Question 1

Being your own boss means

Accepted Answer

A)  reducing your working hours. 
B)  having the freedom to set your own working hours and taking lots of vacations, particularly when just beginning the business. 
C)  accepting accountability for the mistakes of the business. 
D)  having limited financial resources to throw into the business. 
A)  reducing your working hours. 
B)  having the freedom to set your own working hours and taking lots of vacations, particularly when just beginning the business. 
C)  accepting accountability for the mistakes of the business. 
D)  having limited financial resources to throw into the business.

Question 2

The owners of a corporation are known as general corporate partners.

Accepted Answer

A) True 
 B)False

Question 3

Compared to sole proprietorships, partnerships offer the advantage of shared management and pooled knowledge.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Global franchising is unlikely to experience major growth due to the high costs of operations in global markets.

Accepted Answer

A) True 
 B)False

Question 6

The authors suggest that potential partners discuss the types of skills that each brings to the business. Partners with complementary skills may enhance the business.

Accepted Answer

A) True 
 B)False

Question 7

One difference between partnerships and sole proprietorships is that partnerships

Accepted Answer

A)  take less effort to form. 
B)  are managed by an elected board of directors. 
C)  have the advantage of limited liability. 
D)  have a greater chance of long-term survival due to the accountability of each partner to the other. 
A)  take less effort to form. 
B)  are managed by an elected board of directors. 
C)  have the advantage of limited liability. 
D)  have a greater chance of long-term survival due to the accountability of each partner to the other.

Question 8

Ramses owns a roofing business. He enjoys being his own boss, but it comes at a price. Often, his days are filled with organizing the activities of the employees and seeking out new customers. He often misses events with friends and family because of the obligations of running his own business. He also knows that he has unlimited personal liability for any of his firm's debts. Ramses's business is organized as a(n)

Accepted Answer

A)  joint venture. 
B)  C corporation. 
C)  S corporation. 
D)  sole proprietorship. 
A)  joint venture. 
B)  C corporation. 
C)  S corporation. 
D)  sole proprietorship.

Question 9

A franchise may be organized as a sole proprietorship, partnership, or corporation.

Accepted Answer

A) True 
 B)False

Question 10

Tee Time Golf Club just announced plans to purchase the property and assume the obligations of Chipper's Golf Resort, one of its major competitors. Tee Time Golf Club's plans are an example of a merger.

Accepted Answer

A) True 
 B)False

Question 11

Sean is one of several general partners who own Pints and Cans, a small chain of bar and grills located in Illinois and Indiana. Sean is interested in converting the partnership into a master limited partnership. If he convinces other partners to go along with his idea, Pints and Cans will

Accepted Answer

A)  offer shares of ownership that are traded on a stock exchange much like a corporation. 
B)  pay its taxes like a corporation. 
C)  begin to operate much like a sole proprietorship. 
D)  have to change its name to include the term Ltd. in its title to indicate its owners have limited liability. 
A)  offer shares of ownership that are traded on a stock exchange much like a corporation. 
B)  pay its taxes like a corporation. 
C)  begin to operate much like a sole proprietorship. 
D)  have to change its name to include the term Ltd. in its title to indicate its owners have limited liability.

Question 12

To change ownership in a corporation you simply sell your stock to someone else.

Accepted Answer

A) True 
 B)False

Question 13

One reason that companies participate in mergers and acquisitions is

Accepted Answer

A)  to do the same thing as the competition because it makes for a highly leveraged company. 
B)  to convert a sole proprietorship into a partnership. 
C)  to expand within their own field or enter new markets. 
D)  to take the first step toward a join venture. 
A)  to do the same thing as the competition because it makes for a highly leveraged company. 
B)  to convert a sole proprietorship into a partnership. 
C)  to expand within their own field or enter new markets. 
D)  to take the first step toward a join venture.

Question 14

Compared to partnerships and sole proprietorships, a major advantage of the conventional (C) 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 15

Which of the following statements about buying a franchise is most accurate?

Accepted Answer

A)  One of the advantages of buying a franchise is that franchisors are so closely regulated that there is virtually no chance for scams to succeed. 
B)  Before purchasing a franchise, the buyer should carefully evaluate the franchise, the franchisor, his or her own situation, and the nature of the market. 
C)  Franchise agreements are simple to evaluate, since federal law requires that all such agreements must be written in plain English with all fees and terms clearly explained. 
D)  Buying a franchise is the simplest and least expensive way to set up a business, since the franchisor has already worked out all of the details for setting up and running the business. 
A)  One of the advantages of buying a franchise is that franchisors are so closely regulated that there is virtually no chance for scams to succeed. 
B)  Before purchasing a franchise, the buyer should carefully evaluate the franchise, the franchisor, his or her own situation, and the nature of the market. 
C)  Franchise agreements are simple to evaluate, since federal law requires that all such agreements must be written in plain English with all fees and terms clearly explained. 
D)  Buying a franchise is the simplest and least expensive way to set up a business, since the franchisor has already worked out all of the details for setting up and running the business.

Question 16

Rafael is a limited partner in an online clothing company. As a limited partner, Rafael can be involved with the company for a maximum of five years.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements about partnerships is most accurate?

Accepted Answer

A)  A partnership is a corporation with fewer than 100 owners. 
B)  A major advantage of a partnership is that it offers all owners limited liability. 
C)  A major drawback of a partnership is that it is difficult to terminate. 
D)  Partnerships are taxed at the lowest corporate tax rate. 
A)  A partnership is a corporation with fewer than 100 owners. 
B)  A major advantage of a partnership is that it offers all owners limited liability. 
C)  A major drawback of a partnership is that it is difficult to terminate. 
D)  Partnerships are taxed at the lowest corporate tax rate.

Question 18

When comparing general partnerships to sole proprietorships, an advantage of partnerships is that they

Accepted Answer

A)  are less risky, because each partner is responsible for only a specified fraction of the firm's debts. 
B)  are easier to terminate. 
C)  cost less to organize. 
D)  give the firm a stronger financial foundation. 
A)  are less risky, because each partner is responsible for only a specified fraction of the firm's debts. 
B)  are easier to terminate. 
C)  cost less to organize. 
D)  give the firm a stronger financial foundation.

Question 19

A well-known franchised food chain was brought to its knees when several customers got sick from tainted beef. Although the food chain recovered due to its quick and consistent action, several franchisees sued the parent company for loss of sales. The franchisees experienced the coattail effects of the bad publicity this event received.

Accepted Answer

A) True 
 B)False

Question 20

An S corporation has fewer ownership rules than a limited liability company.

Accepted Answer

A) True 
 B)False

Exam 5: How to Form a Business

Being your own boss means

The owners of a corporation are known as general corporate partners.

Compared to sole proprietorships, partnerships offer the advantage of shared management and pooled knowledge.

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

Global franchising is unlikely to experience major growth due to the high costs of operations in global markets.

The authors suggest that potential partners discuss the types of skills that each brings to the business. Partners with complementary skills may enhance the business.

One difference between partnerships and sole proprietorships is that partnerships

A franchise may be organized as a sole proprietorship, partnership, or corporation.

Tee Time Golf Club just announced plans to purchase the property and assume the obligations of Chipper's Golf Resort, one of its major competitors. Tee Time Golf Club's plans are an example of a merger.

Sean is one of several general partners who own Pints and Cans, a small chain of bar and grills located in Illinois and Indiana. Sean is interested in converting the partnership into a master limited partnership. If he convinces other partners to go along with his idea, Pints and Cans will

To change ownership in a corporation you simply sell your stock to someone else.

One reason that companies participate in mergers and acquisitions is

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

Which of the following statements about buying a franchise is most accurate?

Rafael is a limited partner in an online clothing company. As a limited partner, Rafael can be involved with the company for a maximum of five years.

Which of the following statements about partnerships is most accurate?

When comparing general partnerships to sole proprietorships, an advantage of partnerships is that they

An S corporation has fewer ownership rules than a limited liability company.

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 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

Appendix: Working Within the Legal Environment

Appendix: Using Technology to Manage Information

Appendix: Managing Risk

Appendix: Managing Personal Finances

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