Question 1

A merger involving a software producer and a clothing manufacturer is 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 2

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 3

Mel,Tim,and Bill agreed to partner in a small rehab business.Initially,they were enthusiastic contributors until their first project took more work than Mel initially estimated;Tim wanted morning meetings and long lunch hours;and,Bill decided to go on vacation even though the project was not complete and ready to sell.As Figure 5.2 indicates,

Accepted Answer

A)  It's smart to begin the partnership with honest communication of what each partner expects to give and get from the partnership. 
B)  Organize the business as a limited liability company to reduce the financial risks that put pressure on members of the partnership. 
C)  Designate one of the partners as the primary partner with final authority to call all the shots. 
D)  Enter into partnerships with people who have similar educational and cultural backgrounds and similar personalities. 
A)  It's smart to begin the partnership with honest communication of what each partner expects to give and get from the partnership. 
B)  Organize the business as a limited liability company to reduce the financial risks that put pressure on members of the partnership. 
C)  Designate one of the partners as the primary partner with final authority to call all the shots. 
D)  Enter into partnerships with people who have similar educational and cultural backgrounds and similar personalities.

Question 4

Jim is one of several general partners who own Beef 'N Beer,a small chain of restaurants located in Missouri and Illinois.Jim is interested in converting the partnership into a master limited partnership.If he convinces other partners to go along with his idea,Beef 'N Beer 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 5

The reason a professional such as a lawyer or doctor would incorporate his/her business is

Accepted Answer

A)  to be assured that another professional firm would not take over and make decisions - similar to a hostile takeover. 
B)  to comply with the law because insurance companies require that they be corporations. 
C)  to protect his/her other assets with limited liability. 
D)  to protect his/her assets with unlimited liability. 
A)  to be assured that another professional firm would not take over and make decisions - similar to a hostile takeover. 
B)  to comply with the law because insurance companies require that they be corporations. 
C)  to protect his/her other assets with limited liability. 
D)  to protect his/her assets with unlimited liability.

Question 6

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 7

Mojo Motors is a small conventional corporation with only 212 stockholders.Eleven of the stockholders are citizens of Mexico,and eight others are citizens of Canada.Due to its size and diversity in ownership,you would recommend that Mojo Motors change to an S-Corporation.

Accepted Answer

A) True 
 B)False

Question 8

Foreign investment in U.S.companies continues to be strong.When Belgian-based,In-Bev purchased the largest beer company in the U.S. ,Anheuser-Busch,this action constituted a(n)_________________ with a negotiated selling price of $52 billion.

Accepted Answer

A)  merger 
B)  aggregate 
C)  acquisition 
D)  unequivocal buy-in 
A)  merger 
B)  aggregate 
C)  acquisition 
D)  unequivocal buy-in

Question 9

Which of the following is normally considered a disadvantage of the corporate form of business?

Accepted Answer

A)  Unlimited liability of owners. 
B)  Difficult transfer of ownership. 
C)  Limited life. 
D)  Double taxation of earnings. 
A)  Unlimited liability of owners. 
B)  Difficult transfer of ownership. 
C)  Limited life. 
D)  Double taxation of earnings.

Question 10

Your friend,Brett called to tell you he just left a sales pitch for a new web site development franchise where "he can get in for a few thousand dollars." He wants to know if you are ready to invest too.Although you lack expertise in graphic design or html programming,this should be a safe investment since it is already advertised as a franchise system.It's probably too good to pass up.

Accepted Answer

A) True 
 B)False

Question 11

A ____________ is two firms combining to form one company.

Accepted Answer

A)  joint tenancy 
B)  tenancy in common 
C)  merger 
D)  leveraged buyout 
A)  joint tenancy 
B)  tenancy in common 
C)  merger 
D)  leveraged buyout

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Unlimited liability means:

Accepted Answer

A)  When you own your own business you are responsible for all the business debts. 
B)  You are only liable for the money you invest in the business. 
C)  As a franchisee your franchisor is responsible for the debts of the franchise. 
D)  You are liable for whatever advertising promises your firm makes. 
A)  When you own your own business you are responsible for all the business debts. 
B)  You are only liable for the money you invest in the business. 
C)  As a franchisee your franchisor is responsible for the debts of the franchise. 
D)  You are liable for whatever advertising promises your firm makes.

Question 14

A prospective franchise owner wants to keep his monthly costs at a minimum.The franchisor he is reviewing is advertising that royalty payments of 8% of sales could be as high as $250,000 per month.The franchisor is claiming that a franchisee can expect monthly sales to be as high as:

Accepted Answer

A)  $2,125,000. 
B)  $2,000,000. 
C)  $3,125,000. 
D)  $200,000. 
A)  $2,125,000. 
B)  $2,000,000. 
C)  $3,125,000. 
D)  $200,000.

