Deck 36: D: Sole Proprietorships and Franchises

Question 1

Ray-On Corporation makes inexpensive,highly efficient,solar energy cells.A anticipates a change in the demand for its products as a consequence of climate change.According to the Securities and Exchange Commission,Ray-On should

A)disclose this information.
B)keep this information confidential.
C)reveal this information to insiders only if asked.
D)release this information to current shareholders only.

Answer 1

A

Question 2

Far Afield Inc.announces its intent to acquire Eversmall Company.Despite this announcement,Eversmall's directors do not prepare for a buyout-they do not determine a price or seek out other buyers,and negotiate with Far Afield for only a short time.Former Eversmall shareholders allege that the directors breached their fiduciary duties.The directors' best defense is

A)the right to indemnification
B)the business judgment rule.
C)the shareholders' preemptive rights.
D)the limited liability of the corporation.

Answer 2

B

Question 3

Rea,an officer with Sel-Mart Company,misappropriates the firm's property through fraud.Later,Rea and Sel-Mart agree to a mutual release of claims.Still later,Sel-Mart discovers Rea's fraud and files a suit to recover the misappropriated property.Most likely,the court will rule that Rea

A)breached her duty of loyalty by failing to disclose her misconduct.
B)is not liable due to Rea's duty to act in her own self-interest.
C)is not liable due to Sel-Mart's failure to timely discover the fraud.
D)is not liable due to the mutual release of claims.

Answer 3

A

Question 4

Beyond Gamez,Inc. ,a video game retailer based in California,does business in all fifty states exclusively online.According to New York state tax law,an out-of-state online retailer must collect and remit state taxes to New York if the retailer

A)plans to establish a substantial physical presence in New York.
B)targets a potential marketing base in New York.
C)maintains a Web site accessible in New York.
D)pays a party within New York to solicit business for its products.

Question 5

Ilya is an officer with Jetspeed,Inc.Ilya is in a position to acquire assets that would benefit Jetspeed if acquired in its name.Ilya's usurping this opportunity may violate the duty of

A)acting in one's own interest.
B)agency.
C)care.
D)loyalty.

Question 6

Simone is a manager of Rolling Hills Resort LLC,a limited liability company.Rolling Hills is formed in a state that does not explicitly create fiduciary duties for LLC managers but does require the exercise of good business judgment.Unless a court rules otherwise,Simone owes fiduciary duties to

A)Rolling Hills's members.
B)Rolling Hills's suppliers.
C)Rolling Hills's customers.
D)none of the choices.

Question 7

Jumbo Juice Inc.offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales.To potential investors,the franchisor must provide

A)actual earnings figures.
B)hypothetical earnings figures.
C)projected earnings figures.
D)none of the choices.