Business Foundations International Edition 3rd Edition by Robert J. Hughes - Test Bank
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Business Foundations International Edition 3rd Edition by Robert J. Hughes - Test Bank

Business Foundations International Edition 3rd Edition by Robert J. Hughes - Test Bank   Instant Download - Complete Test Bank With Answers     Sample Questions Are Posted Below   Chapter 4—Choosing a Form of Business Ownership   ESSAY   Describe the ownership, operation, and size of a sole proprietorship.   ANS: Answer not provided. …

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Business Foundations International Edition 3rd Edition by Robert J. Hughes – Test Bank

 

Instant Download – Complete Test Bank With Answers

 

 

Sample Questions Are Posted Below

 

Chapter 4—Choosing a Form of Business Ownership

 

ESSAY

 

  1. Describe the ownership, operation, and size of a sole proprietorship.

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-1                 NAT:  AACSB: Communication

TOP:   Sole Proprietorships

 

  1. Why is a sole proprietorship the most flexible type of business?

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-1                 NAT:  AACSB: Communication

TOP:   Sole Proprietorships

 

  1. Why is the concept of unlimited liability a concern for the sole proprietor?

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-1                 NAT:  AACSB: Communication

TOP:   Sole Proprietorships

 

  1. Describe the advantages and disadvantages of the sole proprietorship form of ownership.

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-1                 NAT:  AACSB: Communication

TOP:   Sole Proprietorships

 

  1. How do management tasks differ for a general partner and a limited partner?

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-2                 NAT:  AACSB: Communication

TOP:   Partnerships

 

  1. What types of information should a partnership agreement contain?

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-2                 NAT:  AACSB: Communication

TOP:   Partnerships

 

  1. Why would a partnership have more capital available to it than would a sole proprietorship?

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-3                 NAT:  AACSB: Communication

TOP:   Advantages of Partnerships

 

  1. Describe the advantages and disadvantages of the partnership form of ownership.

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-3                 NAT:  AACSB: Communication

TOP:   Advantages of Partnerships

 

  1. What does it mean when someone says that a corporation is an artificial person created by law? In your answer, describe some things that an artificial person and a real person like you could both do.

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-4                 NAT:  AACSB: Communication

TOP:   Corporations

 

  1. What is an owner of a corporation called? What is the difference between a closed corporation and an open corporation?

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-4                 NAT:  AACSB: Communication

TOP:   Corporations

 

  1. Explain the differences among a domestic, a foreign, and an alien corporation.

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-4                 NAT:  AACSB: Communication

TOP:   Corporations

 

  1. How would you go about incorporating a business? Describe the information contained in a corporate charter.

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-4                 NAT:  AACSB: Communication

TOP:   Corporations

 

  1. Compare and contrast common stock and preferred stock. Which would you rather own? Why?

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-4                 NAT:  AACSB: Communication

TOP:   Corporations

 

  1. What does the board of directors manage? What do corporate officers manage?

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-4                 NAT:  AACSB: Communication

TOP:   Corporations

 

  1. Describe the advantages and disadvantages of a corporation.

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-5                 NAT:  AACSB: Communication

TOP:   Advantages of Corporations

 

  1. Why does the IRS allow some corporations to use the S-corporation form of ownership?

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-6                 NAT:  AACSB: Communication

TOP:   Special Types of Business Ownership

 

  1. How does an S-corporation differ from a limited-liability company? Does either type of ownership appeal to you? Explain your answer.

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-6                 NAT:  AACSB: Communication

TOP:   Special Types of Business Ownership

 

  1. Discuss some of the similarities of not-for-profit corporations to for-profit corporations. Also, what are some of the primary differences?

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-6                 NAT:  AACSB: Communication

TOP:   Special Types of Business Ownership

 

 

  1. What is the difference between a joint venture and a syndicate?

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-7                 NAT:  AACSB: Communication

TOP:   Joint Ventures and Syndicates

 

  1. A business can grow by expanding its current operations. It can also grow by completing a merger or acquisition. Which do you think is the best method for growing a company?

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-8                 NAT:  AACSB: Communication

TOP:   Corporate Growth

 

  1. Assume that you are a corporate manager and that a corporate raider is trying to take over your company. What steps could you follow to avoid the takeover?

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-8                 NAT:  AACSB: Communication

TOP:   Corporate Growth

 

  1. In your own words, explain the differences among a horizontal merger, a vertical merger, and a conglomerate merger.

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-8                 NAT:  AACSB: Communication

TOP:   Corporate Growth

 

  1. Describe the merger trends affecting American business.

 

ANS:

Answer not provided.

 

PTS:   1                    OBJ:   4-8                 NAT:  AACSB: Communication

TOP:   Corporate Growth

 

 

MULTIPLE CHOICE

 

Samantha’s Dilemma

 

Samantha graduated from college and needed to decide where she wanted to work. She had several options. Her aunt Julie owned and operated a small business that she started about twenty years ago. Julie, an individual owner of her business, informed Samantha that she could work for her. On one hand, Samantha thought it would be a great opportunity to be able to work for her aunt, learn the business, and then run the business when her aunt retired. On the other hand, she also felt that she wanted something a little more challenging; a job where she could really use her education. Her other option would be to work for a company that a friend and her husband had started and jointly owned. It was a rapidly growing company with plenty of opportunity for advancement. However, Samantha had some reservations about this choice because she was not sure she wanted to work for friends. Her last option was to work for a large retail company, headquartered in Maryland, which had stores across the United States.

 

After much consideration, Samantha decided she didn’t want an opportunity and a job because someone knew her. She wanted to prove how motivated and hard-working she was. Once she weighed all the advantages and disadvantages of her different options, she decided to work for the large retail company so that she could gain the most experience for herself.

 

  1. Refer to Samantha’s Dilemma. Based on the information provided, what type of business does Samantha’s aunt operate?
a. Incorporation
b. Partnership
c. Franchise
d. Corporation
e. Sole proprietorship

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Scenario Questions

 

  1. Refer to Samantha’s Dilemma. What type of company does Samantha’s friend operate?
a. Incorporation
b. Partnership
c. Franchise
d. Corporation
e. Sole proprietorship

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Scenario Questions

 

  1. Refer to Samantha’s Dilemma. If Samantha worked for the large retail company in Philadelphia, what type of corporation would that be?
a. Foreign
b. Alien
c. International
d. Domestic
e. Global

 

 

ANS:  A                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Scenario Questions

 

  1. Refer to Samantha’s Dilemma. What would not be an advantage of Samantha’s aunt’s business?
a. Pride of ownership
b. Retention of profits
c. No special taxes
d. Ability to be your own boss
e. Unlimited liability

 

 

ANS:  E                    PTS:   1                    DIF:    Diff.               OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Scenario Questions

 

B&G, Inc.

