Question 1

Franchisors give franchisees the right to use their name and product, with the understanding that franchisees obtain all financing and develop all marketing strategies on their own.

Accepted Answer

A) True 
 B)False

Question 2

A disadvantage of farm cooperatives is that they are subject to higher tax rates than corporations.

Accepted Answer

A) True 
 B)False

Question 3

Nutty Dough is a small chain of donut shops currently owned and operated by a group of seven partners. The owners think that their chain has the potential for rapid growth, but several of the partners are concerned about the growing financial risks that will accompany this growth. One way the partners could deal with this problem would be to incorporate their business.

Accepted Answer

A) True 
 B)False

Question 4

If you want to sell your ownership in a publicly traded corporation, you find someone willing to buy your shares.

Accepted Answer

A) True 
 B)False

Question 5

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:

Accepted Answer

A)  Automatically continues under new management as a sole proprietorship.
B)   Automatically converts into a public corporation with stock sold to interested investors.
C)  Ceases to exist unless sold or taken over by Joe's heirs.
D)  Becomes the property of the most senior employee who wishes to continue operating the firm.E) B) and D)
F) B) and C)

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Several years ago. Regis Corporation, a very large hair styling salon company purchased 60 "Your Father's Mustache" salons. Although this was initially an acquisition, the merging of these two businesses was a(n)  . Regis went on to purchase several hair care product companies. Joining forces with hair care product companies would represent a .

Accepted Answer

A)  conglomerate merger; horizontal merger
B)   vertical merger; horizontal merger
C)  horizontal merger; vertical merger
D)  conglomerate merger; conglomerate mergerE) B) and D)
F) None of the above

Question 8

The most popular type of business for franchising is:

Accepted Answer

A)  Consumer wholesale firms.
B)  Restaurants.
C)   Specialty steel manufacturing.
D)  Medical services.E) B) and D)
F) A) and D)

Question 9

Which of the following statements about operating a U.S.-based franchise in a foreign country is most accurate?

Accepted Answer

A)  U.S.-based franchises are most likely to succeed in a foreign market if they use the same strategies and procedures used by franchises in the United States.
B)   There are limited opportunities for U.S.-based franchises to open in foreign countries because, aside from Canada, Mexico, and a small number of European countries, most foreign nations do not allow American-owned franchises to operate within their borders.
C)  The operating costs for franchises in foreign countries may be fairly high, but chances for success are quite good, because competition is likely to be less intense and the customer base in many foreign countries is expanding.
D)  It is difficult for U.S.-based franchises to succeed in most foreign countries because the low incomes of most households in theseE) A) and C)
F) A) and B)

Question 10

Compared to the C-corporation, the limited liability company is an attractive form of business ownership because:

Accepted Answer

A)  Even though it is a little more expensive to form, it has a longer life than the C-corporation.
B)   A limited liability company permits one owner to own all the stock of the company, whereas a C-corporation requires several owners.
C)   Once formed the limited liability company is a legal form of business ownership, worldwide, whereas the C-corporation must file for corporate status in each nation it elects to do business.
D)  Once formed, the limited liability company does not require the firm to hold annual meetings, and has the option to avoid double taxation.E) None of the above
F) B) and C)

Question 11

A type of partnership called a acts much like a corporation and is traded on stock exchanges, but it is taxed like a partnership with profits passing through to the owners and taxed as the owner's personal income.

Accepted Answer

A)  limited partnership
B)   combined general partnership
C)   cooperative partnership
D)  master limited partnershipE) B) and D)
F) B) and C)

Question 12

A limited liability company is similar to an S corporation, but without the special eligibility requirements.

Accepted Answer

A) True 
 B)False

Question 13

Greg plans to open up three Hottie Pata′tee franchises in the greater Denver area. He just informed you that he plans to negotiate with the franchisor to eliminate the Big Potato Head that graces the roof of these restaurants. Greg is likely to learn that:

Accepted Answer

A)  The parent company will give him a start-up cost break for the same amount that it would have to pay for three of these signs.
B)   He is making a smart decision because it is not the sign that will bring customers to his potato bar. It is the wide-selection of toppings and six different ways he will cook potatoes.
C)  It is non-negotiable due to company rules.
D)  His failure rate will not increase or decrease because franchises traditionally have low failure rates.E) All of the above
F) A) and B)

Question 14

Stockholders in a corporation accept unlimited liability for the corporation's debts.

Accepted Answer

A) True 
 B)False

Question 15

comprise about 20% of all businesses but account for about 81% of U.S. business receipts.

Accepted Answer

A)  Corporations
B)   Partnerships
C)   Sole proprietorships
D)  Limited liability companiesE) C) and D)
F) A) and B)

Question 16

If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate.

