Question 1:

A business that is owned by one individual is a __________.

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Part 1

A.

sole proprietorship

B.

master limited partnership

C.

corporation

D.

partnership

E.

limited liability company

Question 2:

What is a disadvantage of operating a sole proprietorship?

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Part 1

A.

Privacy

B.

Simplicity

C.

Single layer of taxation

D.

Finite life span

E.

Flexibility and control

Question 3:

Which statement describes the advantage of operating a sole proprietorship?

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Part 1

A.

Sole proprietors have more privacy and generally are not required to report anything to anyone.

B.

Sole proprietorships are liquid, which also helps give them a long life span; when shareholders sell or bequeath their shares, ownership simply passes to a new generation, so to speak.

C.

An important financial advantage in many sole proprietorships is the opportunity to share costs.

D.

In a sole proprietorship, the owner and the business are legally inseparable.

E.

Sole proprietorships have the ability to pool money by selling shares of stock to outside investors.

Question 4:

Which one of the following statements describes a disadvantage of operating a sole proprietorship?

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Part 1

A.

Sole proprietors are required to get approval from a business partner, boss, or board of directors to change any aspect of their business strategy or tactics.

B.

Sole proprietors have less privacy and generally are required to report everything to others in the business.

C.

Sole proprietorships have fewer financial resources and fewer ways to get additional funds from lenders or investors.

D.

A sole proprietorship is difficult to establish and requires far more paperwork than do other structures.

E.

Income tax is a very complex matter for sole proprietorships compared with other forms.

Question 5:

Which of the following is a characteristic of a general partnership?

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Part 1

A.

The partners have joint liability for the firm's financial obligations.

B.

It is owned by one individual.

C.

Only one partner can make decisions.

D.

Partnerships do not have to pay taxes, but a corporation does.

E.

It is a corporation.

Question 6:

Which of the following is a disadvantage of partnerships?

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Part 1

A.

Unlimited liability

B.

Single layer of taxation

C.

More resources

D.

Cost sharing

E.

Simplicity

Question 7:

A business with one or more general partners with the same unlimited liability as a sole proprietor is known as a __________.

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Part 1

A.

limited partnership

B.

master limited partnership

C.

sole proprietorship

D.

general partnership

E.

limited liability company

Question 8:

A business structure in which every partner is liable only for his or her own activities and at least partially liable for the partnership as a whole is known as a __________.

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Part 1

A.

master limited partnership

B.

corporation

C.

general partnership

D.

sole proprietorship

E.

limited liability partnership

Question 9:

Which of the following is a disadvantage of partnerships?

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Part 1

A.

Longevity

B.

More resources

C.

Single layer of taxation

D.

Potential for conflict

E.

Simplicity

Question 10:

A carefully written partnership agreement can maximize the advantages of the partnership structure and minimize the potential disadvantages. Which of the following points will help in writing an effective partnership agreement?

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Part 1

A.

A partnership agreement should strictly follow only the state laws, as they will drive the business.

B.

Address the hopes of each owner, decision-making strategies, and succession and exit strategies.

C.

Dispute-resolution procedures should be avoided, as they apply to corporations.

D.

A great personal partnership cannot get in the way of a successful business partnership.

E.

Incorporate a broad and general understanding of what the business association will be to allow for flexibility.

Question 11:

An S corporation is a ________.

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Part 1

A.

corporation allowed to sell stock to a limited number of investors while enjoying the pass-through taxation of a partnership

B.

profit-seeking corporation whose charter also requires it to pursue a stated social or environmental goal

C.

corporation whose stock is sold to the general public

D.

corporation not allowed to sell stock to investors

E.

company whose stock is held by few owners and is not available for sale to the public

Question 12:

Investors who purchase shares of stock in a company are called ________.

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Part 1

A.

limited partners

B.

sole proprietors

C.

general partners

D.

board members

E.

shareholders

Question 13:

Which form of business is also known as a closely held corporation?

