Question 1

Stockholders in a corporation have limited liability.

Accepted Answer

A) True 
 B)False

Question 2

A good reason why partners should spell out the details of their partnership arrangements in writing is:

Accepted Answer

A)  the partnership is not a legally recognized business unless they do so. 
B)  a written agreement will help reduce misunderstandings and disagreements among the partners. 
C)  putting the agreement in writing will limit the liability of each partner to a specified level. 
D)  doing so will make it easier to convert the business to a corporation at a later date. 
A)  the partnership is not a legally recognized business unless they do so. 
B)  a written agreement will help reduce misunderstandings and disagreements among the partners. 
C)  putting the agreement in writing will limit the liability of each partner to a specified level. 
D)  doing so will make it easier to convert the business to a corporation at a later date.

Question 3

A separation between ownership and management is most likely to occur in a:

Accepted Answer

A)  sole proprietorship. 
B)  general partnership. 
C)  corporation. 
D)  limited liability partnership. 
A)  sole proprietorship. 
B)  general partnership. 
C)  corporation. 
D)  limited liability partnership.

Question 4

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 5

The companies Blue Diamond, Ocean Spray, and Land O'Lakes are well-known cooperatives.

Accepted Answer

A) True 
 B)False

Question 6

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 7

A closed corporation is one whose stock is held by a few people and is not available to the general public.

Accepted Answer

A) True 
 B)False

Question 8

Hidden Valley Communications, Inc., located in a remote area of Utah, made a special device that was used in LTE phones. After three years of local operations, the company that employed 4,000 people was planning to close its Utah operation and move the assembly offshore. Under the direction of a financial services company that financed the deal, the employees agreed to become owners of the company and continue to operate the business. The business concept that describes this arrangement is:

Accepted Answer

A)  IPO (initial public offering). 
B)  LBO (leveraged buyout). 
C)  EPO (equity public offering). 
D)  HM (horizontal merger). 
A)  IPO (initial public offering). 
B)  LBO (leveraged buyout). 
C)  EPO (equity public offering). 
D)  HM (horizontal merger).

Question 9

Which of the following statements about operating a U.S.-based franchise in a foreign country is most accurate?

Accepted Answer

A)  U.S.-based franchises are most likely to succeed in a foreign market if they use the same strategies and procedures used by franchises in the United States. 
B)  There are limited opportunities for U.S.-based franchises to open in foreign countries because, aside from Canada, Mexico, and a small number of European countries, most foreign nations do not allow American-owned franchises to operate within their borders. 
C)  The operating costs for franchises in foreign countries may be fairly high, but chances for success are quite good, because competition is likely to be less intense and the customer base in many foreign countries is expanding. 
D)  It is difficult for U.S.-based franchises to succeed in most foreign countries because the low incomes of most households in these countries result in weak demand. 
A)  U.S.-based franchises are most likely to succeed in a foreign market if they use the same strategies and procedures used by franchises in the United States. 
B)  There are limited opportunities for U.S.-based franchises to open in foreign countries because, aside from Canada, Mexico, and a small number of European countries, most foreign nations do not allow American-owned franchises to operate within their borders. 
C)  The operating costs for franchises in foreign countries may be fairly high, but chances for success are quite good, because competition is likely to be less intense and the customer base in many foreign countries is expanding. 
D)  It is difficult for U.S.-based franchises to succeed in most foreign countries because the low incomes of most households in these countries result in weak demand.

Question 10

A limited partnership refers to a partnership set up for a temporary purpose, such as a real estate development project.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements about the operation of a corporation is correct?

Accepted Answer

A)  A corporation receives its charter from a state government. 
B)  A corporate charter automatically expires in 99 years and must be renewed if the corporation wants to remain in business. 
C)  Owners of a corporation have unlimited liability for any claims against their company. 
D)  A corporation tends to be much easier to set up than a sole proprietorship or partnership. 
A)  A corporation receives its charter from a state government. 
B)  A corporate charter automatically expires in 99 years and must be renewed if the corporation wants to remain in business. 
C)  Owners of a corporation have unlimited liability for any claims against their company. 
D)  A corporation tends to be much easier to set up than a sole proprietorship or partnership.

