Chapter 4 - Choosing a Form of Business Ownership Test Yourself Matching Questions 1. 2. 3. 4. 5. It is an association of two or more business owners. A distribution of earnings to the stockholders of a corporation. This type of ownership is the simplest type of business to start. A person who invests only money in a partnership The concept of being personally responsible for all debts of a business. A business entity or artificial being with most of the legal rights of a person. An agreement between two or more groups to form a business entity in order to achieve a specific goal or to operate for a specific period of time. A financing method that uses borrowed money to pay for the company that is being taken over. 9. A temporary association of individuals or firms organized to perform a specific task that requires a large amount of capital. 10. A. A company chartered in a foreign country doing business in the United States. alien corporation b. joint venture c. syndicate d. leveraged buyout e. common stock f. limited partner g. S corporation h. corporation i. dividend j. partnership k sole proprietorship 1. unlimited liability 6. 7. 8 True False Questions 11. TUnlimited liability is an advantage of a sole proprietorship. 12. T F Preferred stockholders elect the board of directors that manage the day-to- day business activities of a corporation. 13. T F A conglomerate merger takes place between firms in completely different industries 14.T F A limited partner is responsible for any debts of the partnership, regardless of whether he or she was directly involved in the transaction that created the debt. 15. T F The articles of partnership is a written contract describing the terms of a partnership 16. T F Compared to a corporation, a partnership is more difficult and expensive to establish. 17. T F The Scorporation form of organization allows a corporation to avoid double taxation 18. T F Corporate officers are elected by the firm's stockholders. 19. T F The board of directors is directly responsible to the stockholders. 20. T F The amount paid for stock is the most a stockholder can lose in the corporate form of ownership. Multiple-Choice Questions a. 21 During college, Elyssa Wood earned extra money by using her culinary skills to cater special parties. After graduation, she decided to turn her part-time job into a full- time business that she plans to expand in the future. In the meantime, she wants to maintain complete control of the business. She will most likely organize the business as a a. limited partnership b. corporation c. general partnership d. sole proprietorship e. S corporation 22 Which of the following is not an advantage of a corporate form of ownership? It is easier to raise capital b. Ownership can be transferred easily and quickly c. The death of an owner does not terminate the corporation. d. Profits are taxed twice. e. The liability of the owners is limited 23. A corporation incorporated in Texas doing business in New York is known in New York as a domestic corporation b. Texas as a foreign corporation. c. Texas as a domestic corporation d. New York as an alien corporation. e. The firm cannot do business in New York 24. PepsiCo acquired Pizza Hut. What type of merger was this? Limited b. Syndicated c. Joint venture d. Horizontal Vertical 25. J.R. Imax, a financial investor, wants to control the Simex Company. So far he has been unsuccessful in purchasing enough stock to give him control. To reach his goal, which technique should he use to gather enough stockholder votes to control the company? Hostile takeover b. Leveraged buyout c. Merger d. Acquisition e. Proxy fight 26. A corporation whose stock is owned by relatively few people is called a(n) a limited corporation. b. open corporation c. closed corporation d. domestic corporation c. friendly corporation 27. When two business firms need large sums of money to finance a major project, they are likely to establish a a closed corporation b. syndicate c. new sole proprietorship business. d. Scorporation e. conglomerate venture. 28 The ability to combine skills and knowledge is an advantage of a a. partnership b. sole proprietorship c. limited venture. d. a joint venture a not-for-profit corporation 29 One of the advantages of an LLC is that owners have liability a. unlimited b. restricted c. special d. limited e. taxable 30. Unlimited liability means a. there is no limit on the amount an owner can borrow. b. creditors will absorb any loss from nonpayment of debt. c. the business can borrow money for any type of purchase. d. the owner is responsible for all business debts. c. stockholders can borrow money from the business e. a. e a