Question 1

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 (partner)

Question 2

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 3

When one of the owners of a corporation dies, the corporation legally ceases to exist.

Accepted Answer

A) True 
 B)False

Question 4

At one time there were many farm cooperatives, but more recently other forms of business ownership have replaced them.

Accepted Answer

A) True 
 B)False

Question 5

Joe Jackson operates a sole proprietorship, but he is in poor health and may be unable to continue running the business. If Joe becomes incapacitated, his business:

Accepted Answer

A)  automatically continues under new management as a sole proprietorship. 
B)  automatically converts into a public corporation with stock sold to interested investors. 
C)  ceases to exist unless sold or taken over by Joe's heirs. 
D)  becomes the property of the most senior employee who wishes to continue operating the firm. 
A)  automatically continues under new management as a sole proprietorship. 
B)  automatically converts into a public corporation with stock sold to interested investors. 
C)  ceases to exist unless sold or taken over by Joe's heirs. 
D)  becomes the property of the most senior employee who wishes to continue operating the firm.

Question 6

The strategy of investors who are attempting a leveraged buyout is to:

Accepted Answer

A)  shape up the company for quick resale. 
B)  use debt to finance the buyout of the firm's stockholders and gain control of the firm themselves. 
C)  secure ownership of all of the existing stock in a company by issuing and selling large amounts of new stock. 
D)  use investment tax credits from the government to acquire all of the physical assets owned by the firm. 
A)  shape up the company for quick resale. 
B)  use debt to finance the buyout of the firm's stockholders and gain control of the firm themselves. 
C)  secure ownership of all of the existing stock in a company by issuing and selling large amounts of new stock. 
D)  use investment tax credits from the government to acquire all of the physical assets owned by the firm.

Question 7

One reason franchises have become so popular is that this arrangement provides the franchisee with:

Accepted Answer

A)  a nationally recognized name and product. 
B)  a low cost way to start a business. 
C)  limited liability. 
D)  the right to retain all profits earned by their franchise. 
A)  a nationally recognized name and product. 
B)  a low cost way to start a business. 
C)  limited liability. 
D)  the right to retain all profits earned by their franchise.

Question 8

_____________ are companies that are similar to S corporations but are not restricted with similar eligibility requirements.

Accepted Answer

A)  Regulated equity companies 
B)  Corporate cooperatives 
C)  Limited liability companies 
D)  Private drawing companies 
A)  Regulated equity companies 
B)  Corporate cooperatives 
C)  Limited liability companies 
D)  Private drawing companies

Question 9

Franchising in global markets has demonstrated that high operating costs are counterbalanced by high profit opportunities.

Accepted Answer

A) True 
 B)False

Question 10

The organization structure of a corporation allows for stockholders to exert a significant degree of control over the company's daily operations.

Accepted Answer

A) True 
 B)False

Question 11

In a franchise arrangement, ownership remains in the hands of the franchisor.

Accepted Answer

A) True 
 B)False

Question 12

A horizontal merger refers to a merger between two companies in the same industry, and serving the same markets.

Accepted Answer

A) True 
 B)False

Question 13

A major advantage of S corporations is that they:

Accepted Answer

A)  can have more stockholders than a C corporation. 
B)  can operate in foreign nations as if they were domestic corporations. 
C)  require less paperwork to set up than a C corporation does. 
D)  avoid the problem of double taxation associated with conventional corporations. 
A)  can have more stockholders than a C corporation. 
B)  can operate in foreign nations as if they were domestic corporations. 
C)  require less paperwork to set up than a C corporation does. 
D)  avoid the problem of double taxation associated with conventional corporations.

Question 14

A merger between two businesses in different stages of related businesses is known as a vertical merger.

Accepted Answer

A) True 
 B)False

Question 15

One disadvantage of a limited liability company is that it:

Accepted Answer

A)  requires all earnings of the business be taxed at the corporate rate. 
B)  has a limited life span. 
C)  requires the owners to divide up profits and losses in a fixed proportion. 
D)  has a more restrictive ownership requirement than S corporations. 
A)  requires all earnings of the business be taxed at the corporate rate. 
B)  has a limited life span. 
C)  requires the owners to divide up profits and losses in a fixed proportion. 
D)  has a more restrictive ownership requirement than S corporations.

Question 16

A quasi-public corporation is a corporation chartered by the government as an approved monopoly to perform services to the general public.

Accepted Answer

A) True 
 B)False

Question 17

Emily wants to open a chain of hair styling salons and hopes to attract investors to help finance growth. She considered forming a C corporation, but wants to have more flexibility about how the new business will be taxed. She also wants to offer investors/owners limited liability. Emily can satisfy her objectives by setting up a(n):

Accepted Answer

A)  limited liability company. 
B)  S corporation. 
C)  alien corporation. 
D)  general partnership. 
A)  limited liability company. 
B)  S corporation. 
C)  alien corporation. 
D)  general partnership.

Question 18

A(n) ___________ is an arrangement whereby someone with a proven idea for a business sells the rights to use the business model, to sell a product or service to others in a given territory.

Accepted Answer

A)  conditional grant 
B)  franchise agreement 
C)  trade contract 
D)  extended ownership agreement 
A)  conditional grant 
B)  franchise agreement 
C)  trade contract 
D)  extended ownership agreement

Question 19

What is a C corporation? What are the major advantages and disadvantages of this form of business ownership?

Accepted Answer

The C corporation is a state-chartered l

Question 20

Few people today start their own business.

Accepted Answer

A) True 
 B)False

Exam 5: How to Form a Business

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.

A ____________ is two firms combining to form one company.

When one of the owners of a corporation dies, the corporation legally ceases to exist.

At one time there were many farm cooperatives, but more recently other forms of business ownership have replaced them.

Joe Jackson operates a sole proprietorship, but he is in poor health and may be unable to continue running the business. If Joe becomes incapacitated, his business:

The strategy of investors who are attempting a leveraged buyout is to:

One reason franchises have become so popular is that this arrangement provides the franchisee with:

_____________ are companies that are similar to S corporations but are not restricted with similar eligibility requirements.

Franchising in global markets has demonstrated that high operating costs are counterbalanced by high profit opportunities.

The organization structure of a corporation allows for stockholders to exert a significant degree of control over the company's daily operations.

In a franchise arrangement, ownership remains in the hands of the franchisor.

A horizontal merger refers to a merger between two companies in the same industry, and serving the same markets.

A major advantage of S corporations is that they:

A merger between two businesses in different stages of related businesses is known as a vertical merger.

One disadvantage of a limited liability company is that it:

A quasi-public corporation is a corporation chartered by the government as an approved monopoly to perform services to the general public.

A(n) ___________ is an arrangement whereby someone with a proven idea for a business sells the rights to use the business model, to sell a product or service to others in a given territory.

What is a C corporation? What are the major advantages and disadvantages of this form of business ownership?

Few people today start their own business.

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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