Question 1

Which of the following is an advantage of franchises?

Accepted Answer

A)  Shared profit. 
B)  Management regulation. 
C)  Management and marketing assistance. 
D)  Coattail effects. 
A)  Shared profit. 
B)  Management regulation. 
C)  Management and marketing assistance. 
D)  Coattail effects.

Question 2

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 3

Like stockholders of a C corporation,owners of a limited liability company (LLC)are free to sell their ownership without the approval of other members.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is the most accurate? Sole proprietorships:

Accepted Answer

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

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

A disadvantage of corporations is that an owner must get the approval of all other owners before selling his or her interest in the firm to another investor.

Accepted Answer

A) True 
 B)False

Question 7

To many businesspeople,one of the major attractions of a sole proprietorship is:

Accepted Answer

A)  The ability to obtain additional financial resources. 
B)  The protection of limited liability. 
C)  An unlimited lifespan. 
D)  The chance to be their own boss. 
A)  The ability to obtain additional financial resources. 
B)  The protection of limited liability. 
C)  An unlimited lifespan. 
D)  The chance to be their own boss.

Question 8

A merger involving a commercial bakery and a grocery retailer would be an example of a:

Accepted Answer

A)  Vertical merger. 
B)  Horizontal merger. 
C)  Linear merger. 
D)  Conglomerate merger. 
A)  Vertical merger. 
B)  Horizontal merger. 
C)  Linear merger. 
D)  Conglomerate merger.

Question 9

Corporations are easy to start and easy to terminate.

Accepted Answer

A) True 
 B)False

Question 10

A difficulty that sole proprietors try to overcome is the fact that they have trouble competing with large firms for expert talent.Large firms can usually pay better and offer fringe benefits that are unaffordable to the sole proprietor.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

A type of partnership called a ___________ acts much like a corporation and is traded on stock exchanges,but it is taxed like a partnership with profits passing through to the owners and taxed as the owner's personal income.

Accepted Answer

A)  limited partnership 
B)  combined general partnership 
C)  cooperative partnership 
D)  master limited partnership 
A)  limited partnership 
B)  combined general partnership 
C)  cooperative partnership 
D)  master limited partnership

Question 13

Connie is a general partner in a retail cookie store.Her personal assets are legally protected from the debts of the business.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements best summarizes the experience of American franchisors in foreign countries?

Accepted Answer

A)  Very few American franchisors of any size have had success in international markets. 
B)  Large franchisors have had success in other nations,but newer and smaller franchisors have lacked the financial strength and reputation to succeed in global markets. 
C)  The only nations in which American franchisors have achieved any success are Great Britain and Mexico. 
D)  Both large and small franchises have found success in foreign countries by providing convenience and a predictable level of service and quality. 
A)  Very few American franchisors of any size have had success in international markets. 
B)  Large franchisors have had success in other nations,but newer and smaller franchisors have lacked the financial strength and reputation to succeed in global markets. 
C)  The only nations in which American franchisors have achieved any success are Great Britain and Mexico. 
D)  Both large and small franchises have found success in foreign countries by providing convenience and a predictable level of service and quality.

Question 15

An evaluation of franchising would conclude that this type of arrangement:

Accepted Answer

A)  Has become the dominant form of business organization in the United States because it has many advantages and almost no disadvantages. 
B)  Appeals to people who want to own a business,but are not comfortable starting a company from scratch. 
C)  Has a much higher risk of failure than independent companies. 
D)  Has little chance of success outside the United States because many foreign countries do not allow such arrangements. 
A)  Has become the dominant form of business organization in the United States because it has many advantages and almost no disadvantages. 
B)  Appeals to people who want to own a business,but are not comfortable starting a company from scratch. 
C)  Has a much higher risk of failure than independent companies. 
D)  Has little chance of success outside the United States because many foreign countries do not allow such arrangements.

