Question 1

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 2

An alien corporation does business abroad but is chartered in the U.S.

Accepted Answer

A) True 
 B)False

Question 3

One of the major advantages for the franchisee is instant business name recognition and important management assistance from the franchisor.

Accepted Answer

A) True 
 B)False

Question 4

What is a limited liability company (LLC)? How does it compare to an S corporation? What are the major advantages and disadvantages of an LLC?

Accepted Answer

A limited liability company (LLC)is a re

Question 5

Marilyn paid a sizeable franchise fee to obtain a Fontmaster Printers franchise in Cleveland,Ohio.With the franchise fee behind her,she can look forward to using her creative talents to make her print shop different and more attractive than other Fontmaster shops in the Cleveland area.

Accepted Answer

A) True 
 B)False

Question 6

In a limited partnership,the general partners should encourage the limited partners to take a more active role in the operations of the business.After all,the limited partner has comparable liability in the business,even though he/she may not be a partner for as long a period of time as the general partners.

Accepted Answer

A) True 
 B)False

Question 7

The "coattail effect" refers to inevitable repercussions on your business if a fellow franchisee should fail.

Accepted Answer

A) True 
 B)False

Question 8

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 9

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 10

_____________ 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 11

Which of the following statements is the most accurate? A foreign corporation:

Accepted Answer

A) Does business in one or more states,but is chartered in another state. 
B) Is 50% owned by individuals or companies from another nation. 
C) Is headquartered in another nation. 
D) Is the same thing as a multinational corporation. 
A) Does business in one or more states,but is chartered in another state. 
B) Is 50% owned by individuals or companies from another nation. 
C) Is headquartered in another nation. 
D) Is the same thing as a multinational corporation.

Question 12

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.Franchises in foreign countries can be more expensive,but this is usually counterbalanced by less competition and a rapidly expanding consumer base. 
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.Franchises in foreign countries can be more expensive,but this is usually counterbalanced by less competition and a rapidly expanding consumer base.

Question 13

In a leveraged buyout,the managers of a firm,its employees,or other investors:

Accepted Answer

A) Move the company elsewhere and start over. 
B) Obtain the assets of the company through bankruptcy proceedings. 
C) Borrow funds to buy out the firm's stockholders. 
D) Negotiate a merger with another firm to create a conglomerate. 
A) Move the company elsewhere and start over. 
B) Obtain the assets of the company through bankruptcy proceedings. 
C) Borrow funds to buy out the firm's stockholders. 
D) Negotiate a merger with another firm to create a conglomerate.

Question 14

Which of the following statements about S corporations is most accurate?

Accepted Answer

A) The major attraction of S corporations is that they avoid the problem of double taxation. 
B) S Corporations are similar to C corporations,except that the majority of owners are foreign investors. 
C) Any corporation willing to pay the necessary fees and fill out the required paperwork can become an S Corporation. 
D) Only large corporations with operations in more than one state can qualify to be classified as S corporations. 
A) The major attraction of S corporations is that they avoid the problem of double taxation. 
B) S Corporations are similar to C corporations,except that the majority of owners are foreign investors. 
C) Any corporation willing to pay the necessary fees and fill out the required paperwork can become an S Corporation. 
D) Only large corporations with operations in more than one state can qualify to be classified as S corporations.

Question 15

A multinational corporation is a firm that operates in several countries.

Accepted Answer

A) True 
 B)False

Question 16

The S corporation is likely to be less popular in the future because:

Accepted Answer

A) Congress repealed the limited liability protection of S corporations and limited them to companies with earnings of less than $3 million per year. 
B) Limited liability companies,which do not have the restrictive eligibility requirements of S corporations and offer greater flexibility in the choice of tax treatment,are now legal in all 50 states. 
C) Many states significantly increased the annual fee that S corporations must pay to maintain their tax status,thus eliminating the financial advantages of this form of ownership. 
D) S corporations have been made illegal in several states as a reaction to widespread abuse of the special benefits available to this type of business. 
A) Congress repealed the limited liability protection of S corporations and limited them to companies with earnings of less than $3 million per year. 
B) Limited liability companies,which do not have the restrictive eligibility requirements of S corporations and offer greater flexibility in the choice of tax treatment,are now legal in all 50 states. 
C) Many states significantly increased the annual fee that S corporations must pay to maintain their tax status,thus eliminating the financial advantages of this form of ownership. 
D) S corporations have been made illegal in several states as a reaction to widespread abuse of the special benefits available to this type of business.

Question 17

A ______________ merger unites firms at different stages of related businesses.

Accepted Answer

A) vertical 
B) horizontal 
C) diagonal 
D) conglomerate 
A) vertical 
B) horizontal 
C) diagonal 
D) conglomerate

Question 18

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(n):

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.

Question 19

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 20

A major objective of a leveraged buyout is to enable investors to gain control of a company by issuing new shares of ownership,thus minimizing the use of debt.

Accepted Answer

A) True 
 B)False

Exam 5: How to Form a Business

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

An alien corporation does business abroad but is chartered in the U.S.

One of the major advantages for the franchisee is instant business name recognition and important management assistance from the franchisor.

What is a limited liability company (LLC)? How does it compare to an S corporation? What are the major advantages and disadvantages of an LLC?

Marilyn paid a sizeable franchise fee to obtain a Fontmaster Printers franchise in Cleveland,Ohio.With the franchise fee behind her,she can look forward to using her creative talents to make her print shop different and more attractive than other Fontmaster shops in the Cleveland area.

The "coattail effect" refers to inevitable repercussions on your business if a fellow franchisee should fail.

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

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

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

Which of the following statements is the most accurate? A foreign corporation:

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

In a leveraged buyout,the managers of a firm,its employees,or other investors:

Which of the following statements about S corporations is most accurate?

A multinational corporation is a firm that operates in several countries.

The S corporation is likely to be less popular in the future because:

A ______________ merger unites firms at different stages of related businesses.

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(n):

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 major objective of a leveraged buyout is to enable investors to gain control of a company by issuing new shares of ownership,thus minimizing the use of debt.

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding How Economics Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

Entrepreneurship and Starting a Small Business

Management and Leadership

Adapting Organizations to Todays Markets

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employee-Management Issues and Relationships

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

Bonus A: Using Technology to Manage Information

Bonus B: Managing Risk

Bonus C: Managing Your Personal Finances

Appendix: Working Within the Legal Environment

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