Question 15

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.

Question 16

Tess and Tijuana have considered starting their own business but are concerned about the possibility of losing their personal assets if the business fails.One way for Tess and Tijuana to avoid this risk would be to organize their firm as a(n):

Accepted Answer

A)  General partnership. 
B)  Limited partnership. 
C)  Corporation. 
D)  Sole proprietorship. 
A)  General partnership. 
B)  Limited partnership. 
C)  Corporation. 
D)  Sole proprietorship.

Question 17

Emma Pebble and Chase Stone formed a partnership in a landscape business.Under their arrangement,Emma actively manages the company and assumes unlimited liability for the firm's debts.Chase 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.Emma and Chase participate in a limited partnership.

Accepted Answer

A) True 
 B)False

Question 18

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 19

If a corporation has after-tax profits of $360,000,and elects to distribute this amount in the form of dividends to its stockholders,these distributions are free and clear of taxes because the corporation paid taxes on this amount prior to distribution.

Accepted Answer

A) True 
 B)False

Question 20

A group of medical doctors are interested in incorporating their business.There is no advantage due to the costs involved.

Accepted Answer

A) True 
 B)False

A merger involving a software producer and a clothing manufacturer is an example of a:

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

Jim is one of several general partners who own Beef 'N Beer,a small chain of restaurants located in Missouri and Illinois.Jim is interested in converting the partnership into a master limited partnership.If he convinces other partners to go along with his idea,Beef 'N Beer will:

The reason a professional such as a lawyer or doctor would incorporate his/her business is

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

Mojo Motors is a small conventional corporation with only 212 stockholders.Eleven of the stockholders are citizens of Mexico,and eight others are citizens of Canada.Due to its size and diversity in ownership,you would recommend that Mojo Motors change to an S-Corporation.

Foreign investment in U.S.companies continues to be strong.When Belgian-based,In-Bev purchased the largest beer company in the U.S. ,Anheuser-Busch,this action constituted a(n)_________________ with a negotiated selling price of $52 billion.

Which of the following is normally considered a disadvantage of the corporate form of business?

A ____________ is two firms combining to form one company.

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

Unlimited liability means:

A prospective franchise owner wants to keep his monthly costs at a minimum.The franchisor he is reviewing is advertising that royalty payments of 8% of sales could be as high as $250,000 per month.The franchisor is claiming that a franchisee can expect monthly sales to be as high as:

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

Tess and Tijuana have considered starting their own business but are concerned about the possibility of losing their personal assets if the business fails.One way for Tess and Tijuana to avoid this risk would be to organize their firm as a(n):

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:

If a corporation has after-tax profits of $360,000,and elects to distribute this amount in the form of dividends to its stockholders,these distributions are free and clear of taxes because the corporation paid taxes on this amount prior to distribution.

A group of medical doctors are interested in incorporating their business.There is no advantage due to the costs involved.

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

Filters

Exam 5: How to Form a Business

A merger involving a software producer and a clothing manufacturer is an example of a:

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

Jim is one of several general partners who own Beef 'N Beer,a small chain of restaurants located in Missouri and Illinois.Jim is interested in converting the partnership into a master limited partnership.If he convinces other partners to go along with his idea,Beef 'N Beer will:

The reason a professional such as a lawyer or doctor would incorporate his/her business is

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

Mojo Motors is a small conventional corporation with only 212 stockholders.Eleven of the stockholders are citizens of Mexico,and eight others are citizens of Canada.Due to its size and diversity in ownership,you would recommend that Mojo Motors change to an S-Corporation.

Foreign investment in U.S.companies continues to be strong.When Belgian-based,In-Bev purchased the largest beer company in the U.S. ,Anheuser-Busch,this action constituted a(n)_________________ with a negotiated selling price of $52 billion.

Which of the following is normally considered a disadvantage of the corporate form of business?

A ____________ is two firms combining to form one company.

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

Unlimited liability means:

A prospective franchise owner wants to keep his monthly costs at a minimum.The franchisor he is reviewing is advertising that royalty payments of 8% of sales could be as high as $250,000 per month.The franchisor is claiming that a franchisee can expect monthly sales to be as high as:

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

Tess and Tijuana have considered starting their own business but are concerned about the possibility of losing their personal assets if the business fails.One way for Tess and Tijuana to avoid this risk would be to organize their firm as a(n):

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:

If a corporation has after-tax profits of $360,000,and elects to distribute this amount in the form of dividends to its stockholders,these distributions are free and clear of taxes because the corporation paid taxes on this amount prior to distribution.

A group of medical doctors are interested in incorporating their business.There is no advantage due to the costs involved.

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

Filters