If a new venture’s projected profit margins do not substantially exceed the reported
profit margins of comparable businesses, investors are likely to doubt these projections.
Founders typically try to push their somewhat reluctant children into positions of
responsibility more quickly than the children wish.
Increasingly, small firms find that they must locate their operations abroad if they are to
keep their contracts as suppliers to large companies.
Personal interview surveys are attractive as a marketing research method because these
are inexpensive to conduct.
Developing a plan for the firm helps the entrepreneur to think through the issues faced
by the firm as well as providing a focus for the firm.
Equity capital is derived only from sources external to the firm.
Most small businesses create their own promotional messages.
An entrepreneurial career can provide an exciting life and substantial personal rewards
while also contributing to the welfare of society.
For the entrepreneur who is simply tired of the day-to-day operations of the business,
siphoning off cash flows over time may require too much patience.
Very small firms lack options in selecting accounting systems and accounting methods.
A conventional measure of a firm’s liquidity is a comparison of current assets to current
liabilities.
You Make the CallSituation 2
Technical Products, Inc., distributes 15 percent of its profits quarterly to its eight
employees. This money is invested for their benefit in a retirement plan and is fully
vested after five years. An employee, therefore, has a claim to the retirement fund even
if he or she leaves the company after five years of service. The employees range in age
from 25 to 59 and have worked for the company from 3 to 27 years. They seem to have
recognized the value of the program. However, younger employees sometimes express
a preference for cash over retirement benefits.
Question 1 What are the most important reasons for structuring the profit-sharing plan
as a retirement program?
Question 2 What is the probable motivational impact of this compensation system?
Question 3 How will an employee’s age affect the appeal of this plan? What other
factors are likely to strengthen or lessen its motivational value? Should it be changed in
any way?
More often than not, buyers and sellers base the harvest value of a company on the
observed market value of a comparable firm relative to its earnings.
Temporary help agencies are good sources of employees when extensive training is
required.
What are some of the ways in which small businesses may gain from consumerism, and
what are some dangers?
Outline the steps in the IPO process.