Question 1

Which of the following statements about partnerships is most accurate?

Accepted Answer

A)  A partnership is a corporation with fewer than 100 owners. 
B)  A major advantage of a partnership is that it offers all owners limited liability. 
C)  A major drawback of a partnership is that it is difficult to terminate. 
D)  Partnerships are taxed at the lowest corporate tax rate. 
A)  A partnership is a corporation with fewer than 100 owners. 
B)  A major advantage of a partnership is that it offers all owners limited liability. 
C)  A major drawback of a partnership is that it is difficult to terminate. 
D)  Partnerships are taxed at the lowest corporate tax rate.

Question 2

In rural areas electrical power is often sold by ____________ that take advantage of the government's policy to sell them electricity at wholesale rates.

Accepted Answer

A)  franchises 
B)  limited partnerships 
C)  mutual funds 
D)  cooperatives 
A)  franchises 
B)  limited partnerships 
C)  mutual funds 
D)  cooperatives

Question 3

One reason that a firm may choose to merge or acquire another company would be diversity of products or services.

Accepted Answer

A) True 
 B)False

Question 4

An evaluation of franchising would conclude that this type of arrangement:

Accepted Answer

A)  has become the dominant form of business organization in the United States because it has many advantages and almost no disadvantages. 
B)  appeals to people who want to own a business, but are not comfortable starting a company from scratch. 
C)  has a much higher risk of failure than independent companies. 
D)  has little chance of success outside the United States because many foreign countries do not allow such arrangements. 
A)  has become the dominant form of business organization in the United States because it has many advantages and almost no disadvantages. 
B)  appeals to people who want to own a business, but are not comfortable starting a company from scratch. 
C)  has a much higher risk of failure than independent companies. 
D)  has little chance of success outside the United States because many foreign countries do not allow such arrangements.

Question 5

Compared to sole proprietorships, partnerships offer the advantage of shared management and pooled knowledge.

Accepted Answer

A) True 
 B)False

Question 6

Delaware is a popular state in which to seek incorporation due to its reduced costs and other perks.

Accepted Answer

A) True 
 B)False

Question 7

If a franchisee decides he wants out of the business, he is free to close up shop or sell the business, just as if he were a sole proprietor or partnership outside of a franchise arrangement.

Accepted Answer

A) True 
 B)False

Question 8

The form of business ownership that usually requires the most detailed record keeping is the:

Accepted Answer

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

Question 9

Eric wants to start a business. He is attracted to the idea of being his own boss, and wants to get started with a minimum of expense and hassle. He is confident in his abilities, and the market he can draw from, so he is not particularly worried about financial risks. All of these factors suggest that Eric may favor starting his business as a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 10

The strategy of a leveraged buyout is used when employee talent is at a minimum.

Accepted Answer

A) True 
 B)False

Question 11

Limited partnerships are just like general partnerships, except that they are partners for a limited time period.

Accepted Answer

A) True 
 B)False

Question 12

The most popular type of business for franchising is:

Accepted Answer

A)  consumer wholesale firms. 
B)  restaurants. 
C)  specialty steel manufacturing. 
D)  medical services. 
A)  consumer wholesale firms. 
B)  restaurants. 
C)  specialty steel manufacturing. 
D)  medical services.

Question 13

The sole proprietorship form of ownership tends to be attractive to people who want to invest in a company without taking an active role in management.

Accepted Answer

A) True 
 B)False

Question 14

If you want to sell your ownership in a publicly traded corporation, you find someone willing to buy your shares.

Accepted Answer

A) True 
 B)False

Question 15

It is correct to say that if a franchisor expects a 6% royalty fee on revenue, the franchisor earns 6 cents on each dollar of revenue the franchisee generates.

Accepted Answer

A) True 
 B)False

Question 16

Nutty Dough is a small chain of donut shops currently owned and operated by a group of seven partners. The owners think that their chain has the potential for rapid growth, but several of the partners are concerned about the growing financial risks that will accompany this growth. One way the partners could deal with this problem would be to incorporate their business.

Accepted Answer

A) True 
 B)False

Question 17

One disadvantage of _________ is the initial cost of formation.

Accepted Answer

A)  corporations 
B)  general partnerships 
C)  sole proprietorships 
D)  limited partnerships 
A)  corporations 
B)  general partnerships 
C)  sole proprietorships 
D)  limited partnerships

Question 18

A recent study showed that partnerships are more likely to fail than sole proprietorships.

Accepted Answer

A) True 
 B)False

Question 19

A disadvantage of corporations is that an owner must get the approval of all other owners before selling his or her interest in the firm to another investor.

Accepted Answer

A) True 
 B)False

Question 20

Trevor and Tyler own all the stock in the Double T Corporation. The stock of this corporation is not sold to the general public. Trevor and Tyler own a:

Accepted Answer

A)  limited liability company. 
B)  master limited partnership. 
C)  alien corporation. 
D)  closed corporation. 
A)  limited liability company. 
B)  master limited partnership. 
C)  alien corporation. 
D)  closed corporation.

Exam 5: How to Form a Business

Which of the following statements about partnerships is most accurate?

In rural areas electrical power is often sold by ____________ that take advantage of the government's policy to sell them electricity at wholesale rates.

One reason that a firm may choose to merge or acquire another company would be diversity of products or services.

An evaluation of franchising would conclude that this type of arrangement:

Compared to sole proprietorships, partnerships offer the advantage of shared management and pooled knowledge.

Delaware is a popular state in which to seek incorporation due to its reduced costs and other perks.

If a franchisee decides he wants out of the business, he is free to close up shop or sell the business, just as if he were a sole proprietor or partnership outside of a franchise arrangement.

The form of business ownership that usually requires the most detailed record keeping is the:

The strategy of a leveraged buyout is used when employee talent is at a minimum.

Limited partnerships are just like general partnerships, except that they are partners for a limited time period.

The most popular type of business for franchising is:

The sole proprietorship form of ownership tends to be attractive to people who want to invest in a company without taking an active role in management.

If you want to sell your ownership in a publicly traded corporation, you find someone willing to buy your shares.

It is correct to say that if a franchisor expects a 6% royalty fee on revenue, the franchisor earns 6 cents on each dollar of revenue the franchisee generates.

One disadvantage of _________ is the initial cost of formation.

A recent study showed that partnerships are more likely to fail than sole proprietorships.

A disadvantage of corporations is that an owner must get the approval of all other owners before selling his or her interest in the firm to another investor.

Trevor and Tyler own all the stock in the Double T Corporation. The stock of this corporation is not sold to the general public. Trevor and Tyler own a:

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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