Chapter 20 Key Terms

Front 1

business life cycle, 656

Back 1

The sequence or pattern of developmental stages any business goes through during its life span.

Front 2

liability of newness, 657

Back 2

The set of risks faced by firms early in their life cycles that comes from a lack of knowledge by the owners about the business they are in and by customers about the new business.

Front 3

slack resources, 657

Back 3

Profits that are available to be used to satisfy the preferences of the owner in how the business is run.

Front 4

harvest, 662

Back 4

Recover value through a sale of a firm or its assets.

Front 5

initial public offering (IPO), 662

Back 5

Transfer method describing the first-time public sale of a stock listed on a public stock exchange.

Front 6

consolidation, 662

Back 6

A transfer method in which a small business is bought by a larger firm for the purpose of quickly growing the larger firm.

Front 7

employee stock ownership plan, 662

Back 7

A formalized legal method to transfer some or all of the ownership of a business to its employees.

Front 8

transfer, 663

Back 8

An endgame strategy in which ownership is moved from one person or group to another.

Front 9

termination, 663

Back 9

An endgame strategy in which the owner closes down a business.

Front 10

liquidity enhancement, 663

Back 10

An estate planning strategy which focuses on generating cash to cover likely estate taxes.

Front 11

tax management, 663

Back 11

An estate planning strategy which focuses on minimizing estate tax payments.

Front 12

estate freeze, 663

Back 12

An estate planning strategy which focuses on transferring assets to heirs when the asset costs are low.

Front 13

bankruptcy, 664

Back 13

An extreme form of business termination which uses a legal method for closing a business and paying off creditors when debts are substantially greater than assets.

Front 14

walkaways, 664

Back 14

Business terminations in which the entrepreneur ends the business with its obligations met.

Front 15

workout, 665

Back 15

A form of business termination in which the firm’s legal or financial obligations are not fully met at closing.

Front 16

reorganization, 665

Back 16

The popular name for a Chapter 13 bankruptcy in which a bankrupt firm continues to operate while paying off debts identified by the bankruptcy trustee.

Front 17

liquidation, 666

Back 17

The popular name for a Chapter 7 bankruptcy in which a bankrupt firm’s assets are sold by the bankruptcy trustee and the proceeds used to pay the firm’s debts.

Front 18

serial entrepreneurs, 666

Back 18

People who open multiple businesses throughout their career.

Front 19

supplemental profits, 668

Back 19

Returns above costs intended as a secondary income for entrepreneurs (where selfemployment is secondary to their main job).

Front 20

substitution profits, 668

Back 20

Returns intended to equal and replace the salary or wages the entrepreneur could draw working for someone else.

Front 21

success profits, 668

Back 21

Returns at levels higher than the entrepreneur could make working for others.