Multiple Choice Questions

Sole proprietorships
  • An owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment.
  • An owner (partner) who has unlimited liability and is active in managing the firm.
  • A business owned and managed by one person.
  • A corporation receives its charter from a state government.
The organizational structure of a corporation permits:
  • stockholders to elect the Board of Directors.
  • to protect his/her other assets with limited liability.
  • Shared management and pooled skills
  • borrow funds to buy out the firm's stockholders.
An evaluation of franchising would conclude that this type of arrangement:
  • has a limited life span.
  • consult an attorney and put their agreement in writing.
  • general
  • appeals to people who want to own a business, but are not comfortable starting a company from scratch.
Corporations
  • A partnership that looks much like a corporation (in that it acts like a corporation and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate income tax.
  • The responsibility of a business's owners for losses only up to the amount they invest; limited partners and shareholders (stockholders) have limited liability.
  • A partnership that limits partners' risk of losing their personal assets to only their own acts.
  • A business that is separate and distinct from the owners. A legal entity with authority to act and have liability apart from its owners.
The __________ is usually the easiest form of business to start and end.
  • sole proprietorship
  • cooperatives
  • acquisition
  • royalty
In a leveraged buyout, the managers of a firm, its employees, or other investors:
  • the firm's stock is no longer available for purchase on the open market.
  • Shared management and pooled skills
  • stockholders to elect the Board of Directors.
  • borrow funds to buy out the firm's stockholders.
Which of the following statements best summarizes the experience of American franchisors in foreign countries?
  • Shared management and pooled skills
  • Joe is intrigued by the idea of combining his time and resources with many other people to operate a business providing a good or service that they all will use.
  • Both large and small franchises have found success in foreign countries by providing convenience and a predictable level of service and quality.
  • A major drawback of a partnership is that it is difficult to terminate.
The most popular type of business for franchising is:
  • restaurants
  • stockholders to elect the Board of Directors.
  • sole proprietorship
  • cooperatives
General Partner
  • A business owned and managed by one person.
  • A corporation receives its charter from a state government.
  • An owner (partner) who has unlimited liability and is active in managing the firm.
  • An owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment.
Limited Liability Partnership (LLP)
  • taxed twice if they are distributed as dividends to stockholders.
  • A partnership that limits partners' risk of losing their personal assets to only their own acts.
  • the firm's stock is no longer available for purchase on the open market.
  • The responsibility of a business's owners for losses only up to the amount they invest; limited partners and shareholders (stockholders) have limited liability.
Halle wants to start a business. She has two goals. First, given her limited personal wealth and eagerness to get started, she wants to get her business up and running with the least possible hassle and expense. Second, she wants to minimize her personal risk in the event that her company experiences difficulties. If Halle chooses a sole proprietorship, she would:
  • A partnership that looks much like a corporation (in that it acts like a corporation and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate income tax.
  • Joe is intrigued by the idea of combining his time and resources with many other people to operate a business providing a good or service that they all will use.
  • Both large and small franchises have found success in foreign countries by providing convenience and a predictable level of service and quality.
  • meet her first goal since sole proprietorships are easy and inexpensive to form. However, she would expose herself to personal risk because owners of sole proprietorships have unlimited liability
The reason a professional such as a lawyer or doctor would incorporate his/her business is:
  • to protect his/her other assets with limited liability.
  • borrow funds to buy out the firm's stockholders.
  • ceases to exist unless sold or taken over by Joe's heirs.
  • stockholders to elect the Board of Directors.
Joe Jackson operates a sole proprietorship, but he is in poor health and may be unable to continue running the business. If Joe becomes incapacitated, his business:
  • borrow funds to buy out the firm's stockholders.
  • taxed twice if they are distributed as dividends to stockholders.
  • to protect his/her other assets with limited liability.
  • ceases to exist unless sold or taken over by Joe's heirs.
Which of the following statements about the operation of a corporation is correct?
  • A corporation receives its charter from a state government.
  • An owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment.
  • A business owned and managed by one person.
  • An owner (partner) who has unlimited liability and is active in managing the firm.
One disadvantage of a limited liability company is that it:
  • general
  • has a limited life span.
  • appeals to people who want to own a business, but are not comfortable starting a company from scratch.
  • consult an attorney and put their agreement in writing.
Partnerships
  • When 2 or more people legally agree to become co-owners of a business.
  • vertical, horizontal, and conglomerate.
  • A business that is separate and distinct from the owners. A legal entity with authority to act and have liability apart from its owners.
  • taxed twice if they are distributed as dividends to stockholders.
Midas Muffler sells franchises to prospective businesspersons who want to use the Midas name and offer Midas products. In a franchise arrangement, Midas would be the ________, and the buyer of the franchise is the ________.
  • Double taxation of earnings.
  • sole proprietorship
  • franchisor; franchisee
  • ceases to exist unless sold or taken over by Joe's heirs.
Three types of corporate mergers are:
  • vertical, horizontal, and conglomerate.
  • the firm's stock is no longer available for purchase on the open market.
  • Shared management and pooled skills
  • stockholders to elect the Board of Directors.
Limited Partner
  • appeals to people who want to own a business, but are not comfortable starting a company from scratch.
  • An owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment.
  • A business owned and managed by one person.
  • An owner (partner) who has unlimited liability and is active in managing the firm.
Master Limited Partnership(MLP)
  • The responsibility of a business's owners for losses only up to the amount they invest; limited partners and shareholders (stockholders) have limited liability.
  • A partnership that looks much like a corporation (in that it acts like a corporation and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate income tax.
  • A partnership that limits partners' risk of losing their personal assets to only their own acts.
  • A business that is separate and distinct from the owners. A legal entity with authority to act and have liability apart from its owners.
Which of the following is an advantage of a partnership?
  • A major drawback of a partnership is that it is difficult to terminate.
  • Shared management and pooled skills
  • Both large and small franchises have found success in foreign countries by providing convenience and a predictable level of service and quality.
  • Double taxation of earnings.
Earnings of C corporations can be:
  • A partnership that limits partners' risk of losing their personal assets to only their own acts.
  • the firm's stock is no longer available for purchase on the open market.
  • taxed twice if they are distributed as dividends to stockholders.
  • to protect his/her other assets with limited liability.
Which of the following is normally considered a disadvantage of the corporate form of business?
  • Shared management and pooled skills
  • Joe is intrigued by the idea of combining his time and resources with many other people to operate a business providing a good or service that they all will use.
  • Double taxation of earnings.
  • Both large and small franchises have found success in foreign countries by providing convenience and a predictable level of service and quality.
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Multiple Choice Questions
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