Accepted Answer

A) True 
 B)False

Question 17

Trevor and Tyler own all the stock in the Double T Corporation. The stock of this corporation is not sold to the general public. Trevor and Tyler own a:

Accepted Answer

A)  Limited liability company.
B)   Master limited partnership.
C)   Alien corporation.
D)  Closed corporation.E) A) and B)
F) A) and C)

Question 18

A major objective of limited liability partnerships (LLPs) is to limit each partner's personal liability to the consequences of their own acts and those of people under their supervision.

Accepted Answer

A) True 
 B)False

Question 19

Taking a firm private means turning a profit-seeking corporation into a nonprofit corporation in order to avoid a hostile takeover.

Accepted Answer

A) True 
 B)False

Question 20

According to recent data, 80% of all franchises are restaurants.

Accepted Answer

A) True 
 B)False

Exam 5: How to Form a Business

Correct Answer
verified

Franchisors give franchisees the right to use their name and product, with the understanding that franchisees obtain all financing and develop all marketing strategies on their own.

Correct Answer
verified

Compared to the C-corporation, the limited liability company is an attractive form of business ownership because:

Correct Answer
verified

Trevor and Tyler own all the stock in the Double T Corporation. The stock of this corporation is not sold to the general public. Trevor and Tyler own a:

Correct Answer
verified

A type of partnership called a acts much like a corporation and is traded on stock exchanges, but it is taxed like a partnership with profits passing through to the owners and taxed as the owner's personal income.

Correct Answer
verified

Greg plans to open up three Hottie Pata′tee franchises in the greater Denver area. He just informed you that he plans to negotiate with the franchisor to eliminate the Big Potato Head that graces the roof of these restaurants. Greg is likely to learn that:

Correct Answer
verified

If you want to sell your ownership in a publicly traded corporation, you find someone willing to buy your shares.

Correct Answer
verified

Stockholders in a corporation accept unlimited liability for the corporation's debts.

Correct Answer
verified

If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate.

Correct Answer
verified

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

Correct Answer
verified

Taking a firm private means turning a profit-seeking corporation into a nonprofit corporation in order to avoid a hostile takeover.

Correct Answer
verified

Which of the following statements about operating a U.S.-based franchise in a foreign country is most accurate?

Correct Answer
verified

According to recent data, 80% of all franchises are restaurants.

Correct Answer
verified

A limited liability company is similar to an S corporation, but without the special eligibility requirements.

Correct Answer
verified

A major objective of limited liability partnerships (LLPs) is to limit each partner's personal liability to the consequences of their own acts and those of people under their supervision.

Correct Answer
verified

Correct Answer
verified

A disadvantage of farm cooperatives is that they are subject to higher tax rates than corporations.

Correct Answer
verified

comprise about 20% of all businesses but account for about 81% of U.S. business receipts.

Correct Answer
verified

The most popular type of business for franchising is:

Correct Answer
verified

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:

Correct Answer
verified

Exam 5: How to Form a Business

Correct AnswerverifiedShow Answer

Franchisors give franchisees the right to use their name and product, with the understanding that franchisees obtain all financing and develop all marketing strategies on their own.

Correct AnswerverifiedShow Answer

Compared to the C-corporation, the limited liability company is an attractive form of business ownership because:

Correct AnswerverifiedShow Answer

Trevor and Tyler own all the stock in the Double T Corporation. The stock of this corporation is not sold to the general public. Trevor and Tyler own a:

Correct AnswerverifiedShow Answer

A type of partnership called a acts much like a corporation and is traded on stock exchanges, but it is taxed like a partnership with profits passing through to the owners and taxed as the owner's personal income.

Correct AnswerverifiedShow Answer

Greg plans to open up three Hottie Pata′tee franchises in the greater Denver area. He just informed you that he plans to negotiate with the franchisor to eliminate the Big Potato Head that graces the roof of these restaurants. Greg is likely to learn that:

Correct AnswerverifiedShow Answer

If you want to sell your ownership in a publicly traded corporation, you find someone willing to buy your shares.

Correct AnswerverifiedShow Answer

Stockholders in a corporation accept unlimited liability for the corporation's debts.

Correct AnswerverifiedShow Answer

If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Taking a firm private means turning a profit-seeking corporation into a nonprofit corporation in order to avoid a hostile takeover.

Correct AnswerverifiedShow Answer

Which of the following statements about operating a U.S.-based franchise in a foreign country is most accurate?

Correct AnswerverifiedShow Answer

According to recent data, 80% of all franchises are restaurants.

Correct AnswerverifiedShow Answer

A limited liability company is similar to an S corporation, but without the special eligibility requirements.

Correct AnswerverifiedShow Answer

A major objective of limited liability partnerships (LLPs) is to limit each partner's personal liability to the consequences of their own acts and those of people under their supervision.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A disadvantage of farm cooperatives is that they are subject to higher tax rates than corporations.

Correct AnswerverifiedShow Answer

comprise about 20% of all businesses but account for about 81% of U.S. business receipts.

Correct AnswerverifiedShow Answer

The most popular type of business for franchising is:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

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