Question 1

Compared to partnerships and sole proprietorships, a major advantage of the C (conventional) corporation as a form of business ownership is that it:

Accepted Answer

A) Has the ability to raise more money. 
B)  Is easier and less expensive to form. 
C) Qualifies for simplified tax treatment. 
D) Creates unlimited liability for its owners. 
A) Has the ability to raise more money. 
B)  Is easier and less expensive to form. 
C) Qualifies for simplified tax treatment. 
D) Creates unlimited liability for its owners.

Question 2

A partner (owner) who invests money in a business, does not take an active role in managing the operation, and is only subject to losing the funds he/she invested.

Accepted Answer

A) Implied partner. 
B) Limited partner. 
C)  Partial partner. 
D) Corporate partner. 
A) Implied partner. 
B) Limited partner. 
C)  Partial partner. 
D) Corporate partner.

Question 3

Corporations are easy to start and easy to terminate.

Accepted Answer

A) True 
 B)False

Question 4

To qualify as an S corporation, a company must:

Accepted Answer

A) Have no more than 50 shareholders. 
B) Have shareholders who are individuals or estates, and, qualify as permanent residents of the U.S. 
C)  Have a different class of stock for each owner. 
D) Have not more than 5 percent of income derived from passive sources. 
A) Have no more than 50 shareholders. 
B) Have shareholders who are individuals or estates, and, qualify as permanent residents of the U.S. 
C)  Have a different class of stock for each owner. 
D) Have not more than 5 percent of income derived from passive sources.

Question 5

A merger between two businesses in different stages of related businesses is known as a vertical merger.

Accepted Answer

A) True 
 B)False

Question 6

All partners in a general partnership have limited liability for the debts of their firm.

Accepted Answer

A) True 
 B)False

Question 7

Finley is a limited partner in Gettout & Associates. Heywood U. Gettout, one of the general partners in the company, must temporarily leave the company to attend to some personal matters. Heywood has asked Finley to perform his managerial duties while he is gone. As a limited partner, Finley:

Accepted Answer

A) Can fill in as a manager whenever necessary, as long as it is for only a limited time. 
B)  Can make managerial decisions as long as they do not involve the payment of money. 
C) Cannot participate in the management of the partnership. 
D) Can manage the firm as long as he gets approval from the company's other general partners. 
A) Can fill in as a manager whenever necessary, as long as it is for only a limited time. 
B)  Can make managerial decisions as long as they do not involve the payment of money. 
C) Cannot participate in the management of the partnership. 
D) Can manage the firm as long as he gets approval from the company's other general partners.

Question 8

Alex's uncle recently passed away and left him an American Dream Real Estate franchise business. Alex is not a licensed agent or broker, nor does he know anything about the real estate business. He plans to sell his American Dream franchise to his friend, Derek who recently got his real estate license. One of the advantages of owning a franchise is that you can decide to sell-out to anyone you believe is suitable for the business.

Accepted Answer

A) True 
 B)False

Question 9

A major objective of a leveraged buyout is to enable investors to gain control of a company by issuing new shares of ownership, thus minimizing the use of debt.

Accepted Answer

A) True 
 B)False

Question 10

The "coattail effect" refers to the burden of corporate rules and regulations on franchisees.

Accepted Answer

A) True 
 B)False

Question 11

Leanne, a franchisee runs a chain of small restaurants with a well-known name. Due to her hard work and people skills, her locations are doing quite well. She has noticed that several other franchisees in the same franchise system have let their restaurants deteriorate, especially in terms of lack of upgrades. Leanne should be concerned about this trend, since it eventually could affect her own business.

Accepted Answer

A) True 
 B)False

Question 12

The fairest way to handle profits in any partnership arrangement is to divide things evenly. If there are two owners in the business, each gets 50%. If there are three owners (even if one is a limited partner), each gets 33.333% of any accumulated profits.

Accepted Answer

A) True 
 B)False

Question 13

Trans Globe Airlines is in talks with Royal Blue Airlines, a financially troubled rival. The firms believe the merger will create a stronger company that can offer travelers more flights to a wider variety of destinations. This proposed merger is an example of a:

Accepted Answer

A) Conglomerate merger. 
B)  Leveraged buyout. 
C) Horizontal merger. 
D) Joint venture. 
A) Conglomerate merger. 
B)  Leveraged buyout. 
C) Horizontal merger. 
D) Joint venture.

Question 14

A distinguishing feature of a cooperative is that it:

Accepted Answer

A) Maintains a distinct separation between ownership and management. 
B)  Is only intended to operate for a limited period of time. 
C) Is owned and operated by the people who use it. 
D) Can have no more than 75 owners, all of whom must be citizens of the United States. 
A) Maintains a distinct separation between ownership and management. 
B)  Is only intended to operate for a limited period of time. 
C) Is owned and operated by the people who use it. 
D) Can have no more than 75 owners, all of whom must be citizens of the United States.

Question 15

A few years back, your friends who are horse fanatics inherited several acres of land that they turned into a retirement haven for race horses. Peaceful Pastures was recently incorporated as a limited liability company. The members are re-evaluating this form of ownership. Unlike an S-corporation, they now pay self-employment taxes on all company profits - not just on the salaries they pay themselves.

Accepted Answer

A) True 
 B)False

Question 16

The owners of a limited liability company (LLC) must pay self-employment taxes on any profits they earn, even if they did not obtain a salary from the company.

