Deck 5: Forms of Business Ownership and Organization

Question 1

A(n)___________ is a written document that provides an orderly statement of a company's goals,the methods by which it intends to achieve these goals,and the standards by which it will measure its achievements.

A)mission statement
B)executive summary
C)business incubator
D)business plan

Answer 1

D

Question 2

Which of these uses their own capital supplemented with government loans to invest in small businesses?

A)Franchisors
B)Small Business Investment Companies (SBICs)
C)Joint ventures
D)Freemium business models

Answer 2

B

Question 3

How do small businesses contribute to the U.S economy?

A)By creating job opportunities
B)By refraining from market competition
C)By paying a professional tax higher than other businesses
D)By adhering to traditional methods of operation

Answer 3

A

Question 4

Which of the following is a reason for Krispy Kreme's near failure?

A)Consumers felt that its employees were incompetent.
B)The company lacked funding for its development.
C)The quality of its donuts was bad.
D)Consumers preferred its competitors' products.

Question 5

Sumi is the owner of a very small technology start-up.She shares clerical staff,computers,and other business services with other small business owners.Sumi is part of a:

A)business incubator.
B)venture capital company.
C)joint venture.
D)microloan company.

Question 6

Yashmi wants to start an event management firm with two of her friends.She decides to create a business plan that will help her in securing financing for her firm.Which of the following should she include in the business plan?

A)A list of her previous clients
B)A list of the potential lenders
C)An introduction that includes the objectives of her business
D)A time frame for selling stock to investors

Question 7

Small businesses comprise ______% of all firms.

A)50.5
B)99.9
C)75.8
D)66.7

Question 8

Which of the following is one of the criteria for borrowers to qualify for a Small Business Administration-backed loan?

A)The borrower should not be a financial service provider.
B)The borrower should not be a home-based business.
C)The borrower should be unable to secure conventional commercial financing.
D)The borrower should be a not-for-profit organization that focuses on energy conservation.

Question 9

Why do small-business owners want to determine whether their companies meet the standards for small-business designation? Because:

A)they do not have to pay taxes on their profits.
B)government agencies offer benefits designed to help small businesses compete with larger firms.
C)incorporation is easier for them.
D)banks are more likely to grant them loans.

Question 10

Almost 90% of U.S.farms are owned by _____.

A)the government
B)large corporations
C)individual farmers
D)small corporations

Question 11

While nearly ____ percent of new businesses survive at least two years,about ______ percent make it to the five-year mark.

A)75; 25
B)66; 33
C)80; 20
D)70; 50

Question 12

Who are the largest lenders to small businesses?

A)Commercial banks
B)Retail chains
C)Venture capitalists
D)Investors

Question 13

Traditionally,small businesses tended to be concentrated in the _____ industry.

A)manufacturing
B)retailing
C)wholesaling
D)importing/exporting

Question 14

Small businesses generate over _______% of new jobs.

A)25
B)99
C)75
D)60

Question 15

A business plan for a small business typically contains all of the following EXCEPT _____.

A)a statement of the company's goals
B)an executive summary
C)separate financial and marketing sections
D)a time frame for selling stock to investors

Question 16

Why do many businesses fail during the early years?

A)Niche marketers
B)Inadequate financing
C)Unmotivated owners
D)Poor planning

Question 17

Which of the following statements regarding small businesses,compared to large businesses,is correct?

A)Small businesses are less likely to hire young employees.
B)Small businesses are less likely to develop new products.
C)Small businesses are more likely to be eligible for government loans or for government purchasing programs.
D)Small businesses are more likely to be franchises.

Question 18

How can owners of small businesses can increase their chances of success?

A)If they become an expert in legal,financial,marketing,and other related business areas.
B)If they incorporate their business.
C)If they hire only family members or friends.
D)If they understand their customers.

Question 19

The management of Bank-of-Us Investments wants to create more job opportunities in their city.They believe that the best way to create more jobs is to help people start their own business.They invest a portion of the company's profit,along with money received through government loans,to support people trying to start their own business.Bank-of-Us Investments is an example of:

A)Unit investment trusts (UITs).
B)Small Business Investment Companies (SBICs).
C)Joint ventures.
D)Business incubators.

