International Business 4th Edition by Les Dlabay - Test Bank

International Business 4th Edition by Les Dlabay – Test Bank

 

Instant Download – Complete Test Bank With Answers

 

 

Sample Questions Are Posted Below

 

CHAPTER 5—STRUCTURES OF INTERNATIONAL BUSINESS ORGANIZATIONS

 

TRUE/FALSE

 

1. A sole proprietorship is the easiest type of business to start.

 

ANS:  T                    PTS:   1

 

2. A corporation is considered a legal “person” that acts on behalf of the company’s owners.

 

ANS:  T                    PTS:   1

 

3. Owners of a corporation are commonly called stockholders.

 

ANS:  T                    PTS:   1

 

4. Corporate earnings can be taxed twice: first as business income and second as dividend income to stockholders.

 

ANS:  T                    PTS:   1

 

5. Direct exporting occurs when a company actively seeks to sell goods and services in other countries.

 

ANS:  T                    PTS:   1

 

6. If one partner buys expensive equipment for the partnership without consulting the other partner, only that partner is liable for the cost of the equipment.

 

ANS:  F                    PTS:   1

 

7. One way to raise money to operate a corporation is to sell portions of ownership to the public.

 

ANS:  T                    PTS:   1

 

8. Limited liability means that stockholders can lose their investment if the corporation fails.

 

ANS:  T                    PTS:   1

 

9. Municipal corporations do not usually engage in international business activities.

 

ANS:  F                    PTS:   1

 

10. A cooperative is an example of a government-owned corporation.

 

ANS:  F                    PTS:   1

 

11. Multinational companies only pay taxes to the government in their home countries.

 

ANS:  F                    PTS:   1

 

12. A multinational company is said to have a world-wide market view because it views the entire world as a potential customer.

 

ANS:  T                    PTS:   1

 

13. The simplest, lowest-risk method of getting involved in international business is to form a joint venture with a company in another country.

 

ANS:  F                    PTS:   1

 

14. One reason direct exporting is a relatively low-risk method of getting involved in international business is because the exporting company does not have an extensive investment in another country.

 

ANS:  T                    PTS:   1

 

15. Contract manufacturing can be a form of international business if the manufacturer produces products for a company located in another country.

 

ANS:  T                    PTS:   1

 

MULTIPLE CHOICE

 

1. A common disadvantage of a sole proprietorship is

a.	difficulty starting the business.
b.	the limited life of the business.
c.	that the owner must share profits with others.
d.	double taxation of earnings.

 

 

ANS:  B                    PTS:   1

 

2. Ease of creation and availability of different talents are common advantages of a

a.	partnership.	c.	cooperative.
b.	corporation.	d.	sole proprietorship.

 

 

ANS:  A                    PTS:   1

 

3. A common disadvantage of partnerships is

a.	disagreements among owners.	c.	double taxation of earnings.
b.	ease of creation.	d.	limited liability.

 

 

ANS:  A                    PTS:   1

 

4. A common advantage of a corporation is

a.	ease of creation.	c.	unlimited liability of owners.
b.	double taxation of earnings.	d.	limited liability of owners.

 

 

ANS:  D                    PTS:   1

 

5. A method of international business with the lowest risk is

a.	indirect exporting.	c.	a joint venture.
b.	franchising.	d.	foreign direct investment.

 

 

ANS:  A                    PTS:   1

 

6. When a movie company allows its cartoon characters to be used on clothing items produced in other countries, it is an example of

a.	management contracting.	c.	licensing.
b.	a wholly owned subsidiary.	d.	direct exporting.

 

 

ANS:  C                    PTS:   1

 

7. A joint venture exists when

a.	companies in two countries are taxed as a single organization.
b.	a foreign government buys imported goods or services.
c.	a company obtains the right to use a company name or business process.
d.	two or more companies share a business project.

 

 

ANS:  D                    PTS:   1

 

8. A separate foreign company owned by a parent company is called a

a.	joint venture.	c.	cooperative.
b.	wholly owned subsidiary.	d.	municipal corporation.

 

 

ANS:  B                    PTS:   1

 

9. Unlimited liability means that

a.	if a sole proprietorship fails, the business’s creditors may force the owner to sell personal property, such as a house and car, to pay the amounts owed.
b.	each partner in a partnership may independently make decisions affecting the partnership.
c.	all stockholders who own shares of a corporation vote on who will manage the corporation.
d.	none of the above

 

 

ANS:  A                    PTS:   1

 

10. An example of a business organization that is formed to make a profit is a

a.	municipal corporation.
b.	nonprofit corporation.
c.	multinational corporation.
d.	cooperative.

 

 

ANS:  C                    PTS:   1

 

11. An example of a cooperative is a

a.	credit union.	c.	private college.
b.	hospital.	d.	none of the above

 

 

ANS:  A                    PTS:   1

 

12. Of the following statements, the one that does NOT describe a multinational company is that

a.	it maintains both an international and local perspective.
b.	a country may become too dependent on it.
c.	it obtains raw material only from the country in which it manufactures products.
d.	none of the above

 

 

ANS:  C                    PTS:   1

 

13. Many people believe that multinational companies need to be regulated and controlled because

a.	they make too much money.
b.	they may dominate a country’s economy and control the political situation.
c.	they do not employ citizens of the host countries to a large enough extent.
d.	none of the above

 

 

ANS:  B                    PTS:   1

 

14. Of the following methods for getting involved in international business, the one with the lowest risk is

a.	joint venture.	c.	management contracting.
b.	licensing.	d.	foreign direct investment.