Question 16

The difference between a merger and an acquisition is:

Accepted Answer

A)  A merger does not combine the assets and liabilities of firms,whereas an acquisition combines assets and liabilities. 
B)  A merger combines the assets of the two firms,but each company continues to assume its own liabilities,whereas an acquisition is a total buyout of one firm by another. 
C)  A merger is the joining of resources of two companies,whereas an acquisition is a buyout of one firm by the other.The new company concerns itself with merging of resources. 
D)  A merger is always something smaller tagging onto something larger,like a merging lane onto an interstate,whereas an acquisition is two firms that are relatively the same size agreeing to continue as one - more like two major interstates that come together and travel as one for several miles. 
A)  A merger does not combine the assets and liabilities of firms,whereas an acquisition combines assets and liabilities. 
B)  A merger combines the assets of the two firms,but each company continues to assume its own liabilities,whereas an acquisition is a total buyout of one firm by another. 
C)  A merger is the joining of resources of two companies,whereas an acquisition is a buyout of one firm by the other.The new company concerns itself with merging of resources. 
D)  A merger is always something smaller tagging onto something larger,like a merging lane onto an interstate,whereas an acquisition is two firms that are relatively the same size agreeing to continue as one - more like two major interstates that come together and travel as one for several miles.

Question 17

A general partner takes an active role in the management of the business.

Accepted Answer

A) True 
 B)False

Question 18

Chipper's Golf Resort has the opportunity to buy 1000 acres of property adjacent to its 18-hole golf course.After talking with her banker,the owner is encouraged to begin the paperwork to change from a Limited Liability Company form of business ownership to a corporation.You applaud this strategy because she will eliminate the problem of double taxation.

Accepted Answer

A) True 
 B)False

Question 19

One of the major disadvantages of a sole proprietorship is the:

Accepted Answer

A)  Possibility of disagreements between owners. 
B)  Unlimited liability the owner has for the debts of the firm. 
C)  Fact that any income earned by this type of business is taxed twice. 
D)  High cost of starting or ending the company. 
A)  Possibility of disagreements between owners. 
B)  Unlimited liability the owner has for the debts of the firm. 
C)  Fact that any income earned by this type of business is taxed twice. 
D)  High cost of starting or ending the company.

Question 20

According to the Uniform Partnership Act,the three key elements of any general partnership are:

Accepted Answer

A)  A board of directors,a written partnership agreement,and a well-defined product or service. 
B)  Two owners,an adequate financial base,and a written statement describing the manner in which profits and losses will be divided. 
C)  Common ownership,shared profits and losses,and right to participate in management. 
D)  Common stock,a board of directors,and a statement of limited liability. 
A)  A board of directors,a written partnership agreement,and a well-defined product or service. 
B)  Two owners,an adequate financial base,and a written statement describing the manner in which profits and losses will be divided. 
C)  Common ownership,shared profits and losses,and right to participate in management. 
D)  Common stock,a board of directors,and a statement of limited liability.

Exam 5: How to Form a Business

Which of the following is an advantage of franchises?

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:

Like stockholders of a C corporation,owners of a limited liability company (LLC)are free to sell their ownership without the approval of other members.

Which of the following statements is the most accurate? Sole proprietorships:

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

A disadvantage of corporations is that an owner must get the approval of all other owners before selling his or her interest in the firm to another investor.

To many businesspeople,one of the major attractions of a sole proprietorship is:

A merger involving a commercial bakery and a grocery retailer would be an example of a:

Corporations are easy to start and easy to terminate.

A difficulty that sole proprietors try to overcome is the fact that they have trouble competing with large firms for expert talent.Large firms can usually pay better and offer fringe benefits that are unaffordable to the sole proprietor.

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

A type of partnership called a ___________ acts much like a corporation and is traded on stock exchanges,but it is taxed like a partnership with profits passing through to the owners and taxed as the owner's personal income.

Connie is a general partner in a retail cookie store.Her personal assets are legally protected from the debts of the business.

Which of the following statements best summarizes the experience of American franchisors in foreign countries?

An evaluation of franchising would conclude that this type of arrangement:

The difference between a merger and an acquisition is:

A general partner takes an active role in the management of the business.

One of the major disadvantages of a sole proprietorship is the:

According to the Uniform Partnership Act,the three key elements of any general partnership are:

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding How Economics Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

Entrepreneurship and Starting a Small Business

Management and Leadership

Adapting Organizations to Todays Markets

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employee-Management Issues and Relationships

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 A: Using Technology to Manage Information

Appendix B: Managing Risk

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