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Exam 5: How to Form a Business

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Question 1

Multiple Choice

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When two firms who do not participate in the same industries, for example a software company and a fast food restaurant company decide to merge, the result is called a merger.

A) vertical
B) horizontal
C) linear
D) conglomerate

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

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Question 2

True/False

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

A) True
B) False

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Question 3

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Which of the following is normally considered a disadvantage of the corporate form of business?

An advantage of corporations is their ability to attract good talent by offering stock options and other employee benefits.

According to the Spotlight on Small Business box, titled, "Pick Your Partners Wisely", attributes such as trust and integrity are not something you should get overly concerned about when selecting partners, due to the fact that this is a business decision, not a friendly game of golf.

Jamie and Maria invested all their savings in a small pizzeria they opened outside the University of Western Kentucky. They operated the business as a general partnership. After 11 months, the business went broke and Jamie and Maria were left with outstanding bills of $37,500, which was more than their initial investment in the company. Jamie and Maria can:

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:

It is impossible to run a franchise completely from home.

The Uniform Partnership Act is law in every state except Louisiana.

The following companies: Blue Diamond, Ocean Spray, and Land O'Lakes are well known cooperatives.

An entrepreneur who wishes to start a business with little delay or hassle, and who wants to be his or her own boss, should organize the business as a:

A company that loses its status as an S corporation may not reelect this status for at least 5 years.

States may levy special taxes on corporations that are not imposed on other businesses.

Franchisees must follow more rules, regulations, and procedures than if they operated independently-owned businesses.

One difference between partnerships and sole proprietorships is that partnerships:

A person who buys the right to use a business name and sell a product within a given territory is called a:

In a limited liability partnership, each partner's risk of losing personal assets is:

A cooperative consists of people with similar needs who pool their resources for mutual gain.

A leveraged buyout is an attempt by top management to gain control of a company by issuing a large amount of new stock.

One of the strengths of the sole proprietorship is its ability to sustain rapid growth by raising large amounts of financial resources.