Question 20

______ is an advantage of a home-based business.

A)Greater visibility to customers
B)Lower costs
C)Less flexibility
D)Isolation

Question 21

Rashmi and Karina opened a restaurant in partnership.Two years later,Karina left the restaurant,and Rashmi discovered that Karina had incurred numerous expenses to their account.These expenses resulted in thousands of dollars' worth of debt for the restaurant.From the following,identify an accurate statement about this situation.

A)Rashmi doesn't have to worry because,according to law,everyone is responsible for his/her own debts.
B)Rashmi doesn't have to worry because business creditors will pursue Karina alone since her signature authorized payments.
C)Business creditors will expect Rashmi to pay at least half the debt since she owns 50% of the business.
D)Business creditors will expect full payment from Rashmi.

Question 22

Adelina is the owner of an electronic repair shop.She creates the marketing strategy for her shop,pays all the required taxes,and is also the only person who enjoys the profits generated by the shop.Adelina's business ownership in this scenario can be regarded as a _____.

A)sole proprietorship
B)partnership
C)corporation
D)franchise

Question 23

The two principal parties in a franchising agreement are the _____.

A)manager and worker
B)franchiser and partners
C)franchisor and franchisee
D)venture capitalist and SBA

Question 24

In exchange for an ownership share,small businesses receive financing from a group of investors known as _____,

A)microloan investors
B)franchisors
C)Small Business Investment Companies
D)venture capitalists

Question 25

Sole proprietorships have all of the following advantages EXCEPT _____.

A)unlimited life
B)ease of formation
C)profits subject only to a single tax
D)ease of liquidation

Question 26

The Small Business Administration (SBA)provides all of the following EXCEPT _____.

A)loan guarantees
B)information and advice through toll-free telephone numbers
C)loans for natural disaster recovery
D)business incubators

Question 27

Franchising offers all of the following advantages EXCEPT _____.

A)a recognizable company name
B)prior performance record
C)training
D)guaranteed level of profitability

Question 28

Which of these is a drawback of franchising?

A)It necessitates the development of new business models for every franchise.
B)It provides no opportunities for expansion.
C)It restricts the business to a single geographical location.
D)It deprives the franchisor of absolute control over his or her business.

Question 29

Although _____ are the most common type of business ownership,the greatest revenues come from _____.

A)sole proprietorships; partnerships
B)sole proprietorships; corporations
C)corporations; partnerships
D)partnerships; corporations

Question 30

Adolpho requires funding for a shopping portal that he launched recently.He wants to secure a government procurement contract to ensure adequate funding.Which of the following organizations can help Adolpho avail the contract?

A)Limited-liability corporation
B)Center for Women's Business Research
C)Small Business Administration
D)International Franchise Association

Question 31

Corporations have all of the following advantages EXCEPT _____.

A)favorable tax treatment
B)limited liability
C)expanded financial capacity
D)limited legal risk

Question 32

Roshni owns Express FoodMart,the franchisee of a local retail shop.Which of the following will be one of Roshni's chief concerns regarding owning the franchise?

A)The franchisor does not provide her with the required supplies.
B)The franchising agreement is too restrictive.
C)The franchise has the benefit of name recognition.
D)The franchisor can negotiate better deals on ingredients,supplies,and real estate,because of its financial strength.

Question 33

One of the disadvantages of partnerships is that:

A)the partners are not covered by life insurance.
B)all partners should have expertise in every area.
C)the partners are exposed to unlimited financial liability.
D)they are difficult to form and dissolve.

Question 34

Which of the following is a benefit of franchising?

A)The failure of one franchise does not affect the brand.
B)It offers several opportunities for the expansion of a business.
C)It does not require any start-up cost.
D)The founder of the business has absolute control over every franchise.

Question 35

The stocks of Novelties-R-Us,a toy store,are completely owned by the Garcias.When the family elected to move from a sole proprietorship to a corporation,the greatest concern was _____.

A)there might be family squabbles
B)how to limit liability
C)choosing work assignments
D)double taxation

Question 36

Which of the following statements regarding franchising is FALSE?

