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CEPA (Certified Exit Planning Advisor) Exam Prep
(Latest Update) Questions With (100% Correct
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What survey indicated that 99% of business owners at least in some way agreed that "having a transition strategy is important for my future and the future of my business?" State of Owner Readiness It's important to not just tell an owner the right answer, but to ask them the right question. Which is an example of the "right question" to ask a business owner client? a. What is the strength of your intangible capital? b. What is your biggest pain point and biggest desire? c. What deal structure are you looking for when selling? d. All the above (correct) Complete the following quote: "Luck is ___ meeting opportunity." Preparation four intangible capitals (The 4Cs) include Human, Structural, Social, and Customer capitals. (T/F) TRUE Which of the following statements is false? c. The Baby Boomer generation doesn't need to be thinking about exit planning yet
Complete this sentence: A successful exit strategy balances the "____ Legs of the Stool." b. Three (Business, Financial, and Personal) What is one of the main causes of "sellers' cold feet" during the sale of a business? a. Lack of personal planning What is the first stage in the "Five Stages of Value Maturity?" c. Identify When ranking a business's intangible capitals, what is the main purpose of using the common sense scoring of 1-6? c. It forces you to not choose "average" A key difference between lifestyle businesses and value creator businesses is that value creator businesses usually generate better income. (T/F) True Which of the following is not a gate in the Value Acceleration Methodology? b. Plan If the potential value for a business is 16 million, and it's currently valued at 9 million, what is the value gap of the business? a. 7 million
A _____ gift is one in which the person who received the gift has the unrestricted right to the immediate possession and use of it. c. Present interest gift Which of the following statements is not true? a. All states have an estate tax The main goal of minimizing wealth tax is to: c. Maximize the client's portion of earnings and minimize the IRS's portion What does the acronym "NING" stand for when looking at income tax planning options? b. Nevada Incomplete Non-Grantor Trust Which of the following is a disadvantage of an intentionally defective grantor trust (IDGT)? d. Client cannot be a beneficiary A strategy which makes assets difficult or impossible to reach is called: d. Asset protection What are the benefits for the business owner and family for integrating charitable contributions? a. Wanting to transfer values and purpose, not just assets
b. Creating intergenerational common ground to collaborate, make joint decisions, gain confidence, develop/fulfill potential c. Developing an emotional and functional bridge between wealth, purpose, and society d. All of the above (correct) Of the 250,000 US companies with $5M to $100M in revenue set to transition by 2030, how many will actually sell for desired value? b. 14, As categorized by the Fisher College of Business at the Ohio State University, what are the three types of companies in the marketplace? d. Investors, Innovators, Efficiency Experts What are some categories to evaluate and compare to other companies in the marketplace? a. Market growth b. Equipment condition c. Products and sales d. All of the above (correct) What is the timeframe most private companies can increase their value and should begin their value growth? a. Three to five years A "deliverable"includes which of the following characteristics? a. Represents the conclusion of an assignment, task, or action
A business attractiveness score of 67% is considered: d. Above average Why would an owner want to have a business valuation performed on their company? a. Divorce b. Ownership transfer to family c. Installing an ESOP d. All of the above (correct) Which of the following is NOT a standard of value when it comes to business valuation? b. Hypothetical value Fair Market Standard of Value is defined as the price at which the property would change hands between a "hypothetical" willing buyer and a "hypothetical" willing seller. (T/F) True The primary benefit of the Discounted Cash Flow (DCF) method of valuation is that it represents a specific forecast of future financial results. (T/F) True Which of the following is not one of the three broad approaches to determining value? a. Liquidity
In the income approach to business valuation, which method is predicated on a specific future look at economic benefits? d. Discounted cash flow method What are the two most common types of transactions during a business sale? b. Asset Sale and Stock Sale For valuation purposes, the financial results for closely held companies are not often normalized for non recurring costs and discretionary expenses. (T/F) False How does creating a vision help focus a business owner? a. Expresses personal values b. Drives inspiration c. Directs focus and movement forward d. All of the above (correct) In which gate of the Value Acceleration Methodology should you create a prioritized action plan? a. Discover What are the three key success areas a business owner's goals and objectives should focus on? d. Business, Financial, and Personal
What is a benefit of a Start-Stop workshop? a. A start-stop workshop is useful to determine inside versus outside realty b. A start-stop workshop can help you understand informal politics and leadership in the company c. A start-stop workshop determines what things you do well from a customer standpoint d. All of the above (correct) When sorting projects, which of the below categories do de-risking projects typically fall into? d. Low value, low cost In what gate do you create a personal action plan for the business owner? Discover gate What are the first type of actions a business owner should focus on when setting priorities in an action plan? c. Mitigating risk What question should you be asking yourself when performing an opportunity assessment? a. What are the deliverables b. Where are the resources coming from? c. What are the risks? d. All of the above (correct) Which activity is an action that would usually be completed in Delivering action plans?
