Question 1

Although sole proprietors do not pay any special taxes, as the owner of the business you are also an employee of the business, which requires you to:

Accepted Answer

A)  pay income tax only one time each year. 
B)  pay self-employment taxes. 
C)  pay for the right to get an employee identification number. 
D)  file an income tax return for the business. 
A)  pay income tax only one time each year. 
B)  pay self-employment taxes. 
C)  pay for the right to get an employee identification number. 
D)  file an income tax return for the business. B

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  True

Question 3

Mini-Case
For as long as she could remember, Jenna Raiter's passion was cars. As a teenager, she spent hours with her dad tinkering with the family car, learning to change the oil and making minor repairs. She got a job at a local garage while still in high school. A few years after graduating from high school and completing the auto mechanics degree at a local community college, Jenna decided she wanted to be her own boss. She quit her job, borrowed some money from her dad, and began her own repair shop, the AutoMotion Garage. Jenna's hard work gradually attracted a loyal clientele of satisfied customers. Her success has her thinking about opening garages in two other locations, but she lacks the financial resources needed for expansion. Furthermore, the success of her business is forcing Jenna to spend more time managing the business and less time doing the actual technical work she still enjoys. She wants to find business partners who can help her with management and provide additional financial resources. She has approached a couple of friends she met in high school: Al Ternator and Lew Banfilter, to see if they would like to join the business.
-Jenna approached Al Ternator about joining the business as an owner. She proposed that she continue to provide the technical expertise and deal directly with customers, while Al, who has a college degree in finance, handles many of the financial aspects of running AutoMotion. In addition, Jenna wants Al to contribute some much-needed money for expansion. Under Jenna's proposal, she and Al would operate the business together as:

Accepted Answer

A)  limited partners. 
B)  general partners. 
C)  majority shareholders. 
D)  business consultants. 
A)  limited partners. 
B)  general partners. 
C)  majority shareholders. 
D)  business consultants. B

Question 4

When two firms which do not participate in the same industries, for example, a software company and a fast food restaurant company, decide to merge, the result is called a ____________ merger.

Accepted Answer

A)  vertical 
B)  horizontal 
C)  linear 
D)  conglomerate 
A)  vertical 
B)  horizontal 
C)  linear 
D)  conglomerate

Question 5

Maria recently purchased 100 shares of stock in Idle Time Gaming, Inc. Maria 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 6

One way to eliminate some of the risk of your partners making costly mistakes that could jeopardize your personal assets is to set up a:

Accepted Answer

A)  Master Limited Partnership. 
B)  sole proprietorship. 
C)  limited amount of time each can actively spend in the business. 
D)  limited liability partnership. 
A)  Master Limited Partnership. 
B)  sole proprietorship. 
C)  limited amount of time each can actively spend in the business. 
D)  limited liability partnership.

Question 7

One method to avoid conflicts between partners is to solicit the services of a lawyer to create a well-written partnership agreement.

Accepted Answer

A) True 
 B)False

Question 8

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.

Question 9

It is usually easy to start and end a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

The stockholders of large, publicly traded corporations have a daily pulse on the operation of the business.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Opening and operating a franchise in a different country:

Accepted Answer

A)  is illegal according to the Clayton Antitrust Act. 
B)  is no different than setting up a franchise in the domestic market. 
C)  may require the owner to adapt to social and cultural differences. 
D)  is much less risky than owning a domestically based franchise. 
A)  is illegal according to the Clayton Antitrust Act. 
B)  is no different than setting up a franchise in the domestic market. 
C)  may require the owner to adapt to social and cultural differences. 
D)  is much less risky than owning a domestically based franchise.

Question 15

An acquisition is when one company buys the property and obligations of another company.

Accepted Answer

A) True 
 B)False

Question 16

Jamie and Maria invested all their savings in a small pizzeria they opened outside the University of Western Kentucky. They operated the business as a general partnership. After 11 months, the business went broke and Jamie and Maria were left with outstanding bills of $37,500, which was more than their initial investment in the company. Jamie and Maria can:

Accepted Answer

A)  lose their personal assets as the result of their company's financial problems. 
B)  lose only the funds they originally invested in their company. 
C)  lose only the total value of the assets actually used to operate the business. 
D)  avoid any liability for these debts since a partnership is considered to be a business entity that is separate and distinct from the partners who own it. 
A)  lose their personal assets as the result of their company's financial problems. 
B)  lose only the funds they originally invested in their company. 
C)  lose only the total value of the assets actually used to operate the business. 
D)  avoid any liability for these debts since a partnership is considered to be a business entity that is separate and distinct from the partners who own it.

Question 17

Which of the following statements is the most accurate? A foreign corporation:

Accepted Answer

A)  does business in one or more states, but is chartered in another state. 
B)  is 50% owned by individuals or companies from another nation. 
C)  is headquartered in another nation. 
D)  is the same thing as a multinational corporation. 
A)  does business in one or more states, but is chartered in another state. 
B)  is 50% owned by individuals or companies from another nation. 
C)  is headquartered in another nation. 
D)  is the same thing as a multinational corporation.

Question 18

Farm cooperatives were originally established to help farmers increase their economic power by acting as a group rather than as individuals.

Accepted Answer

A) True 
 B)False

Question 19

When a sole proprietor dies:

Accepted Answer

A)  the sole proprietor's heirs have the option of taking over the business. 
B)  the business is sold to a larger corporation. 
C)  the company continues to function as it always has. 
D)  the company always closes down. 
A)  the sole proprietor's heirs have the option of taking over the business. 
B)  the business is sold to a larger corporation. 
C)  the company continues to function as it always has. 
D)  the company always closes down.

Question 20

One drawback of franchises is that they have a higher failure rate than other types of business ventures.

Accepted Answer

A) True 
 B)False

Exam 5: How to Form a Business

Although sole proprietors do not pay any special taxes, as the owner of the business you are also an employee of the business, which requires you to:

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

When two firms which do not participate in the same industries, for example, a software company and a fast food restaurant company, decide to merge, the result is called a ____________ merger.

Maria recently purchased 100 shares of stock in Idle Time Gaming, Inc. Maria is a(n)_____________ of this company.

One way to eliminate some of the risk of your partners making costly mistakes that could jeopardize your personal assets is to set up a:

One method to avoid conflicts between partners is to solicit the services of a lawyer to create a well-written partnership agreement.

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

It is usually easy to start and end a sole proprietorship.

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

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

The stockholders of large, publicly traded corporations have a daily pulse on the operation of the business.

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:

Opening and operating a franchise in a different country:

An acquisition is when one company buys the property and obligations of another company.

Which of the following statements is the most accurate? A foreign corporation:

Farm cooperatives were originally established to help farmers increase their economic power by acting as a group rather than as individuals.

When a sole proprietor dies:

One drawback of franchises is that they have a higher failure rate than other types of business ventures.

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 Union and 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

Managing the Marketing Mix: Product, Price, Place and Promotion

Extension: Working Within the Legal Environment

Extension: Using Technology to Manage Information

Extension: Managing Risk

Extension: Managing Personal Finances

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