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Part 1

A.

Sole proprietorship

B.

Limited liability partnership

C.

Private corporation

D.

Master limited partnership

E.

Public corporation

Question 14:

Which one of the following statements is NOT an accurate description of corporations?

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Part 1

A.

Corporations can change from private to public ownership but not from public to private ownership.

B.

The stock of a private corporation is not made available for purchase by the public.

C.

The stock of a public corporation is sold to anyone who has the means to buy it.

D.

Public corporations are said to be publicly held or publicly traded.

E.

Shareholders of a corporation are investors who can purchase shares of stock.

Question 15:

Which of the following is an advantage of corporations?

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Part 1

A.

Managerial demands

B.

Reporting requirements

C.

Longevity

D.

Potential for conflict

E.

Simplicity

Question 16:

Which of the following is a disadvantage of corporations?

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Part 1

A.

Limited liability

B.

Longevity

C.

Reporting requirements

D.

Liquidity

E.

Ability to raise capital

Question 17:

Which term describes the ability of people to easily and quickly convert their shares into cash by selling them on the open market?

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Part 1

A.

Potential for conflict

B.

Limited liability

C.

Longevity

D.

Liquidity

E.

Reporting requirements

Question 18:

A ________ has unlimited liability, but the various _______ who own the stock face only limited liability.

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Part 1

A.

sole proprietorship; individuals

B.

partnership; partners

C.

limited partnership; board members

D.

corporation; shareholders

E.

sole proprietorship; board members

Question 19:

Which form of business has most of the characteristics of a regular corporation but adds the legal constraint that the company has to follow a specified nonfinancial goal?

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Part 1

A.

Benefit corporation

B.

S corporation

C.

General partnership corporation

D.

Private corporation

E.

Limited liability corporation

Question 20:

Which one of the following statements is NOT accurate in relation to shareholders and their conduct in a corporation?

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Part 1

A.

Because shareholders elect the directors, the shareholders are the final governing body of the corporation.

B.

Activist shareholders are becoming better prepared and more classy.

C.

Because shareholders elect the directors, institutional

stockholderssuch

as pension funds, insurance companies, mutual funds, religious organizations, and college endowment

fundshave

significant impact on the governance of corporations.

D.

Shareholder activism has become a progressively noticeable issue in corporate governance.

E.

Even though most do not have any direct participation in firm management, shareholders play a significant role in corporate governance.

Question 21:

Federal law now requires that a majority of the directors on the board of a corporation be _______.

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Part 1

A.

employees in the same industry

B.

independent

C.

sole proprietors

D.

top management of the corporation

E.

competitors

Question 22:

Which one of the following statements is NOT accurate in relation to the responsibilities of the board of directors of a corporation?

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Part 1

A.

Much of the attention focused on corporate reform in recent years has zeroed in on boards being not too closely allied with management.

B.

As the representatives of the shareholders, the members of the board of directors are responsible for selecting corporate officers.

C.

Much of the attention focused on corporate reform in recent years has zeroed in on boards failing to add enough value to strategy planning.

D.

Boards are typically composed of major shareholders, philanthropists, and executives from other corporations.

E.

Directors are often paid a combination of an annual fee and stock options, and the right to buy company shares at an advantageous price.

Question 23:

Two businesses coming together to form a single company is known as a(n) __________.

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Part 1

A.

leveraged buyout

B.

merger

C.

joint venture

D.

hostile takeover

E.

acquisition

Question 24:

A(n) _____________ occurs when an individual or a group of people buy a company's publicly traded stock mainly by using borrowed funds.

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Part 1

A.

joint venture

B.

leveraged buyout

C.

acquisition

D.

merger

E.

hostile takeover

Question 25:

Every public corporation is susceptible to a takeover. Which of the following is a defense against unwanted takeovers?

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Part 1

A.

Joint venture

B.

Proxy fight

C.

Tender offer

D.

Strategic alliance

E.

Poison pill