 

A year ago, Kevin went to work for B&G, Inc. He has worked for the finance department ever since he started. He noticed that the corporation was only taxed as though it were a partnership. This was something that he found very odd when he first started working for the company, but he later realized it was a fairly common practice. He recognized that this was one of the advantages of this type of corporation.

 

While the job was challenging, Kevin was not happy. He wanted to work for a company whose main goal was to provide service to the community, not to make a profit. However, Kevin felt that, considering his present financial situation, he had to continue working for B&G, Inc. A week later, Kevin discovered there was going to be a merger between B&G, Inc. and one of its major competitors. Kevin’s boss informed him that he would be getting a promotion and a raise. While he was excited about making more money, he still was not happy. He knew then that he would not be working for the company for long.

 

  1. Refer to B&G, Inc. What type of organization is B&G, Inc.?
a. Sole proprietorship
b. Limited-liability company
c. S-corporation
d. Not-for-profit corporation
e. Cooperative

 

 

ANS:  C                    PTS:   1                    DIF:    Mod.              OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Scenario Questions

 

  1. Refer to B&G, Inc. Which of these features does not belong to this type of corporation?
a. No double taxation
b. Management flexibility
c. Limited liability
d. Personal asset protection
e. Many Internal Revenue tax regulations

 

 

ANS:  B                    PTS:   1                    DIF:    Diff.               OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Scenario Questions

 

  1. Refer to B&G, Inc. What type of organization was Kevin considering switching to?
a. Limited-liability corporation
b. Sole proprietorship
c. S-corporation
d. Not-for-profit corporation
e. Closed corporation

 

 

ANS:  D                    PTS:   1                    DIF:    Mod.              OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Scenario Questions

 

  1. Refer to B&G, Inc. B&G, Inc. was going through a ____ merger.
a. vertical
b. horizontal
c. conglomerate
d. hostile
e. leveraged

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Scenario Questions

 

  1. The simplest form of business owned and operated by one person is called a(n)
a. franchise.
b. partnership.
c. S-corporation.
d. sole proprietorship.
e. syndicate.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Glenn owns and operates a large hardware store in Missouri that employs about fifty people. He delegates some of the decision making to two managers, but he remains the only owner. Glenn’s business is organized as a
a. corporation.
b. partnership.
c. sole proprietorship.
d. limited partnership.
e. limited-liability corporation.

 

 

ANS:  C                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Karen Howard loves to cook and receives unqualified praise whenever she prepares a meal for someone. Encouraged by these compliments and eager to put her culinary talents to good use, Karen decides to open a small neighborhood restaurant. Since she plans to maintain complete control of the business, she will most likely organize it as a
a. limited partnership.
b. corporation.
c. general partnership.
d. cooperative.
e. sole proprietorship.

 

 

ANS:  E                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Local residents have always thought the mom-and-pop store on the corner of Locust and Congress was a partnership between Mr. and Mrs. Jones. But Mr. Jones is the real owner. This probably means that the store is a
a. limited partnership.
b. sole proprietorship.
c. corporation.
d. cooperative.
e. joint venture.

 

 

ANS:  B                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. In the United States, approximately 71 percent of all businesses are
a. corporations.
b. partnerships.
c. sole proprietorships.
d. joint ventures.
e. franchises.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. When compared to partnerships and corporations, sole proprietorships account for ____ percent of total sales.
a. 34
b. 16
c. 9
d. 4
e. 2

 

 

ANS:  D                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Which form of business is the easiest to start?
a. Corporation
b. Partnership
c. Entrepreneurship
d. Sole proprietorship
e. S-corporation

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Which of the following is necessary for starting a sole proprietorship?
a. A contract
b. An agreement
c. An application to the secretary of state
d. Articles of proprietorship
e. No specific legal documents

 

 

ANS:  E                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. To close a sole proprietorship, the owner must
a. notify the secretary of state.
b. pay creditors.
c. publish an out-of-business statement in the newspaper.
d. have all licenses and permits revoked.
e. do none of the above.

 

 

ANS:  B                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Laura wants to start a business, but she is unsure of the legal form best for her. Short of cash, she has decided to take the form that is the least expensive and most flexible in terms of decision making and implementation. Which would you recommend?
a. Joint venture
b. Partnership
c. Sole proprietorship
d. Cooperative
e. Corporation

 

 

ANS:  C                    PTS:   1                    DIF:    Diff.               OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Thomas wants to make money, so he starts his own business as a sole proprietor. He likes this form of business because
a. he will get to keep all of the profits the business makes.
b. profit is guaranteed since he will be the only owner.
c. it will provide a steady income for him.
d. he has to split the profits with only one other person.
e. he has to pay small dividends to the other owners.

 

 

ANS:  A                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Angela is tired of her boss as well as corporate America in general. She decides she would like to start a business where no one tells her what to do, and she can always make the decisions. The best form of business for Angela is a(n)
a. partnership.
b. limited partnership.
c. singleship.
d. sole proprietorship.
e. S-corporation.

 

 

ANS:  D                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Stephen decides his business will begin staying open until 7 p.m. instead of 6 p.m. The next day, the shop stays open until 7 p.m. This environment of flexibility to quickly change is characteristic of what form of business organization?
a. Corporation
b. Partnership
c. S-corporation
d. Flexible partnership
e. Sole proprietorship

 

 

ANS:  E                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Which of the following is an advantage of a sole proprietorship?
a. The owner has unlimited liability.
b. The business ceases to exist when the owner dies.
c. There is a limit to the amount one person can borrow.
d. Profits are taxed as individual income.
e. The owner enjoys lack of continuity.

 

 

ANS:  D                    PTS:   1                    DIF:    Diff.               OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. How might a sole proprietorship have a possible tax advantage?
a. It does not have to make tax payments until the end of the year.
b. It does not have to pay federal income taxes.
c. It does not have to charge sales tax on its merchandise.
d. It does not pay special state and federal taxes that corporations pay.
e. It is subject to a form of double taxation.

 

 

ANS:  D                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Which of the following is not a disadvantage of sole proprietorships?
a. Unlimited liability
b. Lack of money
c. Double taxation
d. Lack of continuity
e. Limited management skills

 

 

ANS:  C                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Which of the following is not an advantage of a sole proprietorship?
a. It is easy to form and dissolve.
b. It has unlimited liability.
c. Profits are taxed as personal income.
d. There owner has the flexibility of being his or her own boss.
e. The owner keeps all profits.

