Question 1

Sandy Beech,a talented fashion designer who wants to start her own women's swimwear and beach towel line,is trying to decide which form of business ownership is right for her.As a young mother who aspires to send her children to college some day,she does not want to jeopardize her savings account in any way.In order to overcome these risks,Sandy should start her business as a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 2

When a sole proprietor dies:

Accepted Answer

A)  The sole proprietor's heirs have the option of taking over the business.
B)  The business is sold to a larger corporation.
C)  The company continues to function as it always has.
D)  The company always closes down.E) None of the above
F) C) and D)

Question 3

The owners of a corporation are known as general corporate partners.

Accepted Answer

A) True 
 B)False

Question 4

Chipper's Golf Resort has the opportunity to buy 1000 acres of property adjacent to its 18-hole golf course.After talking with her banker,the owner is encouraged to begin the paperwork to change from a Limited Liability Company form of business ownership to a corporation.You applaud this strategy because she will eliminate the problem of double taxation.

Accepted Answer

A) True 
 B)False

Question 5

An attempt by employees,management,or a group of investors to purchase an organization primarily through borrowing is called a(n) :

Accepted Answer

A)  Golden parachute.
B)  Arbitrage agreement.
C)  Factor transaction.
D)  Leveraged buyout.E) B) and D)
F) A) and D)

Question 6

A corporation can raise financial capital by selling shares of stock to interested investors.

Accepted Answer

A) True 
 B)False

Question 7

Compared to a sole proprietorship,which of the following is considered an advantage of a general partnership?

Accepted Answer

A)  Ability to pool financial resources
B)  Unlimited liability for all owners
C)  Division of profits among owners
D)  Ease and flexibility in transferring shares of ownership to othersE) A) and B)
F) C) and D)

Question 8

Stock options are the right to purchase shares of the corporation for a fixed price.

Accepted Answer

A) True 
 B)False

Question 9

When two companies in the same industry agree to become one firm,the result is called a:

Accepted Answer

A)  Vertical merger.
B)  Joint venture.
C)  Monopoly.
D)  Horizontal merger.E) C) and D)
F) A) and B)

Question 10

By filling out the correct paperwork annually,any corporation can qualify to be classified as an S corporation.

Accepted Answer

A) True 
 B)False

Question 11

What is a C corporation? What are the major advantages and disadvantages of this form of business ownership?

Accepted Answer

The C corporation is a state-chartered l...

Question 12

One disadvantage of a limited liability company is that it:

Accepted Answer

A)  Requires all earnings of the business be taxed at the corporate rate.
B)  Has a limited life span.
C)  Requires the owners to divide up profits and losses in a fixed proportion.
D)  Has a more restrictive ownership requirement than S corporations.E) B) and D)
F) B) and C)

Question 13

A cooperative is simply another name for a corporation.

Accepted Answer

A) True 
 B)False

Question 14

An entrepreneur who wishes to start a business with little delay or hassle,and who wants to be his or her own boss,should organize the business as a:

Accepted Answer

A)  Sole proprietorship.
B)  Cooperative.
C)  C corporation.
D)  General partnership.E) A) and C)
F) A) and B)

Question 15

Recent figures indicate that franchising has declined in importance over the last ten years.

Accepted Answer

A) True 
 B)False

Question 16

A(n) ___________ is an arrangement whereby someone with proven idea for a business sells the rights to use the business model,to sell a product or service to others in a given territory.

Accepted Answer

A)  conditional grant
B)  franchise agreement
C)  trade contract
D)  extended ownership agreementE) None of the above
F) A) and B)

Question 17

A horizontal merger refers to a merger between two companies in the same industry,and serving the same markets.

Accepted Answer

A) True 
 B)False

Question 18

When two firms who do not participate in the same industries,for example a software company and a fast food restaurant company decide to merge,the result is called a ____________ merger.