A)Franchises are riskier than other forms of business ownership.
B)Franchisees have the benefit of name recognition.
C)Franchisors provide a wide range of support to franchisees.
D)Benefits for the franchisor include opportunities for expansion that might not otherwise be available.

Question 37

American Foods International,a fast food chain,offers a contractual business arrangement in various countries around the world.This fast food chain will be an example of a(n)international _____.

A)franchise
B)acquisition
C)merger
D)not-for-profit corporation

Question 38

If business owners in a partnership wish to limit liability,they have the option to _____.

A)pledge funds
B)limit expenditure
C)set up a limited-liability partnership
D)dissolve the partnership

Question 39

Which of the following is TRUE of a business with sole proprietorship?

A)It involves several owners.
B)It is difficult to form and dissolve.
C)Its owner has maximum management flexibility.
D)Its owner is exempt from corporate franchise taxes.

Question 40

The franchisor provides all of the following services EXCEPT _____.

A)business training
B)marketing programs
C)name recognition
D)on-site management

Question 41

Bianca owns a company that provides laundry services.She ensures that only her family members are the stockholders of her company.She also allows them to control and manage all of the company's activities.In this scenario,Bianca owns a _____.

A)public corporation
B)closed corporation
C)not-for-profit corporation
D)limited-liability corporation

Question 42

Which of the following statements regarding family-owned businesses is true?

A)Only a small percentage of family-owned businesses survive into the second or third generation.
B)Family-owned companies must submit a written agreement to the state in which it organizes.
C)All family-owned companies must be closed corporations.
D)Family-owned companies are an example of a not-for-profit corporation.

Question 43

Alternatives to private ownership include _____.

A)public ownership and collective ownership
B)employee ownership and foreign corporations
C)foreign corporations and public ownership
D)employee ownership and collective ownership

Question 44

The maximum number of shareholders is limited to _____ for a firm to qualify as a subchapter S corporation.

A)25
B)50
C)75
D)100

Question 45

Mateo is the owner of a small mushroom farm in Pennsylvania.He would like to join hands with other growers to create an organization that will promote and distribute mushrooms.The form of ownership that would be most suited for Mateo and other growers will be a(n)_____.

A)joint venture
B)open corporation
C)government-owned collective
D)cooperative

Question 46

An acquisition occurs when _____.

A)one company purchases the property and assumes the obligations of another company
B)one corporation owns 8% of the stock of another corporation
C)owners of small companies band together to operate their businesses collectively
D)two or more firms combine to form a single company

Question 47

Three members of Santiago's family work at BioTechno,a multi-national drug manufacturer.Each of them owns 5% shares of the company respectively.In fact,most of the employees of BioTechno,like Santiago and his family members,are stockholders of the company.BioTechno can be regarded as a _____.

A)sole proprietorship
B)employee-owned corporation
C)family-owned business
D)partnership

Question 48

Which of the following statements is true regarding employee-owned corporations?

A)The number of employee-owned corporations is declining in the United States.
B)Employee-owned corporations may not publicly trade their stock.
C)Employees buy shares of stock in the company that employs them.
D)Stock prices in employee-owned corporations typically decrease.

Question 49

Luciana is a chief financial officer in a large corporation.She has the full financial authority to make appropriations and authorize expenditures.Luciana is likely to be a member of _____ management.

A)Middle
B)advisory
C)supervisory
D)Top

Question 50

Alejandro is a stockholder in a software consulting firm.He gets a share of the earnings of the firm,on which he has to pay taxes.Moreover,the firm pays taxes on its earnings.As an individual,Alejandro is not legally liable to pay off the debts that might be incurred by the firm.In this scenario,the software consulting firm can be regarded as a _____.

A)sole proprietorship
B)partnership
C)corporation
D)franchise

Question 51

PUR Water is a company that designs and implements innovative water purification solutions using simple and inexpensive methods.All its decision-making focuses on a better environment.While the company manages to make profits,its vision is set beyond financial gains.Its adherence to its goals is verified by a third-party auditor.Which of the following types of corporations does this scenario illustrate?

A)B corporation
B)S corporation
C)Employee-owned corporation
D)Not-for-profit corporation

Question 52

Who elects the board of directors of a corporation?