 

 

ANS:  B                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Unlimited liability means
a. there is no limit on the amount an owner can borrow.
b. creditors will absorb any loss from nonpayment of debt.
c. the business can borrow money for any type of purchase.
d. the owner is responsible for all business debts.
e. stockholders can borrow money from the business.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Darrell inherited a large amount of money from his uncle. Darrell wishes to start his own business, and his lawyers encourage him to make it a corporation. What disadvantage of a sole proprietorship are the lawyers trying to avoid?
a. Unlimited liability
b. Lack of management skills
c. Retention of all profits
d. Lack of money
e. Double taxation

 

 

ANS:  A                    PTS:   1                    DIF:    Diff.               OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. When the owner of a sole proprietorship dies, what becomes of the business?
a. The employees take over the business.
b. It ceases to exist unless the heirs take it over or sell it.
c. It is automatically auctioned to the highest bidder.
d. It ceases to exist, and no one may legally take it over.
e. It may continue existing but only under a new name.

 

 

ANS:  B                    PTS:   1                    DIF:    Diff.               OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. According to the text, which of the following statements is false?
a. The sole proprietor is often the sole manager.
b. Many sole proprietors cannot afford to hire the help they need.
c. Potential employees often feel there is no room for advancement in a sole proprietorship.
d. When compared to larger businesses, the lure of employee benefits is one reason why people go to work for sole proprietorships.
e. The sole proprietor often finds it hard to keep competent employees.

 

 

ANS:  D                    PTS:   1                    DIF:    Diff.               OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. The major reason why businesses change from sole proprietorships to other forms of ownership is to
a. gain unlimited liability.
b. avoid unlimited liability.
c. avoid lack of continuity.
d. obtain help and eliminate the problem of too much to do in one day.
e. offer advancement opportunities for employees.

 

 

ANS:  D                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. A voluntary association of two or more people acting as co-owners of a business is known as a
a. partnership.
b. corporation.
c. sole proprietorship.
d. conglomerate.
e. syndicate.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. Most partnerships have ____ partners.
a. two
b. three
c. four
d. five
e. more than five

 

 

ANS:  A                    PTS:   1                    DIF:    Mod.              OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. Ted’s partnership agreement with two other men was a bit unsound. One of the problems the men were encountering was uneven productivity among the partners. The agreement required each partner to contribute to every aspect of the business to receive an equal portion of the profits. This agreement did not reflect the idea that
a. all partners need not be equal; that is, there are different types of partners. Some may be fully active in running the business, whereas others may have a more limited role.
b. limited partners are required to be active in day-to-day business operations.
c. customers and creditors of a limited partnership need not be protected.
d. the Uniform Partnership Act requires every general partnership to have at least one limited partner.
e. each partner must agree to contracts entered into on behalf of all the others.

 

 

ANS:  A                    PTS:   1                    DIF:    Diff.               OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. The person who assumes full co-ownership of a partnership, including unlimited liability, is a
a. sole proprietor.
b. stockholder.
c. shareholder.
d. limited partner.
e. general partner.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. Legally, a partnership must
a. have at least one limited partner.
b. have at least one general partner.
c. make all owners general partners.
d. not have any general partners.
e. designate a limited partner to be responsible for all debts of the partnership.

 

 

ANS:  B                    PTS:   1                    DIF:    Mod.              OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. The partner who can lose only what he or she has invested in a business is the
a. general partner.
b. sole proprietor.
c. manager.
d. employee.
e. limited partner.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. Mike Nettles approached Nathan Lang about becoming a partner in a firm that destroys environmental waste. While Mike would like to become a partner in the firm, he is concerned about his liability because he has recently inherited a lot of money. In this situation, Mike should become a
a. general partner with a majority ownership interest in the business.
b. general partner with a minority ownership interest in the business.
c. limited partner.
d. joint venturist.
e. sole proprietor.

 

 

ANS:  C                    PTS:   1                    DIF:    Mod.              OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. A ____ invests money in the business but has no management responsibility.
a. general partner
b. limited partner
c. sole proprietor
d. nominal partner
e. stockbroker

 

 

ANS:  B                    PTS:   1                    DIF:    Diff.               OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. The ____ is a legal document that lists and explains the terms of the partnership.
a. co-owners’ agreement
b. charter
c. will
d. articles of partnership
e. formation contract

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. Keisha Cook and Donnie Blackman decide to go into business together. They start by writing an agreement listing and explaining the terms of the business they will both own, along with each of their responsibilities. Keisha and Donnie created a(n)
a. articles of partnership.
b. master limited partnership agreement.
c. licensing agreement.
d. corporate charter.
e. division of partnership agreement.

 

 

ANS:  A                    PTS:   1                    DIF:    Mod.              OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. Which of the following would least likely be stated in the articles of partnership?
a. Who will make the final decisions
b. How much each partner will invest
c. What the duties of each partner are
d. What products the company will sell
e. What will happen if a partner dies or wants to dissolve the partnership

 

 

ANS:  D                    PTS:   1                    DIF:    Diff.               OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. Wade Comer and Tom Busby decide to start a partnership and offer accounting services. Which of the following is the best way to start this partnership?
a. They should orally discuss how they want the partnership to work and who is responsible for certain areas.
b. They should determine the exact way the business should be run and have a witness listen to their oral discussion.
c. They should let a third party, such as a consultant or an attorney, draft whatever agreement the consultant or attorney thinks is appropriate.
d. They should carefully draft an articles of partnership together, outlining each partner’s responsibilities and other important information.
e. With the help of an attorney, they should draft a partnership agreement that states each partner’s duties and investments.

 

 

ANS:  E                    PTS:   1                    DIF:    Diff.               OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. As a limited partner in a construction business, Joe
a. has input only on major company decisions.
b. contributes only his time and not his money.
c. does not receive any portion of the profits.
d. only risks his initial investment.
e. cannot lose his investment in the partnership.

 

 

ANS:  D                    PTS:   1                    DIF:    Mod.              OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. With respect to combined business skills and knowledge, which of the following partnerships is best?
a. Joe, Louis, and Raul own a bakery. They are able bakers by trade. Each wants to spend all of his time baking items.
b. Carolyn, Melvin, and Cindy own a boutique. Carolyn has marketing expertise. Melvin has ten years’ experience operating a successful small store, including hiring employees, handling inventory control, buying, and managing credit. Cindy is a CPA. Each has agreed to use his or her experience and expertise for the success of the business.
c. Mary and Robert, both young pharmacists, own a pharmacy. Neither has taken a business course, but they are willing to learn.
d. Carter and Renée own a video store. Renée is most experienced as a homemaker and mother. Carter has worked as an auto mechanic for ten years.
e. Vince and Linda own a vacuum cleaner store. Vince knows everything possible about store operations. Linda is wealthy and can provide investment capital.

 

 

ANS:  B                    PTS:   1                    DIF:    Diff.               OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. All of the following are advantages of the partnership form of organization except
a. unlimited liability.
b. retention of profits.
c. combined skills and knowledge.
d. better access to capital and credit.
e. ease of start-up.

