Question 1

Stockholders in a corporation have limited liability.

Accepted Answer

A) True 
 B)False  True

Question 2

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

Accepted Answer

A) True 
 B)False  False

Question 3

Payton recently purchased 100 shares of stock in Game Guys, Inc. Payton is a(n)________ of this company.

Accepted Answer

A)  owner 
B)  manager 
C)  creditor 
D)  partner 
A)  owner 
B)  manager 
C)  creditor 
D)  partner A

Question 4

A ________ is an organization that is owned and controlled by the people who use it-producers, consumers, and workers with similar needs pool their resources for mutual gain.

Accepted Answer

A)  corporation 
B)  limited partnership 
C)  mutual fund 
D)  cooperative 
A)  corporation 
B)  limited partnership 
C)  mutual fund 
D)  cooperative

Question 5

Corporations are easy to start and easy to terminate.

Accepted Answer

A) True 
 B)False

Question 6

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

Question 7

The stockholders in a corporation elect a board of directors to oversee the company's major policy issues.

Accepted Answer

A) True 
 B)False

Question 8

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 9

If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate.

Accepted Answer

A) True 
 B)False

Question 10

A conventional corporation is a state-chartered legal entity, with authority to act and have liability separate from its owners.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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 13

One advantage of a partnership is that there is a simple process for partners to terminate their business.

Accepted Answer

A) True 
 B)False

Question 14

A company that loses its status as an S corporation may not reelect this status for at least 5 years.

Accepted Answer

A) True 
 B)False

Question 15

The companies Ace Hardware, Blue Diamond, and Sunkist are well-known cooperatives.

Accepted Answer

A) True 
 B)False

Question 16

One reason many companies do not organize themselves as an S corporation is that this form of business

Accepted Answer

A)  is subject to a higher tax rate than a general partnership. 
B)  does not provide owners with limited liability. 
C)  has a special eligibility restriction, which many businesses are unable to meet. 
D)  is much more difficult to set up than C corporations. 
A)  is subject to a higher tax rate than a general partnership. 
B)  does not provide owners with limited liability. 
C)  has a special eligibility restriction, which many businesses are unable to meet. 
D)  is much more difficult to set up than C corporations.

Question 17

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 18

Which of the following people would be most interested in participating in a business organized as a cooperative?

Accepted Answer

A)  Eric is interested in the idea of combining his time and resources with others to operate a business providing a good or service that they all will use. 
B)  Rose looks to be an owner of a business and share in its profits, but does not want to take an active role in managing the company or participating in its daily operations. 
C)  Matteo wants to work for a government-owned business because he believes government ownership ensures a more equitable distribution of income and wealth. 
D)  Juliana prefers to work for a charitable organization that emphasizes helping people who are less fortunate than she is. 
A)  Eric is interested in the idea of combining his time and resources with others to operate a business providing a good or service that they all will use. 
B)  Rose looks to be an owner of a business and share in its profits, but does not want to take an active role in managing the company or participating in its daily operations. 
C)  Matteo wants to work for a government-owned business because he believes government ownership ensures a more equitable distribution of income and wealth. 
D)  Juliana prefers to work for a charitable organization that emphasizes helping people who are less fortunate than she is.

Question 19

The three major forms of business ownership in the U.S. are sole proprietorships, partnerships, and corporations.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 5: How to Form a Business

Stockholders in a corporation have limited liability.

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

Payton recently purchased 100 shares of stock in Game Guys, Inc. Payton is a(n)________ of this company.

A ________ is an organization that is owned and controlled by the people who use it-producers, consumers, and workers with similar needs pool their resources for mutual gain.

Corporations are easy to start and easy to terminate.

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

The stockholders in a corporation elect a board of directors to oversee the company's major policy issues.

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

If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate.

A conventional corporation is a state-chartered legal entity, with authority to act and have liability separate from its owners.

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

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

One advantage of a partnership is that there is a simple process for partners to terminate their business.

A company that loses its status as an S corporation may not reelect this status for at least 5 years.

The companies Ace Hardware, Blue Diamond, and Sunkist are well-known cooperatives.

One reason many companies do not organize themselves as an S corporation is that this form of business

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.

Which of the following people would be most interested in participating in a business organized as a cooperative?

The three major forms of business ownership in the U.S. are sole proprietorships, partnerships, and corporations.

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.

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 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

Working Within the Legal Environment

Using Technology to Manage Information

Managing Risk

Managing Personal Finances

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