Question 1

The purpose of a conglomerate merger is to diversify operations and investments.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements is the most accurate?

Accepted Answer

A)  Sole proprietorships are well suited for people who want to own a business and share in its profits without taking an active role in management. 
B)  Sole proprietorships are taxed at the owner's personal tax rate. 
C)  Sole proprietorships are the least risky form of business ownership. 
D)  Sole proprietorships must receive a state charter before they can legally conduct business. 
A)  Sole proprietorships are well suited for people who want to own a business and share in its profits without taking an active role in management. 
B)  Sole proprietorships are taxed at the owner's personal tax rate. 
C)  Sole proprietorships are the least risky form of business ownership. 
D)  Sole proprietorships must receive a state charter before they can legally conduct business.

Question 3

Amelia has a lot of business knowledge and is confident in her abilities to open a successful store. She recently opened a bakery as a sole proprietor. She is expecting a high level of profits and is looking forward to

Accepted Answer

A)  the lower corporate tax rate paid by sole proprietorships. 
B)  keeping all of the money she earns except for the taxes she is required to pay. 
C)  keeping all of the money she earns since she does not have to pay taxes as a sole proprietor. 
D)  easily raising additional large sums of money from the capital markets since she is a sole proprietor. 
A)  the lower corporate tax rate paid by sole proprietorships. 
B)  keeping all of the money she earns except for the taxes she is required to pay. 
C)  keeping all of the money she earns since she does not have to pay taxes as a sole proprietor. 
D)  easily raising additional large sums of money from the capital markets since she is a sole proprietor.

Question 4

One important consideration when prospecting for a good franchise business is

Accepted Answer

A)  the saturation rate of the franchise. The more saturation the better. 
B)  the market potential for the product or service, at the prices you need to charge. 
C)  the population level of the area where you will operate. Large populations are too overwhelming, often needlessly increasing demand. 
D)  a limited disclosure statement, and being mindful that any disclosure statement may limit your success. 
A)  the saturation rate of the franchise. The more saturation the better. 
B)  the market potential for the product or service, at the prices you need to charge. 
C)  the population level of the area where you will operate. Large populations are too overwhelming, often needlessly increasing demand. 
D)  a limited disclosure statement, and being mindful that any disclosure statement may limit your success.

Question 5

Stockholders in a corporation entrust control over the company's daily operations to managers selected by the board of directors to run the company.

Accepted Answer

A) True 
 B)False

Question 6

Midwest Auto Experts, Inc. sells franchises to prospective businesspersons who want to use the Midwest Auto Experts name and offer its products. In a franchise arrangement, Midwest Auto Experts would be the ________, and the buyer of the franchise is the ________.

Accepted Answer

A)  owner; limited partner 
B)  co-signer; co-signee 
C)  franchisor; franchisee 
D)  franchisee; franchisor 
A)  owner; limited partner 
B)  co-signer; co-signee 
C)  franchisor; franchisee 
D)  franchisee; franchisor

Question 7

Although Lou Banfilter, now a young attorney, is impressed with Car Keepers and believes it could be a good investment, he told Genna that his professional position at a law firm prevents him from taking an active role in the business. He is also concerned about accepting more risk since he and his wife are expecting a child. He mentioned a preference for limited liability. If Lou joined Genna and Al, the three might consider forming a

Accepted Answer

A)  limited partnership. 
B)  general partnership. 
C)  sole proprietorship. 
D)  master limited partnership. 
A)  limited partnership. 
B)  general partnership. 
C)  sole proprietorship. 
D)  master limited partnership.

Question 8

If a sole proprietorship fails, the owner may lose whatever was invested in the business, and the owner's personal assets are also at risk.

Accepted Answer

A) True 
 B)False

Question 9

Lorenzo and Lila own all of the Double L Corporation's stock. The stock of this corporation is not sold to the general public. Lorenzo and Lila own a(n)

Accepted Answer

A)  limited liability company. 
B)  master limited partnership. 
C)  alien corporation. 
D)  closed corporation. 
A)  limited liability company. 
B)  master limited partnership. 
C)  alien corporation. 
D)  closed corporation.