 

 

ANS:  C                    PTS:   1

 

15. Of the following methods for getting involved in international business, the one with the highest risk is

a.	joint venture.	c.	management contracting.
b.	licensing.	d.	foreign direct investment.

 

 

ANS:  D                    PTS:   1

 

COMPLETION

 

1. Profit results when the money paid for ____________________ is subtracted from the money taken in for sales.

 

ANS:  expenses

 

PTS:   1

 

2. A document that represents ownership in a corporation is a ____________________.

 

ANS:  stock certificate

 

PTS:   1

 

3. Corporations share their profits with stockholders by paying ____________________.

 

ANS:  dividends

 

PTS:   1

 

4. A ____________________ corporation is an incorporated town or city organized to provide services for citizens rather than to make a profit.

 

ANS:  municipal

 

PTS:   1

 

5. Using agents and brokers to arrange for buyers in other countries for a product is known as ____________________ exporting.

 

ANS:  indirect

 

PTS:   1

 

6. ____________________ exporting occurs when a company actively seeks out opportunities and sells goods to other countries.

 

ANS:  Direct

 

PTS:   1

 

7. When a company buys the right to use the name of a fast-food restaurant, such as McDonald’s or Wendy’s, and operate a restaurant in a specific way, it is buying a ____________________.

 

ANS:  franchise

 

PTS:   1

 

8. When two or more companies agree to share a business project and share the profits, they are operating a ____________________.

 

ANS:  joint venture

 

PTS:   1

 

9. When a British company buys an office building in New York City, it is making a ____________________ investment.

 

ANS:  foreign direct

 

PTS:   1

 

10. A ____________________ subsidiary is an independent company owned by a parent company.

 

ANS:  wholly-owned

 

PTS:   1

 

SHORT ANSWER

 

1. What are the disadvantages of the partnership form of business organization?

 

ANS:

Unlimited liability of partners, sharing profits, potential for disagreements between partners, and possible sudden dissolution of the business.

 

PTS:   1

 

2. What are the advantages of the corporation form of business organization?

 

ANS:

More sources of funds, limited liability of investors, availability of specialized management, and unlimited life of the company.

 

PTS:   1

 

3. Give five examples of nonprofit corporations.

 

ANS:

Examples could include churches, synagogues, private schools, colleges, and universities, many charities, labor unions, environmental groups, and other public interest organizations, American Red Cross, Boy Scouts of America, and the Salvation Army.  Incorrect answers would include incorporated towns and cities, cooperatives, and credit unions.

 

PTS:   1

 

4. Describe two relatively low-risk methods of getting involved in international business.

 

ANS:

Students should describe indirect exporting, direct exporting, management contracting, licensing, or franchising.

 

PTS:   1

 

5. What is the difference between licensing and franchising?

 

ANS:

Licensing is selling the right to use some intangible property such as a process, trademark, or brand name, while franchising is selling the right to use a company name or business process in a specific way, usually involving selling a product or service.

 

PTS:   1

 

6. Describe two different types of foreign direct investment.

 

ANS:

A foreign company may buy land or other resources in another country or it may buy a company in another country.

 

PTS:   1

 

ESSAY

 

1. Cheryl Cluxton has been making a wooden document organizer in her home workshop for friends.  Lately, other friends and acquaintances have been requesting that she make one for them.  She is considering starting a business to manufacture and sell these organizers.  After considering all the factors, she will begin as a sole proprietorship.  Explain why she probably made this decision.  Then briefly describe the circumstances under which she might want to expand to a proprietorship or corporation as the business grows.

 

ANS:

Answers should include the following concepts:

(1)  Sole proprietorship has the advantages of ease of starting, freedom to make decisions, keeping all the profits, and pride of ownership.

(2)  A partnership might become practical as the business expands and needs additional investment and/or additional skills a partner might contribute.

(3)  A corporation would facilitate additional investments and have tax advantages without the disadvantages of a partnership.

 

PTS:   1

 

2. Your long-time friend Dominic Chin has approached you to enter a partnership with him to create and market computer software.  You have outstanding programming skills and Dominic is outgoing and has outstanding human relations and sales skills.  What should you consider before going into partnership with Dominic?

 

ANS:

Answers should include the following points:

(1)  There should be a firm understanding and written agreement about investments and sharing of profits and losses that fairly represents the investment of money and ability to the partnership.

(2)  There should be full consideration of the risks of going into business with a friend because of the possibility of disagreements and the consequences of unlimited liability.

 

PTS:   1

 

3. You are the president of a less-developed country (LDC) on an island in the Pacific Ocean.  A wealthy multinational company (MNC) wishes to open a factory on your island.  Discuss the advantages and disadvantages and then make a decision about whether to allow the factory or not.

 

ANS:

Answers should include the following concepts:

(1)  Advantages: The MNC could provide jobs, products, services, and even improved infrastructure for the island nation.

(2)  Disadvantages: The MNC could be the dominant economic power, making the country totally dependent on its presence and success.  The MNC could also influence or even control the government.

(3)  The decision about allowing the MNC to open the factory will vary depending on student perceptions of MNCs. Students might acknowledge that there is not enough information provided to decide or state that the reputation and history of the MNC could be a determining factor.

 

PTS:   1

 

4. Describe three characteristics of successful multinational corporations.

 

ANS:

Answers should include three of the following concepts:

(1)  A competitive advantage.

(2)  Considers and adapts to different societies and countries.

(3)  World-wide market view.

(4)  Standardized product.

(5)  Culturally-sensitive hiring.

(6)  Both an international and local perspective.

 

PTS:   1