Question 12

According to the Uniform Partnership Act, the three key elements of any general partnership are (1) shares of stock to represent ownership, (2) limited liability, and (3) ease of ownership transfer.

Accepted Answer

A) True 
 B)False

Question 13

It is impossible to run a franchise completely from home.

Accepted Answer

A) True 
 B)False

Question 14

Public utilities are examples of quasi-public corporations.

Accepted Answer

A) True 
 B)False

Question 15

_____________ is by far the most popular target for American franchisors seeking to establish franchises in other countries.

Accepted Answer

A)  Canada 
B)  Mexico 
C)  Great Britain 
D)  Japan 
A)  Canada 
B)  Mexico 
C)  Great Britain 
D)  Japan

Question 16

The form of business ownership best suited to raising large amounts of money for expansion is the:

Accepted Answer

A)  sole proprietorship. 
B)  partnership. 
C)  corporation. 
D)  cooperative. 
A)  sole proprietorship. 
B)  partnership. 
C)  corporation. 
D)  cooperative.

Question 17

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 18

Marco is a franchisee with Daggies, a chain of sandwich shops. His business was doing well until several Daggies franchisees got in trouble and were forced to close their shops. Soon afterward, Marco's business deteriorated and he too was forced to close. This is an example of:

Accepted Answer

A)  an economic shakeout at work. 
B)  the coattail effect. 
C)  the law of diminishing returns. 
D)  management by exception. 
A)  an economic shakeout at work. 
B)  the coattail effect. 
C)  the law of diminishing returns. 
D)  management by exception.

Question 19

In order to protect all parties and minimize misunderstandings among partners, all terms of the partnership should be spelled out in writing.

Accepted Answer

A) True 
 B)False

Question 20

Franchisors may send reverse royalties to franchisees who:

Accepted Answer

A)  have not yet created their own website. 
B)  feel their sales have been hurt by the franchisor's Internet sales. 
C)  are using e-commerce to expand their sales territory. 
D)  desire to streamline their communication with employees, customers, and vendors. 
A)  have not yet created their own website. 
B)  feel their sales have been hurt by the franchisor's Internet sales. 
C)  are using e-commerce to expand their sales territory. 
D)  desire to streamline their communication with employees, customers, and vendors.

Exam 5: How to Form a Business

Stockholders in a corporation have limited liability.

A good reason why partners should spell out the details of their partnership arrangements in writing is:

A separation between ownership and management is most likely to occur in a:

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

The companies Blue Diamond, Ocean Spray, and Land O'Lakes are well-known cooperatives.

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

A closed corporation is one whose stock is held by a few people and is not available to the general public.

Which of the following statements about operating a U.S.-based franchise in a foreign country is most accurate?

A limited partnership refers to a partnership set up for a temporary purpose, such as a real estate development project.

Which of the following statements about the operation of a corporation is correct?

According to the Uniform Partnership Act, the three key elements of any general partnership are (1) shares of stock to represent ownership, (2) limited liability, and (3) ease of ownership transfer.

It is impossible to run a franchise completely from home.

Public utilities are examples of quasi-public corporations.

_____________ is by far the most popular target for American franchisors seeking to establish franchises in other countries.

The form of business ownership best suited to raising large amounts of money for expansion is the:

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

Marco is a franchisee with Daggies, a chain of sandwich shops. His business was doing well until several Daggies franchisees got in trouble and were forced to close their shops. Soon afterward, Marco's business deteriorated and he too was forced to close. This is an example of:

In order to protect all parties and minimize misunderstandings among partners, all terms of the partnership should be spelled out in writing.

Franchisors may send reverse royalties to franchisees who:

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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