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| 1 | |
A __________ is a business with one owner who assumes unlimited liability. |
| | A) | sole proprietorship |
| | B) | limited partnership |
| | C) | corporation |
| | D) | cooperative |
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| 2 | |
Greg's band wants to form a partnership. General partners will include the drummer, two guitarists, one keyboardist, and one singer. Greg's great-uncle, a musician in his own right plans to provide $30,000, but does not plan to participate in the gigs, only in the profits. The band will form a _______________. |
| | A) | Sole Proprietorship |
| | B) | General Partnership |
| | C) | Limited Liability Company |
| | D) | Limited Partnership |
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| 3 | |
Jim and Sherry run Lawns for Less, Inc., a commercial lawn cutting service. The couple supplements their income with the rentals from a few apartment buildings that they own. They incorporated the lawn care business in order to keep it separate from their other income. As a C-corporation, if the business should fail, the couple would: |
| | A) | lose their personal assets as the result of their company's financial problems. |
| | B) | lose only the funds they originally invested in their company. |
| | C) | lose only the potential profits. |
| | D) | more likely lose business assets, including the apartments. |
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| 4 | |
A separation between ownership and management is most likely to occur in a: |
| | A) | sole proprietorship. |
| | B) | general partnership. |
| | C) | corporation. |
| | D) | limited liability partnership. |
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| 5 | |
One reason limited liability companies have become so popular is that they: |
| | A) | can be taxed either as a corporation or as a partnership. Owners can choose the tax treatment that is most advantageous for their situation. |
| | B) | allow owners to sell their interests in the company without requiring approval from other owners. |
| | C) | have unlimited life. |
| | D) | allow owners to avoid paying self-employment taxes on the company's profits. |
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| 6 | |
In a leveraged buyout, the managers of a firm, its employees, or other investors attempt to: |
| | A) | move the company elsewhere and start over. |
| | B) | obtain the assets of the company through bankruptcy proceedings. |
| | C) | use borrowed funds to buy out the firm's stockholders. |
| | D) | negotiate a merger with another firm to create a conglomerate. |
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| 7 | |
Trans Globe Airlines recently merged with Royal Blue Airlines, a financially troubled rival. The firms' management believes the merger will create a stronger company that can offer travelers more flights to a wider variety of destinations. This proposed merger is an example of a: |
| | A) | conglomerate merger. |
| | B) | leveraged buyout. |
| | C) | horizontal merger. |
| | D) | joint venture. |
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| 8 | |
An evaluation of franchising would conclude that this type of arrangement: |
| | A) | has become the dominant form of business organization in the United States because it has many advantages and almost no disadvantages. |
| | B) | appeals to people who want to own a business, but are not comfortable starting a company from scratch. |
| | C) | has a much higher risk of failure than independent companies. |
| | D) | has little chance of success outside the United States because many foreign countries do not allow such arrangements. |
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| 9 | |
Midas Muffler sells franchises to prospective business persons 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 ____________. |
| | A) | owner; limited partner |
| | B) | co-signer; co-signee |
| | C) | franchisor; franchisee |
| | D) | wholesaler; retailer |
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| 10 | |
A ___________ is an organization that is owned and controlled by the people who use it—producers, consumers and workers with similar needs who pool their resources for mutual gain. |
| | A) | corporation |
| | B) | limited partnership |
| | C) | mutual fund |
| | D) | cooperative |
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