Question 10

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 be 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 11

One result of taking a firm private is

Accepted Answer

A)  the firm's stock is no longer available for purchase on the open market. 
B)  managers lose some control as the number of stockholders increases. 
C)  the public image of the firm will suffer. 
D)  the firm will have access to more capital. 
A)  the firm's stock is no longer available for purchase on the open market. 
B)  managers lose some control as the number of stockholders increases. 
C)  the public image of the firm will suffer. 
D)  the firm will have access to more capital.

Question 12

GloboTech, Inc., a large manufacturer of laptops, is considering a merger with ChipComm, a leading producer of microprocessors and other computer chips. GloboTech believes such a merger would give it a guaranteed source of needed components, and enable it to have better control over quality. If this merger occurs, it would be an example of a horizontal merger.

Accepted Answer

A) True 
 B)False

Question 13

For 11 years, Dennis and Tom have owned a car wash business as partners. Now they would like their younger brother Jimmy to join them. Unfortunately, partnership law states that only two partners can participate in a partnership.

Accepted Answer

A) True 
 B)False

Question 14

A ________ is a form of business that is owned, and usually managed, by one person.

Accepted Answer

A)  closed corporation 
B)  subchapter S corporation 
C)  sole proprietorship 
D)  limited partnership 
A)  closed corporation 
B)  subchapter S corporation 
C)  sole proprietorship 
D)  limited partnership

Question 15

What is the difference between a general partner and a limited partner? Give an example of a situation in which a person would want to be a limited partner.

Accepted Answer

A general partner is an owner who has un

Question 16

One of the major disadvantages of a partnership is that profits must be divided equally.

Accepted Answer

A) True 
 B)False

Question 17

Payton recently purchased 100 shares of stock in Game Guys, Inc. Payton is a(n)________ of this company.

Accepted Answer

A)  owner 
B)  manager 
C)  creditor 
D)  partner 
A)  owner 
B)  manager 
C)  creditor 
D)  partner

Question 18

A company that loses its status as an S corporation may not reelect this status for at least 5 years.

Accepted Answer

A) True 
 B)False

Question 19

The strategy of a leveraged buyout is used when employee talent is at a minimum.

Accepted Answer

A) True 
 B)False

Question 20

A person who buys the right to use a business name and sell a product within a given territory is called a

Accepted Answer

A)  stockholder. 
B)  franchisee. 
C)  limited franchisor. 
D)  venture capitalist. 
A)  stockholder. 
B)  franchisee. 
C)  limited franchisor. 
D)  venture capitalist.

Exam 5: How to Form a Business

The purpose of a conglomerate merger is to diversify operations and investments.

Which of the following statements is the most accurate?

Amelia has a lot of business knowledge and is confident in her abilities to open a successful store. She recently opened a bakery as a sole proprietor. She is expecting a high level of profits and is looking forward to

One important consideration when prospecting for a good franchise business is

Stockholders in a corporation entrust control over the company's daily operations to managers selected by the board of directors to run the company.

Midwest Auto Experts, Inc. sells franchises to prospective businesspersons who want to use the Midwest Auto Experts name and offer its products. In a franchise arrangement, Midwest Auto Experts would be the ________, and the buyer of the franchise is the ________.

If a sole proprietorship fails, the owner may lose whatever was invested in the business, and the owner's personal assets are also at risk.

Lorenzo and Lila own all of the Double L Corporation's stock. The stock of this corporation is not sold to the general public. Lorenzo and Lila own a(n)

One result of taking a firm private is

For 11 years, Dennis and Tom have owned a car wash business as partners. Now they would like their younger brother Jimmy to join them. Unfortunately, partnership law states that only two partners can participate in a partnership.

A ________ is a form of business that is owned, and usually managed, by one person.

What is the difference between a general partner and a limited partner? Give an example of a situation in which a person would want to be a limited partner.

One of the major disadvantages of a partnership is that profits must be divided equally.

Payton recently purchased 100 shares of stock in Game Guys, Inc. Payton is a(n)________ of this company.

A company that loses its status as an S corporation may not reelect this status for at least 5 years.

The strategy of a leveraged buyout is used when employee talent is at a minimum.

A person who buys the right to use a business name and sell a product within a given territory is called a

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

Midwest Auto Experts, Inc. sells franchises to prospective businesspersons who want to use the Midwest Auto Experts name and offer its products. In a franchise arrangement, Midwest Auto Experts would be the , and the buyer of the franchise is the .