 

 

ANS:  A                    PTS:   1                    DIF:    Mod.              OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. Brian wants to start a business that provides canoe and kayak trips. He decides that it would be better to ask his brother Brad to become his partner because
a. one person could not possibly run this type of business.
b. Brian will receive all of the profits from the partnership.
c. together they will be able to get more capital and credit to start the business.
d. the business will pay less taxes than it would as a sole proprietorship.
e. there are generally fewer control issues in a partnership than in a sole proprietorship.

 

 

ANS:  C                    PTS:   1                    DIF:    Diff.               OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. Lisa and John own a partnership that provides rental equipment for parties and special occasions. Which of the following is true about the way Lisa and John would handle company profits?
a. Automatically split the profits, with 50 percent for Lisa and 50 percent for John.
b. They would do nothing because partnerships require that profits remain in the business.
c. Divide the profits according to each person’s investment in the business.
d. Distribute the profits according to the terms of the partnership agreement.
e. Split the profits according to how many hours each person worked.

 

 

ANS:  D                    PTS:   1                    DIF:    Diff.               OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. Kerry wants to start a business to sell handmade jewelry. She is very competent at making the jewelry and teaching others to make it, and she has saved a reasonable amount of money to start the business. Who of the following would make the best partner for Kerry?
a. Bailey, an artist with a real flair for new-aged jewelry design
b. Ashley, Kerry’s best friend who is fun to hang out with and good at solving problems
c. Natalie, who has business experience with accounting, management, and marketing
d. Janette, who used to work at the jewelry counter at a department store
e. Darla, an engineer with industrial management experience but no money

 

 

ANS:  C                    PTS:   1                    DIF:    Diff.               OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. With regard to taxation of partnerships, which of the following statements is correct?
a. Profits are taxed twice.
b. Each partner is taxed in the same way as a sole proprietor.
c. Taxes are paid on a partnership’s profits, after which each partner pays taxes on his or her share of the profits.
d. A partnership is exempt from taxes.
e. The partnership is taxed as a separate entity.

 

 

ANS:  B                    PTS:   1                    DIF:    Mod.              OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. All of the following are disadvantages that Sean should consider before entering a partnership agreement with his cousin except
a. lack of continuity.
b. effects of disagreements with his cousin.
c. the inability to get out the money he invests.
d. unlimited liability.
e. double taxation.

 

 

ANS:  E                    PTS:   1                    DIF:    Diff.               OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. Quarrels among business associates have become common. The associates quarrel over what products the firm should sell, division of authority, selection of personnel, whether to bring family members into the business, whether to expand, and who is contributing most to the firm’s success. Such feuding, which damages business relationships, occurs most frequently in what form of business?
a. Partnerships
b. Cooperatives
c. Corporations
d. Sole proprietorships
e. S-corporations

 

 

ANS:  A                    PTS:   1                    DIF:    Diff.               OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. Daniel, Thomas, and Lucas are partners in a law firm under a typical partnership agreement in which each owns an equal share of the business. Thomas dies suddenly of a heart attack. What will most likely become of the partnership?
a. It will immediately cease to exist and Daniel and Lucas will have to find new jobs.
b. Thomas’s share of the business will automatically be split between Daniel and Lucas.
c. Daniel and Lucas will be able to purchase Thomas’s interest from his estate.
d. Daniel and Lucas will have to quickly find a new partner to take Thomas’s place.
e. It will dissolve, and Daniel and Lucas will lose personal property to pay business debts.

 

 

ANS:  C                    PTS:   1                    DIF:    Diff.               OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. Jack has been saving his excess funds for several years and has contemplated entering a partnership with a friend from college. Jack hesitates because he knows that it is ____ to invest money in a partnership and ____ to get the money back out.
a. difficult; difficult
b. easy; difficult
c. easy; impossible
d. easy; easy
e. difficult; easy

 

 

ANS:  B                    PTS:   1                    DIF:    Diff.               OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. What is the primary disadvantage of both a sole proprietorship and a partnership that a corporation overcomes?
a. No access to capital
b. Taxing complications
c. Unlimited liability
d. Ease of start-up
e. Lack of secrecy

 

 

ANS:  C                    PTS:   1                    DIF:    Mod.              OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. The form of business organization that accounts for almost 85 percent of all sales revenues in the United States is the
a. sole proprietorship.
b. partnership.
c. corporation.
d. joint venture.
e. syndicate.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. The form of business organization that comprises about 19 percent of all businesses in the United States is the
a. joint venture.
b. syndicate.
c. sole proprietorship.
d. partnership.
e. corporation.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Kayla purchases shares of ownership in General Electric. These shares are referred to as
a. ownership documents.
b. stock.
c. articles of ownership.
d. incorporation.
e. corporate certificates.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. A corporation whose stock can be purchased by anyone and is traded in stock markets is known as a(n)
a. sole proprietorship..
b. S-corporation.
c. closed corporation.
d. open corporation.
e. not-for-profit corporation.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Mars, Inc., maker of M&Ms and other candy, is 100 percent owned by the Mars family and is therefore referred to as a(n)
a. open corporation.
b. public corporation.
c. syndicate.
d. cooperative.
e. closed corporation.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Nortons, Inc. is a hardware store that is owned by members of the Norton family as well as a few close friends of the family. This company is a(n)
a. sole proprietorship.
b. partnership.
c. open corporation.
d. closed corporation.
e. public corporation.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Shares of Burger House stock cannot be purchased on any stock exchange or by just any individual. This means that Burger House is a(n)
a. alien corporation.
b. partnership.
c. open corporation.
d. family corporation.
e. closed corporation.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Anyone with the money can purchase shares of Coca-Cola’s stock. This makes Coca-Cola a(n) ____ corporation.
a. closed
b. open
c. domestic
d. foreign
e. alien

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Susan has a commercial laundry service that has been growing rapidly. She wants to continue to grow the business, but she needs access to more money and does not want to risk her personal assets. Susan contacts her lawyer to see if all the legal requirements are met to start the process of
a. partnering.
b. selling her business.
c. incorporating.
d. consulting.
e. corporate opening.

 

 

ANS:  C                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. When incorporating, a business
a. may incorporate in any state it chooses.
b. must incorporate in the state in which its headquarters are located.
c. must incorporate in the state in which it does the most business.
d. must receive the secretary of state’s permission to incorporate in any state other than the one in which its corporate headquarters will be located.
e. must do none of the above.