A)Corporation's employees
B)Bondholders and other creditors
C)Corporate officers
D)Stockholders

Question 53

Which of the following is a function of the board of directors of a corporation?

A)Evaluating the performance of employees
B)Hiring the chief executive officer
C)Assigning specific tasks to employees
D)Maintaining personnel records

Question 54

The arrangement,when a government unit owns and operates an organization,is known as _____.

A)private ownership
B)a cooperative
C)public ownership
D)employee ownership

Question 55

_____ must verify in writing the accuracy of their corporation's financial statements.

A)Board members
B)Stockholders
C)Chief operating officers and chief financial officers
D)Governmental officials

Question 56

Sushma established a corporation in Nebraska,but she recently moved to Colorado where she now conducts her business.What type of corporation does Sushma own?

A)Alien corporation
B)Domestic corporation
C)Foreign corporation
D)National corporation

Question 57

Isabella owns 100 _____ stock of NxtGen Solutions,a software firm.It means that she has voting rights on company decisions at NxtGen Solutions,but only residual claims on the company's assets.

A)preferred
B)principal
C)management
D)common

Question 58

An example of public ownership is:

A)A movie theater
B)The city sewer system
C)A trucking company
D)A television company

Question 59

Brady decides to start a trust-run hospital to help the poor get expensive treatments for free.Which of the following is most likely to be true of the hospital?

A)It has a high profit margin.
B)It issues stock certificates.
C)It pays dividends to owners.
D)It is exempt from corporate taxes.

Question 60

The board of directors usually includes some individuals who are not employed by the corporation.These people are referred to as _____.

A)priority directors
B)outside directors
C)stockholders
D)members of top management

Question 61

Government agencies offer benefits designed to help small businesses compete with larger firms.

Question 62

Walmart,an American retail chain,started doing business in India by forming a _____ with one of India's leading retail business groups.

A)joint venture
B)subsidiary
C)horizontal merger
D)vertical merger

Question 63

Top Gear Comp,a tech firm decides to invest some of its excess cash by acquiring a coffeehouse chain.This would be a _____.

A)conglomerate company
B)vertical merger
C)horizontal merger
D)joint venture

Question 64

Any firm with fewer than 1,000 employees is considered a small business.

Question 65

Direct SBA loans are available in only a few special situations,such as natural disaster recovery and energy conservation.

Question 66

One reason small businesses are so successful is also the reason they might fail-their founders are willing to take a risk.

Question 67

Because of technology and online resources,many small-business start-ups are more competitive.

Question 68

News 24/7,a newspaper group,merged with Alfalah Finance,an investment firm.The two companies merged together to diversify their business and to generate more revenue.This merger will be an example of a _____.

A)conglomerate merger
B)horizontal merger
C)vertical merger
D)joint venture

Question 69

Interestingly,research finds that larger firms prove more successful than smaller firms in offering innovative products to consumers.

Question 70

The joining of two computer manufacturing companies will be an example of a _____.

A)conglomerate company
B)horizontal merger
C)vertical merger
D)joint venture

Question 71

If ABC steel buys NextGen Iron Ore to assure itself of a constant flow of ore,it will be an example of a _____.

A)conglomerate company
B)domestic company
C)vertical merger
D)subsidiary corporation

Question 72

20th century innovations developed by small businesses include the personal computer and the zipper.

Question 73

Small businesses are more likely to employ older workers than large businesses,but not the youngest ones.

Question 74

Over 50% of new jobs are generated by small businesses.

Question 75

The vast majority of firms have fewer than 500 employees.

Question 76

Which type of merger is done to increase customer bases?

A)Vertical merger
B)Conglomerate company
C)Joint venture
D)Horizontal merger

Question 77

Most managers of home-based businesses struggle to establish business hours that correspond with customer availability.

Question 78

Nova Airlines' purchase of Emu Airlines combines the resources and capabilities of both firms to create the world's largest airline.The newly formed company is an example of a _____.

A)vertical merger
B)joint venture
C)horizontal merger
D)conglomerate company

Question 79

Approximately 50 percent of all small businesses are minority-owned.

Question 80

Four out of five businesses without paid employees are home-based.