Question 1

The purpose of a conglomerate merger is to diversify operations and investments.

Accepted Answer

A) True 
 B)False

Question 2

One difference between partnerships and sole proprietorships is that partnerships:

Accepted Answer

A)  take less work to form. 
B)  are managed by an elected board of directors. 
C)  have the advantage of limited liability. 
D)  have a greater chance of long-term survival due to the accountability of each partner to the other. 
A)  take less work to form. 
B)  are managed by an elected board of directors. 
C)  have the advantage of limited liability. 
D)  have a greater chance of long-term survival due to the accountability of each partner to the other.

Question 3

A horizontal merger refers to a merger between two companies that serve entirely different markets.

Accepted Answer

A) True 
 B)False

Question 4

Stockholders in a corporation exert a significant degree of control over the company's daily operations.

Accepted Answer

A) True 
 B)False

Question 5

An advantage of corporations is their ability to attract good talent by offering stock options and other employee benefits.

Accepted Answer

A) True 
 B)False

Question 6

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)  are 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)  are the least risky form of business ownership. 
D)  must receive a state charter before they can legally conduct business.

Question 7

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

Accepted Answer

A)  taxed as income for the business, but 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 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 8

A few years back, your friends who are horse fanatics inherited several acres of land that they turned into a retirement haven for race horses. Peaceful Pastures was recently incorporated as a limited liability company. The members are reevaluating this form of ownership. Unlike an S corporation, they now pay self-employment taxes on all company profits-not just on the salaries they pay themselves.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is an advantage of a partnership?

Accepted Answer

A)  Ease of starting and ending the business 
B)  Unlimited liability 
C)  Shared management and pooled skills 
D)  Little time commitment 
A)  Ease of starting and ending the business 
B)  Unlimited liability 
C)  Shared management and pooled skills 
D)  Little time commitment

Question 10

Twenty-six years ago, several small vineyard owners in California joined voluntarily to market their grapes and wine in an attempt to get better prices. Over the years they expanded the organization to include other services such as buying and selling farm supplies and equipment and providing financial and technical services. The arrangement established by these vineyard owners is an example of a(n):

Accepted Answer

A)  closed corporation. 
B)  joint venture. 
C)  limited agricultural partnership. 
D)  farm cooperative. 
A)  closed corporation. 
B)  joint venture. 
C)  limited agricultural partnership. 
D)  farm cooperative.

Question 11

Continental Foods is considering a conglomerate merger with a company that makes storage solutions. A likely reason is:

Accepted Answer

A)  expand its market share. 
B)  develop spin-off companies. 
C)  diversification. 
D)  meet the requirements to convert to a limited liability company. 
A)  expand its market share. 
B)  develop spin-off companies. 
C)  diversification. 
D)  meet the requirements to convert to a limited liability company.

Question 12

The debts of a business operated as a sole proprietorship are considered to be the personal debts of the owner of the business.

Accepted Answer

A) True 
 B)False

Question 13

When comparing general partnerships to sole proprietorships, an advantage of partnerships is that they:

Accepted Answer

A)  are less risky, because each partner is responsible for only a specified fraction of the firm's debts. 
B)  are easier to terminate. 
C)  cost less to organize. 
D)  give the firm a stronger financial foundation. 
A)  are less risky, because each partner is responsible for only a specified fraction of the firm's debts. 
B)  are easier to terminate. 
C)  cost less to organize. 
D)  give the firm a stronger financial foundation.

Question 14

The corporation is the most common form of business ownership.

Accepted Answer

A) True 
 B)False

Question 15

In today's economy, only large business enterprises should operate as corporations.

Accepted Answer

A) True 
 B)False

Question 16

In the Adapting to Change box, digital franchising is an impossible feat and could not be successful.

Accepted Answer

A) True 
 B)False

Question 17

Halle wants to start a business. She has two goals. First, given her limited personal wealth and eagerness to get started, she wants to get her business up and running with the least possible hassle and expense. Second, she wants to minimize her personal risk in the event that her company experiences difficulties. If Halle chooses a sole proprietorship, she would:

Accepted Answer

A)  achieve both goals since this form of ownership is both the easiest to form and the least risky. 
B)  meet her first goal since sole proprietorships are easy and inexpensive to form. However, she would expose herself to personal risk because owners of sole proprietorships have unlimited liability. 
C)  not achieve either goal since proprietorships are both costly to set up and subject to unlimited liability. 
D)  achieve her second goal, since the owners of sole proprietorships are legally protected from losing more than the amount they invest in their company. However, she would find that the start-up costs would be higher than if she had incorporated her business. 
A)  achieve both goals since this form of ownership is both the easiest to form and the least risky. 
B)  meet her first goal since sole proprietorships are easy and inexpensive to form. However, she would expose herself to personal risk because owners of sole proprietorships have unlimited liability. 
C)  not achieve either goal since proprietorships are both costly to set up and subject to unlimited liability. 
D)  achieve her second goal, since the owners of sole proprietorships are legally protected from losing more than the amount they invest in their company. However, she would find that the start-up costs would be higher than if she had incorporated her business.

Question 18

Setting up a partnership under the terms of a written agreement is a bad idea, because written agreements tend to be too inflexible and impersonal.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

A partner (owner) who invests money in a business does not take an active role in managing the operation, and is only subject to losing the funds he/she invested.

Accepted Answer

A)  implied partner. 
B)  limited partner. 
C)  partial partner. 
D)  corporate partner. 
A)  implied partner. 
B)  limited partner. 
C)  partial partner. 
D)  corporate partner.

Exam 5: How to Form a Business

The purpose of a conglomerate merger is to diversify operations and investments.

One difference between partnerships and sole proprietorships is that partnerships:

A horizontal merger refers to a merger between two companies that serve entirely different markets.

Stockholders in a corporation exert a significant degree of control over the company's daily operations.

An advantage of corporations is their ability to attract good talent by offering stock options and other employee benefits.

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

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

Which of the following is an advantage of a partnership?

Continental Foods is considering a conglomerate merger with a company that makes storage solutions. A likely reason is:

The debts of a business operated as a sole proprietorship are considered to be the personal debts of the owner of the business.

When comparing general partnerships to sole proprietorships, an advantage of partnerships is that they:

The corporation is the most common form of business ownership.

In today's economy, only large business enterprises should operate as corporations.

In the Adapting to Change box, digital franchising is an impossible feat and could not be successful.

Setting up a partnership under the terms of a written agreement is a bad idea, because written agreements tend to be too inflexible and impersonal.

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

A partner (owner) who invests money in a business does not take an active role in managing the operation, and is only subject to losing the funds he/she invested.

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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