 

 

ANS:  A                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Allied Services is a transportation company that operates in most of the United States. If Allied Services decided to incorporate, in which state would it incorporate?
a. Nebraska, the state in which it started
b. Whatever state contributes the most to company revenues
c. The state where the company headquarters are located
d. Any state that the company chooses
e. A centrally located state within the United States

 

 

ANS:  D                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Which of the following states offers the lowest organizational costs for corporations?
a. Delaware
b. Georgia
c. Michigan
d. New York
e. Alaska

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. In the state in which it is incorporated, a business is known as a(n)
a. S-corporation.
b. resident corporation.
c. public corporation.
d. foreign corporation.
e. domestic corporation.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Boeing is incorporated in Seattle, Washington. It has a large facility in Huntsville, Alabama, and is considered a(n) ____ because it conducts business within Alabama.
a. outsider
b. domestic corporation
c. foreign corporation
d. tax write-off
e. alien corporation

 

 

ANS:  C                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Walmart is incorporated in Arkansas, the state of its origins and headquarters. Within Arkansas, Walmart is classified as a(n) ____ corporation.
a. privately-held
b. foreign
c. alien
d. domestic
e. hometown

 

 

ANS:  D                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. In all states besides the one in which it is incorporated, a business is known as a(n)
a. S-corporation.
b. resident corporation.
c. public corporation.
d. foreign corporation.
e. domestic corporation.

 

 

ANS:  D                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Sears Holding Corporation is incorporated in Delaware, but when it operates in Illinois and Texas, it is considered a(n) ____ corporation in those states.
a. domestic
b. foreign
c. alien
d. small
e. midsized

 

 

ANS:  B                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Mercedes-Benz, which is chartered as a corporation in Germany but conducts much of its business in the United States, is known as a(n) ____ in the United States.
a. foreign corporation
b. alien corporation
c. domestic corporation
d. S-corporation
e. private corporation

 

 

ANS:  B                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. When starting a corporation, people submit articles of incorporation to
a. a county judge.
b. a secretary of state.
c. the U.S. Attorney General.
d. the Department of Commerce.
e. the Small Business Administration.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Before Troy can incorporate his advertising business in Champaign, Illinois, he must have a(n) ____ approved by the ____.
a. articles of incorporation; U.S. Corporate Business Administration
b. corporate charter; Champaign city mayor
c. agreement; Secretary of Commerce of the United States
d. articles of incorporation; stockholders
e. articles of incorporation; secretary of state of Illinois

 

 

ANS:  E                    PTS:   1                    DIF:    Diff.               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. A contract between a business and a state recognizing the business as an artificial person is known as the
a. articles of partnership.
b. articles of incorporation.
c. S-corporation.
d. stock certificate.
e. proxy.

 

 

ANS:  B                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Common stock carries all the following rights except the right to
a. vote on changes to the corporate charter.
b. share in profits.
c. receive information about the corporation.
d. receive part of the profit before other classes of stock.
e. attend the annual stockholders’ meeting.

 

 

ANS:  D                    PTS:   1                    DIF:    Diff.               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Amy owns 100 shares of General Electric preferred stock. She wants to attend the annual stockholder meeting to cast her vote on company issues. Based on your knowledge from school, you caution Amy that
a. people with fewer than 1,000 shares of stock cannot vote.
b. stockholders are not allowed to attend the annual meetings.
c. most preferred stock does not have voting rights.
d. only institutional investors are allowed to attend the meetings.
e. she can vote only by proxy and not in person.

 

 

ANS:  C                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. What is the significance of the name preferred stock?
a. It is the type of stock that most investors would rather have.
b. Its claims on dividends are paid before those of common stock.
c. The overall return on preferred stock is higher than that on common stock.
d. This stock is available only to select individuals associated with the company.
e. This stock provides the most powerful voting rights.

 

 

ANS:  B                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. A distribution of earnings to the stockholders of a corporation is a(n)
a. par distribution.
b. dividend.
c. earnings per share.
d. distributed payment.
e. common payment.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. A ____ is a form that enables stockholders to allow someone else to vote for them.
a. waiver
b. rights transfer
c. proxy
d. voter registration
e. dividend

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Mark owns stock in Walgreens. He has the right to vote on company issues and examine corporate records, and he receives dividends from Walgreens’ profits. What type of stock does Mark own?
a. Common
b. “A” class
c. Proxy
d. Dividend
e. Preferred

 

 

ANS:  A                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Your friend Steve owns a considerable amount of common stock in Microsoft, a computer software company. He wants to cast his votes on various issues at the annual stockholders’ meeting in Seattle, but he does not have the time to travel a great distance to the meeting. Instead of attending the meeting, Steve decides to register his votes by
a. registered mail.
b. pre-emptive right.
c. proxy.
d. power of attorney.
e. preferred stock.

 

 

ANS:  C                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Wade serves on Foot Locker’s board of directors. How did Wade get this position?
a. He volunteered for the assignment.
b. He was appointed by the chief executive officer.
c. He was assigned by the Federal Trade Commission.
d. Through default as the largest stockholder, Wade got the position.
e. He was elected by the company’s stockholders.

 

 

ANS:  E                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. How can the following quotation best be explained: “Stockholders control the activities of a corporation”?
a. All stockholders vote on all the major issues and problems that a company faces on a monthly basis.
b. Stockholders are intricately involved in the daily operations of a corporation.
c. Stockholders elect the board of directors, and this board is responsible for appointing corporate officers who manage the daily business of the corporation.
d. Stockholders vote for the members of the board of directors, and this board makes all the daily business decisions for the corporation.
e. Stockholders usually call company management and tell executives better ways to run the organization.

 

 

ANS:  C                    PTS:   1                    DIF:    Diff.               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. The top governing body of a corporation is known as the
a. incorporators.
b. stockholders.
c. management.
d. officers.
e. board of directors.

 

 

ANS:  E                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Corporate officers are
a. listed in the corporate charter.
b. elected by stockholders.
c. appointed by the board of directors.
d. appointed by management.
e. elected by incorporators.

 

 

ANS:  C                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Which of the following is not a disadvantage of the corporate form of ownership?
a. Difficulty of formation
b. Limited liability
c. Expense of incorporation and selling stock
d. Lack of secrecy
e. Double taxation

 

 

ANS:  B                    PTS:   1                    DIF:    Mod.              OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. The retail card and gift shop chain that Heidi started has since been incorporated. Which of the following best describes the limited liability that Heidi has as the primary stockholder in this corporation?
a. Heidi has no responsibility if the business fails and will still be able to get her initial investment back.
b. Heidi may have to give up her car and house if the corporation fails in order to cover the debts of the corporation.
c. The other stockholders will be able to seize Heidi’s personal money but not her primary residence in the event that the business fails.
d. Heidi’s personal assets will be protected in the event that the corporation fails, although she could lose her entire investment.
e. Heidi will only be liable for losses that develop from decisions she made about the daily business operations.

 

 

ANS:  D                    PTS:   1                    DIF:    Diff.               OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. The most effective form of business organization for raising capital is the
a. joint venture.
b. syndicate.
c. sole proprietorship.
d. partnership.
e. corporation.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. Which of the following is an advantage of the corporate form of organization?
a. Ownership of stock is easy to transfer.
b. Forming a corporation is a complex and costly process.
c. The corporation and its stockholders pay taxes on profits.
d. A corporation must submit detailed information to government agencies.
e. It is difficult to keep operations confidential because of required reports.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. When Alyssa decides that she no longer wants her Radio Shack stock, she will discover that a related benefit of a corporation is
a. the ease of transfer of ownership.
b. its perpetual life.
c. limited liability.
d. specialized management.
e. avoiding double taxation.