a. Hosting a team accountability workshop b. Meeting with a priority champion to discuss progress d. Both A and B (correct) Name three of the four cornerstones of relentless execution d. Vision, Accountability, Rhythm What tools or deliverables are useful to help sustain action and deliver the action plan? a. A monthly 1:1 workshop b. A monthly team accountability workshop d. both a and b (correct) What is the best definition of a 90-day sprint? b. A continual loop of prioritizing, executing, measuring, reconnecting, and recalibrating every 90 days The "Wow" Curve charts a business owner's _____ over time. b. Enthusiasm What is the best definition of relentless execution? a. A specific set of behaviors and techniques that companies need to master in order to have a competitive advantage
What is the common goal of the team, no matter who is in the door first? a) Getting the owner to do the Triggering Event The core capabilities of the Value Advisor include engaging advisors, resolve conflicts, and focusing on enterprise value. (T/F) TRUE Which of the following would be considered a con of the intergeneration transfer exit option? c. Lower sale price What is a pro of intergenerational transfer? a. Business legacy preservation b. Planned c. Lower cost d. All of the above (correct) What are the two general categories for private ownership exit options? c. Inside and Outside Which of the following is not an inside exit option? d. Recapitalization
An owner must sell a majority position to complete a recapitalization or refinance option (T/F) b FALSE In a minority recapitalization transaction, a sponsor acquires less than 50% of the company to hold minority position to support the current management team. (T/F) a. True Which of the following is not a factor for a private equity group considering an investment? c. Stock price Complete the following equation used by private equity groups when calculating how to value a company: _____ x Multiple = Valuation c. EBITDA When considering the Pillars of Growth, the easiest way to begin a company's growth strategy is by: c. Selling existing products to existing customers How does a private equity group value a business? a. EBITDA x multiple b. How the company makes money c. The company's growth opportunities d. Type of business e. All the above (correct)
When a potential buyer wants to get a sense of a company's actual cash flow and production, what time frame in the company's history should they review? c. Last 3 years Why should you consider including a M&A Investment Banker on the team? a. Conducts preliminary valuation/research b. Speeds the process (exponentially) c. Shelters principals from emotional deal-killers and poor future relations d. Provides professional negotiation skills e. All the above (correct) What is a realistic timeline to give your clients when looking to set their expectations on how long the sale process could last? c. 12 months At the end of the day, terms not price drive the deal (T/F) a. True Comprehensive company analysis and due diligence is completed in which stage of the M&A process? b. Research and analysis A Confidential Information Memorandum (CIM) serves as? a. Preliminary due diligence document
b. Sales document c. Communicates opportunities and weaknesses d. All of the above (correct) The seller, company, and employees all receive tax benefits from participating in an ESOP (T/F) a. True n a typical leveraged ESOP formation, who would a bank directly loan money to? c. Company Which of the following is a success factor for an ESOP candidate? a. Unused debt capacity b. Capable management c. Well established company with predictable cash flows d. All the above (correct) Which of the following is not considered for valuation in an ESOP transaction? c. Current stock price Besides providing liquidity for the owner, what is another reason an ESOP may be a viable exit option? a. Capital formation b. Employee productivity and retention c. Known Buyer - controls timing and communication d. All of the above (correct)
Which of the following is an example of an important exercise for advisors to work through with their family business clients? d. Think through and organizing all assets owned by the family What is a family enterprise? a. A family business b. A business family c. A privately held business d. All of the above (correct) What does a Family transitions specialist not do? c. Recommend the best structure for transferring assets without tax implications A father owns his business 100%. He has been married 35 years to the mother of his three children. The oldest child works in the business. When working with this family enterprise, who is the most important person to keep happy? d. The whole family The most effective way to work with a family is to only work with them during triggering or participating events? (T/F) b. False What are the benefits of collaboration with other advisors? b. Not one discipline can do everything for a client
When it comes to estate planning and exit planning, who do you include? a. The owner of the company b. The owner's spouse c. The owner's adult children d. The owner's children's spouses e. All of the above (correct) A helpful framework to discuss when working with families is that fair does not always mean equal. (T/F) a. True what percentage of privately held businesses that are offered for sale each year ultimately do not sell? D) 80% According to the Family Firm Institute, what percentage of family transitions survive into the second generation? 30% According to EPI's first national State of Owner Readiness Survey, what percentage of business owners have done no exit planning 49% Which is NOT one of the five D's? Decide
