To Protect the Interests of Both the Family and the Business

question 31

Multiple Choice

To protect the interests of both the family and the business in a family business, the owner should

• A) recognize a basic obligation to supply family members with employment of some type.
• B) refuse to hire family members but, instead, reward them with generous dividends.
• C) personally make all personnel decisions affecting family members.
• D) identify the positions, if any, that are reserved for family members when hiring nonfamily employees.

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Definitions:

Investment

The allocation of resources (such as capital or time) with the expectation of receiving future returns.

Fair Value

The price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Unrealized Profits

Profits that have occurred on paper due to an asset's increased value but have not yet been cashed in by selling the asset.

Realized Profits

Refers to the gains earned and received from the sale of assets or investments, distinguished from those merely existing on paper.