 

 

ANS:  A                    PTS:   1                    DIF:    Mod.              OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. Unless specified in the charter, a corporation has a
a. legal life of one decade.
b. life of seventeen years, which is renewable.
c. life of fifty years.
d. perpetual life.
e. legally recognized life, which varies from state to state.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. Tiffany is about to finish her degree in business management and wants to find a job that will provide her with opportunities to advance within an organization. What type of business organization should Tiffany work for?
a. A sole proprietorship
b. A small family-owned business that is incorporated
c. A partnership
d. A corporation
e. An unlimited partnership

 

 

ANS:  D                    PTS:   1                    DIF:    Mod.              OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. The order of difficulty and expense, from most to least, when forming a business organization is as follows:
a. corporation, sole proprietorship, partnership.
b. corporation, partnership, sole proprietorship.
c. partnership, corporation, sole proprietorship.
d. partnership, sole proprietorship, partnership.
e. sole proprietorship, partnership, corporation.

 

 

ANS:  B                    PTS:   1                    DIF:    Diff.               OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. All of the following are disadvantages of corporations except
a. perpetual life.
b. double taxation.
c. lack of secrecy.
d. expensive formation.
e. heavy government regulation.

 

 

ANS:  A                    PTS:   1                    DIF:    Mod.              OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. Which of the following is a disadvantage of the corporate form of organization?
a. Both the corporation and its stockholders are taxed on profits retained and distributed.
b. Ownership of stock is easy to transfer.
c. More capital can be raised by the corporate form.
d. Corporations can hire better managers.
e. The organization survives its owners.

 

 

ANS:  A                    PTS:   1                    DIF:    Mod.              OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. The form of business organization that experiences double taxation is the
a. partnership.
b. corporation.
c. venture company.
d. syndicated partnership.
e. sole proprietorship.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. What does double taxation mean?
a. Companies must pay taxes on their income, and then employees must pay taxes on their salaries and wages.
b. Companies have to pay both sales taxes and income taxes.
c. Companies must pay taxes on their earnings, and then stockholders pay taxes on their dividends.
d. Suppliers tax their customers, and in turn these businesses tax the ultimate consumer.
e. Companies must pay taxes on corporate income and then additional taxes on distributions to profit stockholders.

 

 

ANS:  C                    PTS:   1                    DIF:    Diff.               OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. Shane is looking for ways to get more capital for his appliance sales and service business. He is very protective of his company’s information and fears that it will get into the wrong hands. Shane would probably not want to
a. hire new employees.
b. incorporate his company.
c. get a loan from a bank.
d. take on a trustworthy friend as a partner.
e. use a computerized accounting system.

 

 

ANS:  B                    PTS:   1                    DIF:    Mod.              OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. The form of business organization most heavily regulated by the government is the
a. partnership.
b. corporation.
c. joint venture.
d. syndicate.
e. sole proprietorship.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. Judy Barnes, Betty Turley, and Bob Turner want to obtain limited liability for their business, but they want to avoid double taxation. Which type of business ownership would you recommend?
a. Regular corporation
b. General partnership
c. Sole proprietorship
d. S-corporation
e. Not-for-profit corporation

 

 

ANS:  D                    PTS:   1                    DIF:    Mod.              OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. Which of the following is a requirement for an S-corporation?
a. The S-corporation must be incorporated in Delaware.
b. The S-corporation can have no more than 100 stockholders.
c. Only common and preferred stock can be sold to investors.
d. At least 30 percent of the investors must be nonresident aliens.
e. Only individuals can be stockholders.

 

 

ANS:  B                    PTS:   1                    DIF:    Diff.               OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. Twenty-five young investors decided that they want to start a dating service; however, they do not want to be held personally liable for losses of the company. They want to avoid double taxation. Which type of business organization would best fit the needs of these individuals?
a. Corporation
b. Closed corporation
c. Partnership
d. S-corporation
e. Limited cooperative

 

 

ANS:  D                    PTS:   1                    DIF:    Mod.              OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. Tracy is considering expanding his business and has several potential new investors in mind. He originally wanted to form an S-corporation to protect the liability of the investors, but he is now considering a limited-liability company instead because he knows there can be only ____ stockholders in an S-corporation.
a. 10
b. 25
c. 50
d. 100
e. 108

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. A limited-liability company is
a. taxed like a corporation.
b. taxed like a partnership.
c. similar to a cooperative.
d. always used to organize charitable organizations.
e. the result of a horizontal merger.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. To raise capital, Candace Tyson and Martha Black plan to sell stock to between 108 and 200 investors. They also want to avoid double taxation. Which type of business ownership would you recommend?
a. Regular corporation
b. S-corporation
c. Cooperative
d. Limited-liability company
e. Limited partnership

 

 

ANS:  D                    PTS:   1                    DIF:    Mod.              OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. Walters Company, LLC, is a wholesale distributor of industrial packaging. A primary advantage that Walters enjoys as an LLC that corporations do not have is
a. ease of formation.
b. limited liability.
c. avoiding double taxation.
d. one class of outstanding stock.
e. income taxes.

 

 

ANS:  C                    PTS:   1                    DIF:    Diff.               OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. What do experts believe is likely to become one of the most popular types of business organizations?
a. Limited-liability companies
b. S-corporations
c. Partnerships
d. Sole proprietorships
e. Corporations

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. With regard to limited-liability companies, which of the following statements is false?
a. Many experts believe that an LLC is nothing more than an S-corporation.
b. An LLC can have no more than 100 stockholders.
c. An LLC avoids double taxation.
d. An LLC provides limited-liability protection to the personal assets of the owners.
e. When compared to regular corporations, there are fewer government regulations that apply to LLCs.

