Question 1

An acquisition is when one company buys the property and obligations of another company.

Accepted Answer

A) True 
 B)False

Question 2

According to the Spotlight on Small Business box,"Pick Your Partners Wisely",it is really not necessary to interview your prospective partner carefully,especially if they are an old friend.

Accepted Answer

A) True 
 B)False

Question 3

The strategy of investors who are attempting a leveraged buyout is to:

Accepted Answer

A)  Shape up the company for quick resale.
B)  Use debt to finance the buyout of the firm's stockholders and gain control of the firm themselves.
C)  Secure ownership of all of the existing stock in a company by issuing and selling large amounts of new stock.
D)  Use investment tax credits from the government to acquire all of the physical assets owned by the firm.E) All of the above
F) A) and B)

Question 4

The financial advantage to the parent company (the franchisor)in a franchise arrangement is the upfront franchise fee and the collection of royalties if franchisees are successful.

Accepted Answer

A) True 
 B)False

Question 5

According to the Uniform Partnership Act, the three key elements of any general partnership are (1) shares of stock to represent ownership, (2) limited liability, and (3) ease of ownership transfer.

Accepted Answer

A) True 
 B)False

Question 6

Like stockholders of a C corporation,owners of a limited liability company (LLC)are free to sell their ownership without the approval of other members.

Accepted Answer

A) True 
 B)False

Question 7

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) C) and D)
F) A) and B)

Question 8

Two important considerations when choosing a form of business ownership is:

Accepted Answer

A)  Number of employees and banking access.
B)  Taxes and liability.
C)  Liability and number of hours of work per week.
D)  Number of small businesses vs.large businesses currently formed and percentage of profits that each form brings to the nation's GDP.E) B) and C)
F) A) and D)

Question 9

Earnings of C (conventional) corporations can be:

Accepted Answer

A)  Taxed twice if they are distributed as dividends to stockholders.
B)  Taxed at twice the going rate of a partnership or sole proprietorship.
C)  Taxed by the federal government,but they are exempt from state taxes if the corporation owns any facilities within that state.
D)  Taxed the same as a partnership.E) B) and D)
F) A) and C)

Question 10

Maria has a lot of self-confidence and business knowledge.She recently opened a bakery as a sole proprietor.She is expecting a high level of profits and is looking forward to:

Accepted Answer

A)  The lower corporate tax rate paid by sole proprietorships.
B)  Keeping all of the money she earns except for the taxes she is required to pay.
C)  Keeping all of the money she earns since she does not have to pay taxes as a sole proprietor.
D)  Easily raising additional large sums of money from the capital markets since she is a sole proprietor.E) B) and D)
F) A) and C)

Question 11

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 12

the right to participate in managing the operations of the business.

Accepted Answer

A) True 
 B)False

Question 13

Continental Foods is considering a conglomerate merger with a company that makes storage solutions.A likely reason is:

Accepted Answer

A)  Expand its market share.
B)  Develop spin-off companies.
C)  Diversification.
D)  Meet the requirements to convert to a limited liability company.E) B) and C)
F) None of the above

Question 14

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:

Accepted Answer

A)  Achieve both goals since this form of ownership is both the easiest to form and the least risky.
B)  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.
C)  Not achieve either goal since proprietorships are both costly to set up and subject to unlimited liability.
D)  Achieve her second goal,since the owners of sole proprietorships are legally protected from losing more than the amount they invest in their company.However,she would find that the start-up costs would be higher than if she had incorporated her business.E) C) and D)
F) A) and D)

Question 15

Although it is a small company,Zorn Enterprises owns a large number of inexpensive rental housing units in Texas and Louisiana.Currently,the company is a chartered C-corporation,but the owners are interested in switching to an S corporation.After consulting a lawyer,they learned that Zorn Enterprises does not qualify to be designated as an S corporation.Which of the following characteristics of Zorn Enterprises would prevent it from becoming an S corporation?

Accepted Answer

A)  The firm has fewer than 75 stockholders.
B)  The firm is chartered in one state,but owns property in another.
C)  The firm has only one class of stock,all owned by U.S.citizens.
D)  The firm receives more than 70 percent of its income from rents and other passive sources.E) None of the above
F) All of the above

Question 16

Farm cooperatives were originally established to help farmers increase their economic power by acting as a group rather than as individuals.

Accepted Answer

A) True 
 B)False

Question 17

It is not unusual for members of cooperatives to work for and help manage their cooperative.

Accepted Answer

A) True 
 B)False

Question 18

If a firm is advertising that it is selling franchise opportunities,the prospective franchisee can be assured that the government has performed due diligence on this company,and has deemed it a safe investment.

