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Exam 6: Forms of Business Ownership

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Question 21

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A major objective of a leveraged buyout is to enable investors to gain control of a company by issuing new shares of ownership,thus minimizing the use of debt.

A) True
B) False

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Question 22

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In today's economy,only large business enterprises should operate as corporations.

A) True
B) False

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Question 23

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Yolanda owns a roofing business.She enjoys being her own boss,but her satisfaction comes at a price.Her days are filled with organizing the activities of her employees and soliciting new customers.She often misses activities with friends and family because of the obligations of running her own business.She also knows that she has unlimited personal liability for any of her firm's debts.It appears that Yolanda's business is organized as a:

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

Laurel has always worked for others,but has become tired of following orders.She wants to find an inexpensive way to start her own business so that she can have the freedom to run her business exactly as she sees fit.Laurel could achieve her goals by becoming a franchisee.

In a typical franchise agreement,the franchisor pays the franchisee a fee to manage its company,and the two of them split the profits based on the percentages established in the agreement.

Why might employees or managers in an organization attempt a leveraged buyout?

A merger involving a major candy company and a steel producer would be an example of a:

A general partner can take an active role in the management of the business.

If a group of stockholders or management tries to obtain all the stock of a firm for themselves,this is referred to as:

Ram has just paid several thousand dollars to obtain a Fontmaster Printers franchise in Northern Ontario.Now that he has paid his fee,he can look forward to having the freedom to use his own creative talents to make his print shop different and more attractive than other Fontmaster shops in Ontario.

A disadvantage of corporations is that an owner must get the approval of all other owners before selling his or her interest in the firm to another investor.

A disadvantage of corporations is that they generally require extensive paperwork.

Why is size an advantage as well as a disadvantage of corporations?

Juan wants to start his own business.He would be most likely to favour organizing his new company as a sole proprietorship if he:

It is usually easy to start and end a sole proprietorship.

Though popular during the early and middle 1900s,mergers and acquisitions were quite rare in the last decade.

Dr.Driller is a dentist who is interested in incorporating as an individual.If he attempts to do so,Dr.Driller is likely to find that:

A ___________ is a business organization that is owned,and usually managed,by one person.

Elroy is the sole proprietor of a gift shop in a small shopping centre.Because he is a sole proprietor,any profit Elroy's business earns is: