Question 1

Franchising is popular in the United States, but legal barriers have limited its popularity in foreign countries.

Accepted Answer

A) True 
 B)False

Question 2

One reason that a firm would choose to merge or acquire another company would be to gain market share.

Accepted Answer

A) True 
 B)False

Question 3

Sung owns a dog-walking business that she started in high school. Her first goal was to earn money after school and supplement her allowance. Now that she has finished college and maintains a long client list, she's planning on running the business full time. She keeps all the profits and has kept things simple by posting fliers on the bulletin boards at local stores. Sung's business is a(n)

Accepted Answer

A)  sole proprietorship. 
B)  franchise. 
C)  S corporation. 
D)  partnership. 
A)  sole proprietorship. 
B)  franchise. 
C)  S corporation. 
D)  partnership.

Question 4

In recent years, foreign firms were reluctant to merge with or acquire American corporations.

Accepted Answer

A) True 
 B)False

Question 5

A merger is a mutual agreement where companies join together, whereas an acquisition is when one firm purchases the assets and obligations of another firm.

Accepted Answer

A) True 
 B)False

Question 6

Kiersten and her four siblings are starting their own home design business. One of their primary goals is keeping the loving relationship they currently enjoy, so they are following the Model Business Corporation Act recommendations as they write their partnership agreement. Which of the following is an accurate recommendation of the Act?

Accepted Answer

A)  The business should be actively operating for an extended period before the partners decide who is responsible for what business functions. 
B)  Family businesses never take on outside partners, so no discussion of this need take place. 
C)  There should be discussion and well-understood ways that the partners will handle disagreements. 
D)  Due to the fact that they are all under 40 years old and expect to work until they are 65, there is no need to decide what will happen to the partnership if one decides to leave the business or retire, or dies. 
A)  The business should be actively operating for an extended period before the partners decide who is responsible for what business functions. 
B)  Family businesses never take on outside partners, so no discussion of this need take place. 
C)  There should be discussion and well-understood ways that the partners will handle disagreements. 
D)  Due to the fact that they are all under 40 years old and expect to work until they are 65, there is no need to decide what will happen to the partnership if one decides to leave the business or retire, or dies.

Question 7

When two companies in the same industry agree to become one firm, the result is called a

Accepted Answer

A)  vertical merger. 
B)  joint venture. 
C)  monopoly. 
D)  horizontal merger. 
A)  vertical merger. 
B)  joint venture. 
C)  monopoly. 
D)  horizontal merger.

Question 8

Autumn wants to start a business. She has two goals. First, she doesn't have much money but she's ready to get business up and running with the least possible hassle and expense. Second, she wants to minimize her personal risk in the event that her company experiences difficulties. If Autumn chooses a sole proprietorship, she would

Accepted Answer

A)  achieve both goals since this form of ownership is both the easiest to form and the least risky. 
B)  meet her first goal since sole proprietorships are easy and inexpensive to form. However, she would expose herself to personal risk because owners of sole proprietorships have unlimited liability. 
C)  not achieve either goal since proprietorships are both costly to set up and subject to unlimited liability. 
D)  achieve her second goal, since the owners of sole proprietorships are legally protected from losing more than the amount they invest in their company. However, she would find that the start-up costs would be higher than if she had incorporated her business. 
A)  achieve both goals since this form of ownership is both the easiest to form and the least risky. 
B)  meet her first goal since sole proprietorships are easy and inexpensive to form. However, she would expose herself to personal risk because owners of sole proprietorships have unlimited liability. 
C)  not achieve either goal since proprietorships are both costly to set up and subject to unlimited liability. 
D)  achieve her second goal, since the owners of sole proprietorships are legally protected from losing more than the amount they invest in their company. However, she would find that the start-up costs would be higher than if she had incorporated her business.

Question 9

A legal entity with authority to act and have liability separate from its owners is called a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 10

In today's economy, only large business enterprises should operate as corporations.

Accepted Answer

A) True 
 B)False

Question 11

One of the strengths of the sole proprietorship is its ability to sustain rapid growth by raising large amounts of financial resources.

Accepted Answer

A) True 
 B)False

Question 12

Therese is a talented designer who wants to start her own women's swimwear and beach towel line. But first, she is trying to decide which form of business ownership is right for her. As a young mom who hopes to send her children to college some day, she does not want to jeopardize her savings in any way. In order to overcome these risks, Therese should start her business as a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 13

An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing is called a(n)

Accepted Answer

A)  golden parachute. 
B)  arbitrage agreement. 
C)  factor transaction. 
D)  leveraged buyout. 
A)  golden parachute. 
B)  arbitrage agreement. 
C)  factor transaction. 
D)  leveraged buyout.

Question 14

What entity elects the board of directors for a corporation?

Accepted Answer

A)  Creditors 
B)  Stockholders 
C)  Managers 
D)  Employees 
A)  Creditors 
B)  Stockholders 
C)  Managers 
D)  Employees

Question 15

Two of your friends are horse fanatics. They inherited several acres of land that they turned into a retirement sanctuary for racehorses. Serenity Stables was originally incorporated as a limited liability company. The members are reevaluating 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

A recent study showed that partnerships are more likely to fail than sole proprietorships.

Accepted Answer

A) True 
 B)False

Question 17

A disadvantage of corporations is that their charters are only valid for 99 years, so corporations are less permanent than other types of businesses.

Accepted Answer

A) True 
 B)False

Question 18

A multinational corporation is a firm that operates in several countries.

Accepted Answer

A) True 
 B)False

Question 19

Penny Pebble and Stuart Stone formed a partnership in a landscape business. Under their arrangement, Penny actively manages the company and assumes unlimited liability for its debts. Stuart has invested several thousand dollars of his money with plans to share in the profits, but does not actively make management decisions, nor will he assume liability beyond his initial investment. Penny and Stuart are in a limited partnership.

Accepted Answer

A) True 
 B)False

Question 20

A horizontal merger refers to a merger between two companies in the same industry, and serving the same markets.

Accepted Answer

A) True 
 B)False

Franchising is popular in the United States, but legal barriers have limited its popularity in foreign countries.

One reason that a firm would choose to merge or acquire another company would be to gain market share.

In recent years, foreign firms were reluctant to merge with or acquire American corporations.

A merger is a mutual agreement where companies join together, whereas an acquisition is when one firm purchases the assets and obligations of another firm.

When two companies in the same industry agree to become one firm, the result is called a

A legal entity with authority to act and have liability separate from its owners is called a sole proprietorship.

In today's economy, only large business enterprises should operate as corporations.

One of the strengths of the sole proprietorship is its ability to sustain rapid growth by raising large amounts of financial resources.

An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing is called a(n)

What entity elects the board of directors for a corporation?

A recent study showed that partnerships are more likely to fail than sole proprietorships.

A disadvantage of corporations is that their charters are only valid for 99 years, so corporations are less permanent than other types of businesses.

A multinational corporation is a firm that operates in several countries.

A horizontal merger refers to a merger between two companies in the same industry, and serving the same markets.

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

Filters

Exam 5: How to Form a Business

Franchising is popular in the United States, but legal barriers have limited its popularity in foreign countries.

One reason that a firm would choose to merge or acquire another company would be to gain market share.

In recent years, foreign firms were reluctant to merge with or acquire American corporations.

A merger is a mutual agreement where companies join together, whereas an acquisition is when one firm purchases the assets and obligations of another firm.

When two companies in the same industry agree to become one firm, the result is called a

A legal entity with authority to act and have liability separate from its owners is called a sole proprietorship.

In today's economy, only large business enterprises should operate as corporations.

One of the strengths of the sole proprietorship is its ability to sustain rapid growth by raising large amounts of financial resources.

An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing is called a(n)

What entity elects the board of directors for a corporation?

A recent study showed that partnerships are more likely to fail than sole proprietorships.

A disadvantage of corporations is that their charters are only valid for 99 years, so corporations are less permanent than other types of businesses.

A multinational corporation is a firm that operates in several countries.

A horizontal merger refers to a merger between two companies in the same industry, and serving the same markets.

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

Filters