text?
A. failing to execute the business plan
B. inability of the entrepreneur to become a manager
C. failure to anticipate or control costs
D. starting a business based on a hobby rather than a true opportunity
E. human resource problems such an inability to hire good people
29. "It is easy to design a cost control system on paper, but it is much tougher to execute one, especially if
you have not done this in the past" - this is the description of which Management Problem
A. Failure to anticipate or control costs.
B. Starting a business based on an idea or hobby
C. Human resource problems.
D. Failing to execute a business plan.
E. Trying to grow too quickly.
30. "Rather than creating a true opportunity, they assume that since they love something and they want
to work in a related business, they can make money." - this is the description of which Management
Problem
A. Failure to anticipate or control costs.
B. Starting a business based on an idea or hobby
C. Human resource problems.
D. Failing to execute a business plan.
E. Trying to grow too quickly.
, 31. "an inability to hire people, problems attracting excellent employees" - this is the description of which
Management Problem
A. Failure to anticipate or control costs.
B. Starting a business based on an idea or hobby
C. Human resource problems.
D. Failing to execute a business plan.
E. Trying to grow too quickly.
32. "some entrepreneurs can write a great business plan, they may actually lack the skills to implement the
plan properly." - this is the description of which Management Problem
A. Failure to anticipate or control costs.
B. Starting a business based on an idea or hobby
C. Human resource problems.
D. Failing to execute a business plan.
E. Trying to grow too quickly.
33. "results of quick expansion often cause businesses to borrow additional funds, expand operations, and/or
act without planning." - this is the description of which Management Problem
A. Failure to anticipate or control costs.
B. Starting a business based on an idea or hobby
C. Human resource problems.
D. Failing to execute a business plan.
E. Trying to grow too quickly.
34. "spending two to three years researching their idea prior to starting their company, and then work 50- to
80-hour weeks during the early years" - this is the description of which Management Problem
A. Failure to anticipate or control costs.
B. Entrepreneur burnout.
C. Human resource problems.
D. Failing to execute a business plan.
E. Trying to grow too quickly.
35. A human resource problem common to a young business that the entrepreneur has relatively little control
over is (are) __________.
A. hiring mistakes due to poor interviewing skills
B. lack of motivation by employees
C. poorly defined roles and responsibilities
D. difficult in attracting top performing sales people to join an unproven company
E. None of the answers apply.
36. As discussed in the text, Canadian companies that manage to survive their first five years are more prone
to fail due to __________.
A. external shocks
B. failing to execute the business plan
C. mistakes associated with managing a growing company
D. poor capital structure
E. None of the answers apply.
37. As discussed in the text, mature firm management problem(s) include which of the following?
A. not using outside advisors effectively
B. poorly planned or executed expansion
C. human resource issues such as losing key employees
D. inability of the entrepreneur to become a manager
E. All of the answers are correct.