Accepted Answer

A) True 
 B)False

Question 19

An owner of a corporation is known as a(n) :

Accepted Answer

A)  General partner.
B)  Limited partner.
C)  Director.
D)  Stockholder.E) All of the above
F) A) and B)

Question 20

One reason franchises have become so popular is that this arrangement provides the franchisee with:

Accepted Answer

A)  A nationally recognized name and product.
B)  A low cost way to start a business.
C)  Limited liability.
D)  The right to retain all profits earned by their franchise.E) A) and B)
F) B) and C)

Exam 5: How to Form a Business

Maria has a lot of self-confidence and business knowledge.She recently opened a bakery as a sole proprietor.She is expecting a high level of profits and is looking forward to:

Correct Answer
verified

If a firm is advertising that it is selling franchise opportunities,the prospective franchisee can be assured that the government has performed due diligence on this company,and has deemed it a safe investment.

Correct Answer
verified

The financial advantage to the parent company (the franchisor)in a franchise arrangement is the upfront franchise fee and the collection of royalties if franchisees are successful.

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

the right to participate in managing the operations of the business.

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

Farm cooperatives were originally established to help farmers increase their economic power by acting as a group rather than as individuals.

Correct Answer
verified

An acquisition is when one company buys the property and obligations of another company.

Correct Answer
verified

Correct Answer
verified

According to the Spotlight on Small Business box,"Pick Your Partners Wisely",it is really not necessary to interview your prospective partner carefully,especially if they are an old friend.

Correct Answer
verified

One reason franchises have become so popular is that this arrangement provides the franchisee with:

Correct Answer
verified

Earnings of C (conventional) corporations can be:

Correct Answer
verified

Two important considerations when choosing a form of business ownership is:

Correct Answer
verified

An owner of a corporation is known as a(n) :

Correct Answer
verified

Continental Foods is considering a conglomerate merger with a company that makes storage solutions.A likely reason is:

Correct Answer
verified

It is not unusual for members of cooperatives to work for and help manage their cooperative.

Correct Answer
verified

The strategy of investors who are attempting a leveraged buyout is to:

Correct Answer
verified

Like stockholders of a C corporation,owners of a limited liability company (LLC)are free to sell their ownership without the approval of other members.

Correct Answer
verified

Correct Answer
verified

According to the Uniform Partnership Act, the three key elements of any general partnership are (1) shares of stock to represent ownership, (2) limited liability, and (3) ease of ownership transfer.

Correct Answer
verified

Exam 5: How to Form a Business

Maria has a lot of self-confidence and business knowledge.She recently opened a bakery as a sole proprietor.She is expecting a high level of profits and is looking forward to:

Correct AnswerverifiedShow Answer

If a firm is advertising that it is selling franchise opportunities,the prospective franchisee can be assured that the government has performed due diligence on this company,and has deemed it a safe investment.

Correct AnswerverifiedShow Answer

The financial advantage to the parent company (the franchisor)in a franchise arrangement is the upfront franchise fee and the collection of royalties if franchisees are successful.

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

the right to participate in managing the operations of the business.

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

Farm cooperatives were originally established to help farmers increase their economic power by acting as a group rather than as individuals.

Correct AnswerverifiedShow Answer

An acquisition is when one company buys the property and obligations of another company.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to the Spotlight on Small Business box,"Pick Your Partners Wisely",it is really not necessary to interview your prospective partner carefully,especially if they are an old friend.

Correct AnswerverifiedShow Answer

One reason franchises have become so popular is that this arrangement provides the franchisee with:

Correct AnswerverifiedShow Answer

Earnings of C (conventional) corporations can be:

Correct AnswerverifiedShow Answer

Two important considerations when choosing a form of business ownership is:

Correct AnswerverifiedShow Answer

An owner of a corporation is known as a(n) :

Correct AnswerverifiedShow Answer

Continental Foods is considering a conglomerate merger with a company that makes storage solutions.A likely reason is:

Correct AnswerverifiedShow Answer

It is not unusual for members of cooperatives to work for and help manage their cooperative.

Correct AnswerverifiedShow Answer

The strategy of investors who are attempting a leveraged buyout is to:

Correct AnswerverifiedShow Answer

Like stockholders of a C corporation,owners of a limited liability company (LLC)are free to sell their ownership without the approval of other members.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to the Uniform Partnership Act, the three key elements of any general partnership are (1) shares of stock to represent ownership, (2) limited liability, and (3) ease of ownership transfer.

Correct AnswerverifiedShow Answer

Correct Answer
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