 

 

ANS:  B                    PTS:   1                    DIF:    Diff.               OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. Which of the following has a restriction on the number of owners, members, or stockholders?
a. S-corporation
b. Not-for-profit corporation
c. Open corporation
d. Limited-liability company
e. Cooperative

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. A corporation organized to provide a social, educational, religious, or other nonbusiness service is known as a(n)
a. authority.
b. merger.
c. quasi-government corporation.
d. S-corporation.
e. not-for-profit corporation.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. The Smithsonian Institution exists to preserve historical and cultural items of value and to share those items with the public; it does not exist to maximize the wealth of any shareholders. This entity is organized as a(n)
a. cooperative.
b. quasi-government corporation.
c. S-corporation.
d. not-for-profit corporation.
e. closed corporation.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. Habitat for Humanity and Girl Scouts are both examples of
a. cooperatives.
b. quasi-government corporations.
c. limited-liability corporations.
d. cooperatives.
e. not-for-profit corporations.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. Not-for-profit organizations must meet specific guidelines in order to obtain tax-exempt status. These guidelines are structured by the
a. board of directors.
b. U.S. Uniform Partnership Act.
c. U.S. Bureau of the Census.
d. Chamber of Commerce.
e. Internal Revenue Service.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. A partnership formed to operate for a specific time period or to accomplish a specific purpose is known as a
a. conglomerate.
b. cooperative.
c. joint venture.
d. corporation.
e. joint merger.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               OBJ:   4-7

NAT:  AACSB: Analytic                           TOP:   Joint Ventures and Syndicates

 

  1. If Avon and Merck joined together to produce a cream that slows down the aging process, this would be called a(n)
a. cooperative.
b. joint venture.
c. combined corporation.
d. S-corporation.
e. partnership.

 

 

ANS:  B                    PTS:   1                    DIF:    Diff.               OBJ:   4-7

NAT:  AACSB: Analytic                           TOP:   Joint Ventures and Syndicates

 

  1. Genetech, a biotechnology firm engaging in the new field of genetic engineering, has asked your advice about remaining independent and temporarily gaining access to the marketing and manufacturing expertise it lacks from another firm. You would suggest
a. forming a limited-liability company.
b. forming a joint venture.
c. forming an S-corporation.
d. merging with a company with the necessary expertise.
e. starting a cooperative.

 

 

ANS:  B                    PTS:   1                    DIF:    Diff.               OBJ:   4-7

NAT:  AACSB: Analytic                           TOP:   Joint Ventures and Syndicates

 

  1. To gain access to one another’s markets, several U.S. and Japanese automobile manufacturers (for example, Chrysler and Mitsubishi) are engaging in temporary alliances to manufacture and market certain models of cars. These types of partnerships are known as
a. limited-liability companies.
b. S-corporations.
c. cooperatives.
d. joint ventures.
e. foreign corporations.

 

 

ANS:  D                    PTS:   1                    DIF:    Diff.               OBJ:   4-7

NAT:  AACSB: Analytic                           TOP:   Joint Ventures and Syndicates

 

  1. Prudential and several other large insurance companies have joined together to underwrite an extremely large insurance policy. This sort of association is referred to as a(n)
a. syndicate.
b. cooperative.
c. conglomerate.
d. alliance.
e. vertical merger.

 

 

ANS:  A                    PTS:   1                    DIF:    Mod.              OBJ:   4-7

NAT:  AACSB: Analytic                           TOP:   Joint Ventures and Syndicates

 

  1. A temporary association organized to perform a specific task requiring a large amount of capital is known as a(n)
a. conglomerate.
b. cooperative.
c. master limited partnership.
d. syndicate.
e. authority.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               OBJ:   4-7

NAT:  AACSB: Analytic                           TOP:   Joint Ventures and Syndicates

 

  1. When many banks join together to lend money to developing countries such as Bangladesh and Malaysia, they seek to spread out the risk of default. This is called
a. a not-for-profit organization.
b. a cooperative.
c. diversification.
d. a quasi-government corporation.
e. a syndicate.

 

 

ANS:  E                    PTS:   1                    DIF:    Diff.               OBJ:   4-7

NAT:  AACSB: Analytic                           TOP:   Joint Ventures and Syndicates

 

  1. Which of the following statements is false?
a. The main ingredient for growth is capital.
b. One way for a corporation to grow is to sell present products in new geographic locations.
c. When carefully planned and controlled, growth from within can have very little adverse effect on a firm.
d. There is no connection between growth and executive power, prestige, and reputation.
e. One way for a business to grow is to sell new but related products to its existing customer base.

 

 

ANS:  D                    PTS:   1                    DIF:    Diff.               OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. The purchase of one corporation by another is referred to as a
a. proxy.
b. cooperative.
c. joint venture.
d. syndicate.
e. merger.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. A hostile takeover is a situation in which
a. the management and board of directors of the targeted firm disapprove of the proposed merger.
b. stockholders are paid a golden parachute.
c. the targeted firm is dismantled to avoid the merger.
d. the government makes the decision that the corporate raider can purchase the targeted firm.
e. the corporate raider receives a sum of money to leave the targeted firm alone.

 

 

ANS:  A                    PTS:   1                    DIF:    Mod.              OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. Suppose Bill Gates, founder of Microsoft, is interested in a small software company. He may offer to purchase the stock of this company at a price that is just high enough to tempt the current stockholders. This action would be called a
a. monopoly.
b. tender offer.
c. proxy fight.
d. hostile takeover.
e. white knight offer.

 

 

ANS:  B                    PTS:   1                    DIF:    Mod.              OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. A technique used to gather enough stockholder votes to control a targeted company is a
a. tender offer.
b. stockholder fight.
c. proxy fight.
d. porcupine fight.
e. poison pill.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. A merger between two firms that make and sell similar products in similar markets is known as a
a. horizontal merger.
b. cooperative.
c. joint venture.
d. vertical merger.
e. conglomerate merger.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. When Compaq and Hewlett-Packard decided to become one company, this was an example of a(n)
a. acquisition.
b. hostile takeover.
c. horizontal merger.
d. conglomerate merger.
e. joint venture.

 

 

ANS:  C                    PTS:   1                    DIF:    Mod.              OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. Which of the following is an example of a horizontal merger?
a. The purchase of a catering firm by Delta Airlines
b. The purchase of Marathon Oil Company by U.S. Steel
c. The purchase of Kentucky Fried Chicken by PepsiCo
d. The purchase of Sam’s Meat Packing Company by the Kroger supermarket chain
e. The purchase of Mobil Oil by Exxon

 

 

ANS:  E                    PTS:   1                    DIF:    Mod.              OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. Recently there have been several mergers involving Big Four accounting firms. One such merger involved the firms of Arthur Young and Ernst & Whinney, who combined to form Ernst & Young. This is an example of a
a. joint venture.
b. horizontal merger.
c. vertical merger.
d. syndicate.
e. conglomerate merger.