Accepted Answer

A) True 
 B)False

Question 17

The limited liability provided to limited partners means that they are not responsible for the debts of the business beyond:

Accepted Answer

A) The firm's total assets. 
B) The amount they have invested in the company. 
C)  The percentage of profits they are entitled to earn. 
D) Their total personal assets. 
A) The firm's total assets. 
B) The amount they have invested in the company. 
C)  The percentage of profits they are entitled to earn. 
D) Their total personal assets.

Question 18

Franchising in global markets has demonstrated that high operating costs are counterbalanced by high profit opportunities.

Accepted Answer

A) True 
 B)False

Question 19

Although it is a small company, Zorn Enterprises owns a large number of inexpensive rental housing units in Texas and Louisiana. Currently, the company is a chartered C-corporation, but the owners are interested in switching to an S corporation. After consulting a lawyer, they learned that Zorn Enterprises does not qualify to be designated as an S corporation. Which of the following characteristics of Zorn Enterprises would prevent it from becoming an S corporation?

Accepted Answer

A) The firm has fewer than 75 stockholders. 
B)  The firm is chartered in one state, but owns property in another. 
C)  The firm has only one class of stock, all owned by U.S. citizens. 
D) The firm receives more than 70 percent of its income from rents and other passive sources. 
A) The firm has fewer than 75 stockholders. 
B)  The firm is chartered in one state, but owns property in another. 
C)  The firm has only one class of stock, all owned by U.S. citizens. 
D) The firm receives more than 70 percent of its income from rents and other passive sources.

Question 20

In a sole proprietorship, the profits earned by the business are:

Accepted Answer

A) Taxed as income for the business, but is exempt from the personal income tax paid by the owner. 
B)  Taxed at the lowest corporate rate. 
C) The property of the owner, except for taxes owed to the government. 
D) Tax-free if the appropriate exemption is filed with the local government. 
A) Taxed as income for the business, but is exempt from the personal income tax paid by the owner. 
B)  Taxed at the lowest corporate rate. 
C) The property of the owner, except for taxes owed to the government. 
D) Tax-free if the appropriate exemption is filed with the local government.

Compared to partnerships and sole proprietorships, a major advantage of the C (conventional) corporation as a form of business ownership is that it:

A partner (owner) who invests money in a business, does not take an active role in managing the operation, and is only subject to losing the funds he/she invested.

Corporations are easy to start and easy to terminate.

To qualify as an S corporation, a company must:

A merger between two businesses in different stages of related businesses is known as a vertical merger.

All partners in a general partnership have limited liability for the debts of their firm.

Finley is a limited partner in Gettout & Associates. Heywood U. Gettout, one of the general partners in the company, must temporarily leave the company to attend to some personal matters. Heywood has asked Finley to perform his managerial duties while he is gone. As a limited partner, Finley:

A major objective of a leveraged buyout is to enable investors to gain control of a company by issuing new shares of ownership, thus minimizing the use of debt.

The "coattail effect" refers to the burden of corporate rules and regulations on franchisees.

The fairest way to handle profits in any partnership arrangement is to divide things evenly. If there are two owners in the business, each gets 50%. If there are three owners (even if one is a limited partner), each gets 33.333% of any accumulated profits.

Trans Globe Airlines is in talks with Royal Blue Airlines, a financially troubled rival. The firms believe the merger will create a stronger company that can offer travelers more flights to a wider variety of destinations. This proposed merger is an example of a:

A distinguishing feature of a cooperative is that it:

The owners of a limited liability company (LLC) must pay self-employment taxes on any profits they earn, even if they did not obtain a salary from the company.

The limited liability provided to limited partners means that they are not responsible for the debts of the business beyond:

Franchising in global markets has demonstrated that high operating costs are counterbalanced by high profit opportunities.

In a sole proprietorship, the profits earned by the business are:

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Union and Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Filters

Exam 5: How to Form a Business

Compared to partnerships and sole proprietorships, a major advantage of the C (conventional) corporation as a form of business ownership is that it:

A partner (owner) who invests money in a business, does not take an active role in managing the operation, and is only subject to losing the funds he/she invested.

Corporations are easy to start and easy to terminate.

To qualify as an S corporation, a company must:

A merger between two businesses in different stages of related businesses is known as a vertical merger.

All partners in a general partnership have limited liability for the debts of their firm.

Finley is a limited partner in Gettout & Associates. Heywood U. Gettout, one of the general partners in the company, must temporarily leave the company to attend to some personal matters. Heywood has asked Finley to perform his managerial duties while he is gone. As a limited partner, Finley:

A major objective of a leveraged buyout is to enable investors to gain control of a company by issuing new shares of ownership, thus minimizing the use of debt.

The "coattail effect" refers to the burden of corporate rules and regulations on franchisees.

The fairest way to handle profits in any partnership arrangement is to divide things evenly. If there are two owners in the business, each gets 50%. If there are three owners (even if one is a limited partner), each gets 33.333% of any accumulated profits.

Trans Globe Airlines is in talks with Royal Blue Airlines, a financially troubled rival. The firms believe the merger will create a stronger company that can offer travelers more flights to a wider variety of destinations. This proposed merger is an example of a:

A distinguishing feature of a cooperative is that it:

The owners of a limited liability company (LLC) must pay self-employment taxes on any profits they earn, even if they did not obtain a salary from the company.

The limited liability provided to limited partners means that they are not responsible for the debts of the business beyond:

Franchising in global markets has demonstrated that high operating costs are counterbalanced by high profit opportunities.

In a sole proprietorship, the profits earned by the business are:

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Union and Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Filters