Accepted Answer

A)  vertical
B)  horizontal
C)  linear
D)  conglomerateE) B) and C)
F) A) and B)

Question 19

Mel,Tim,and Bill agreed to partner in a small rehab business.Initially,they were enthusiastic contributors until their first project took more work than Mel initially estimated;Tim wanted morning meetings and long lunch hours;and,Bill decided to go on vacation even though the project was not complete and ready to sell.As the Spotlight on Small Business box,titled,"Pick Your Partners Wisely" indicates,

Accepted Answer

A)  It's smart to begin the partnership with honest communication of what each partner expects to give and get from the partnership.
B)  Organize the business as a limited liability company to reduce the financial risks that put pressure on members of the partnership.
C)  Designate one of the partners as the primary partner with final authority to call all the shots.
D)  Enter into partnerships with people who have similar educational and cultural backgrounds and similar personalities.E) None of the above
F) All of the above

Question 20

The form of business ownership best suited to raising large amounts of money for expansion is the:

Accepted Answer

A)  Sole proprietorship.
B)  Partnership.
C)  Corporation.
D)  Cooperative.E) All of the above
F) A) and B)

Exam 5: How to Form a Business

What is a C corporation? What are the major advantages and disadvantages of this form of business ownership?

Correct Answer
verified
The C corporation is a state-chartered l...
View Answer

Stock options are the right to purchase shares of the corporation for a fixed price.

Correct Answer
verified

An entrepreneur who wishes to start a business with little delay or hassle,and who wants to be his or her own boss,should organize the business as a:

Correct Answer
verified

When two firms who do not participate in the same industries,for example a software company and a fast food restaurant company decide to merge,the result is called a ____________ merger.

Correct Answer
verified

Correct Answer
verified

A cooperative is simply another name for a corporation.

Correct Answer
verified

When a sole proprietor dies:

Correct Answer
verified

One disadvantage of a limited liability company is that it:

Correct Answer
verified

The owners of a corporation are known as general corporate partners.

Correct Answer
verified

Correct Answer
verified

Recent figures indicate that franchising has declined in importance over the last ten years.

Correct Answer
verified

A(n) ___________ is an arrangement whereby someone with proven idea for a business sells the rights to use the business model,to sell a product or service to others in a given territory.

Correct Answer
verified

A horizontal merger refers to a merger between two companies in the same industry,and serving the same markets.

Correct Answer
verified

By filling out the correct paperwork annually,any corporation can qualify to be classified as an S corporation.

Correct Answer
verified

An attempt by employees,management,or a group of investors to purchase an organization primarily through borrowing is called a(n) :

Correct Answer
verified

Correct Answer
verified

The form of business ownership best suited to raising large amounts of money for expansion is the:

Correct Answer
verified

A corporation can raise financial capital by selling shares of stock to interested investors.

Correct Answer
verified

When two companies in the same industry agree to become one firm,the result is called a:

Correct Answer
verified

Compared to a sole proprietorship,which of the following is considered an advantage of a general partnership?

Correct Answer
verified

Exam 5: How to Form a Business

What is a C corporation? What are the major advantages and disadvantages of this form of business ownership?

Correct AnswerverifiedThe C corporation is a state-chartered l...View AnswerShow Answer

Stock options are the right to purchase shares of the corporation for a fixed price.

Correct AnswerverifiedShow Answer

An entrepreneur who wishes to start a business with little delay or hassle,and who wants to be his or her own boss,should organize the business as a:

Correct AnswerverifiedShow Answer

When two firms who do not participate in the same industries,for example a software company and a fast food restaurant company decide to merge,the result is called a ____________ merger.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A cooperative is simply another name for a corporation.

Correct AnswerverifiedShow Answer

When a sole proprietor dies:

Correct AnswerverifiedShow Answer

One disadvantage of a limited liability company is that it:

Correct AnswerverifiedShow Answer

The owners of a corporation are known as general corporate partners.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Recent figures indicate that franchising has declined in importance over the last ten years.

Correct AnswerverifiedShow Answer

A(n) ___________ is an arrangement whereby someone with proven idea for a business sells the rights to use the business model,to sell a product or service to others in a given territory.

Correct AnswerverifiedShow Answer

A horizontal merger refers to a merger between two companies in the same industry,and serving the same markets.

Correct AnswerverifiedShow Answer

By filling out the correct paperwork annually,any corporation can qualify to be classified as an S corporation.

Correct AnswerverifiedShow Answer

An attempt by employees,management,or a group of investors to purchase an organization primarily through borrowing is called a(n) :

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The form of business ownership best suited to raising large amounts of money for expansion is the:

Correct AnswerverifiedShow Answer

A corporation can raise financial capital by selling shares of stock to interested investors.

Correct AnswerverifiedShow Answer

When two companies in the same industry agree to become one firm,the result is called a:

Correct AnswerverifiedShow Answer

Compared to a sole proprietorship,which of the following is considered an advantage of a general partnership?

Correct AnswerverifiedShow Answer

Correct Answer
verified
The C corporation is a state-chartered l...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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