 

 

ANS:  B                    PTS:   1                    DIF:    Mod.              OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. A ____ is a merger between firms operating at different but related levels in the production and marketing of a product.
a. conglomerate merger
b. cooperative
c. joint venture
d. vertical merger
e. horizontal merger

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. Which of the following is an example of a vertical merger?
a. The purchase of TWA by American Airlines
b. The purchase of Marathon Oil Company by U.S. Steel
c. The purchase of Kentucky Fried Chicken by PepsiCo
d. The purchase of Malone’s Cost-Plus Supermarkets by the Kroger supermarket chain
e. The purchase of Gulf Oil by Standard Oil Company of California

 

 

ANS:  C                    PTS:   1                    DIF:    Mod.              OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. A merger between firms in completely unrelated industries is known as a
a. conglomerate merger.
b. cooperative.
c. joint venture.
d. vertical merger.
e. horizontal merger.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. Which of the following statements is true?
a. Economists and financial analysts agree that mergers are good for the economy.
b. Takeovers always increase a firm’s productivity.
c. Mergers in the first part of the twenty-first century will see an increase in debt financing.
d. Mergers in the first part of the twenty-first century will be driven by cash-rich companies looking to acquire businesses that will enhance their position in the marketplace.
e. There will be fewer mergers that involve investors from other countries.

 

 

ANS:  D                    PTS:   1                    DIF:    Diff.               OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

TRUE/FALSE

 

  1. The corporation, partnership, and sole proprietorship are the three most common forms of business ownership in the United States.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. About 85 percent of all business firms in the United States are sole proprietorships.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Unlimited liability holds a sole proprietor personally responsible for all the debts of the business.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. If the owner of a sole proprietorship retires or dies, the owner’s heirs may take over a profitable business and either sell it or continue to operate it.

 

ANS:  T                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. Because of unlimited liability, it is easy for sole proprietors to borrow large sums of money.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-1

NAT:  AACSB: Analytic                           TOP:   Sole Proprietorships

 

  1. A voluntary association of two or more people acting as co-owners of a business is known as a partnership.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. A general partner is responsible for any debts of the partnership, regardless of whether he or she was directly involved in the transaction that created the debt.

 

ANS:  T                    PTS:   1                    DIF:    Mod.              OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. Since someone must be responsible for a partnership’s debts, a limited partnership must have at least one general partner.

 

ANS:  T                    PTS:   1                    DIF:    Mod.              OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. In a limited partnership, a limited partner’s name must be included in the partnership’s name.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. Every partnership must have at least one limited partner.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. Articles of partnership are a legal document issued by the secretary of state.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. The courts have held that an oral partnership agreement is not legally binding and, therefore, cannot be enforced.

 

ANS:  F                    PTS:   1                    DIF:    Easy               OBJ:   4-2

NAT:  AACSB: Analytic                           TOP:   Partnerships

 

  1. Compared to a corporation, a partnership is more difficult and expensive to establish.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. A banker or lender is more likely to make sizable loans to a sole proprietor than to a partnership.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

 

  1. The weakness of one partner may be offset by another partner’s strength.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. Although a partnership pays no income tax, the Internal Revenue Service requires partnerships to file an annual information return that states the amount of distributions made to each partner.

 

ANS:  T                    PTS:   1                    DIF:    Mod.              OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. Because there are two or more people in a general partnership, bankers, suppliers, and other creditors are not concerned about unlimited liability.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. As with a sole proprietorship, one disadvantage of a partnership is a lack of continuity.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-3

NAT:  AACSB: Analytic                           TOP:   Advantages of Partnerships

 

  1. A corporation is an artificial person created by law.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Unlike a person, a corporation exists only on paper.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Corporations account for about 82 percent of all sales revenues.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. The Reader’s Digest Association began as an open corporation and later changed to a closed corporation.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. A corporation chartered in Kansas and doing business in Kansas is known as a domestic corporation.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

 

  1. A corporation chartered in Canada and doing business in the United States is known as a foreign corporation in the United States.

 

ANS:  F                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. When a business incorporates, it receives articles of incorporation from the Internal Revenue Service.

 

ANS:  F                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Common stockholders have the right to elect a corporation’s board of directors and vote on corporate matters.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Preferred stockholders receive dividends before dividends are paid to common stockholders.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Most stockholders attend a corporation’s annual meeting and vote in person.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Corporate officers are elected by the stockholders.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-4

NAT:  AACSB: Analytic                           TOP:   Corporations

 

  1. Because of limited liability, individuals are more willing to invest in corporations than in other forms of business.

 

ANS:  T                    PTS:   1                    DIF:    Mod.              OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. A corporation is perhaps the easiest form of business to organize.

 

ANS:  F                    PTS:   1                    DIF:    Easy               OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

  1. Profits of a large corporation are taxed twice, once as corporate income and again as personal income of stockholders.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-5

NAT:  AACSB: Analytic                           TOP:   Advantages of Corporations

 

 

  1. Shareholders of an S-corporation are taxed as if they were owners in a partnership.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. An S-corporation can have no more than twenty stockholders.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. A limited-liability company is taxed like a corporation.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. A limited-liability company extends the concept of personal-asset protection to small-business owners.

 

ANS:  T                    PTS:   1                    DIF:    Mod.              OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. Surplus funds of a not-for-profit organization are distributed to members of the board of directors.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. All not-for-profit corporations rely solely on volunteers to perform services of the organization.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. Experts predict that mergers in the first part of the twenty-first century will be the result of cash-rich companies looking to acquire businesses that will enhance their position in the marketplace.

 

ANS:  T                    PTS:   1                    DIF:    Mod.              OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. All corporations operate primarily for profit.

 

ANS:  F                    PTS:   1                    DIF:    Easy               OBJ:   4-6

NAT:  AACSB: Analytic                           TOP:   Special Types of Business Ownership

 

  1. Joint ventures are created for a specific purpose and dissolved when that purpose is achieved.

 

ANS:  T                    PTS:   1                    DIF:    Mod.              OBJ:   4-7

NAT:  AACSB: Analytic                           TOP:   Joint Ventures and Syndicates

 

  1. Corporations are forbidden by law to enter joint ventures.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-7

NAT:  AACSB: Analytic                           TOP:   Joint Ventures and Syndicates

 

  1. A syndicate is a temporary association of individuals or firms organized to perform a specific task that requires a large amount of capital.

 

ANS:  T                    PTS:   1                    DIF:    Mod.              OBJ:   4-7

NAT:  AACSB: Analytic                           TOP:   Joint Ventures and Syndicates

 

  1. The purchase of one corporation by another is called a merger.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. A tender offer is an offer to purchase stock from existing stockholders.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. A common tactic of corporate raiders is to start a proxy fight.

 

ANS:  T                    PTS:   1                    DIF:    Easy               OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. A horizontal merger is a merger between firms in completely unrelated industries.

 

ANS:  F                    PTS:   1                    DIF:    Easy               OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. A vertical merger is a merger between firms that operate at different but related levels in the production and marketing of a product.

 

ANS:  T                    PTS:   1                    DIF:    Mod.              OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. Economists, financial analysts, corporate managers, and stockholders all agree that mergers are good for both the company and the economy.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

 

  1. Financial experts agree that takeovers enhance corporate profitability and productivity.

 

ANS:  F                    PTS:   1                    DIF:    Mod.              OBJ:   4-8

NAT:  AACSB: Analytic                           TOP:   Corporate Growth

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