Question 1

A ________ merger unites firms at different stages of related businesses.

Accepted Answer

A)   vertical
B)   horizontal
C)   diagonal
D)   conglomerateE) A) and C)
F) C) and D)

Question 2

The coattail effect refers to inevitable repercussions on your business if a fellow franchisee should fail.

Accepted Answer

A) True 
 B)False

Question 3

Although franchise arrangements are a good source of income for the franchisee, these businesses do not contribute significantly toward job creation.

Accepted Answer

A) True 
 B)False

Question 4

Zach is a franchisee with Digger's Doggies, a chain of hotdog shops. He was doing well until several other Digger's Doggies franchisees got in trouble and were forced to close their shops. Soon afterward, Zach's business declined and was also forced to close. This is an example of

Accepted Answer

A)   an economic shakeout at work.
B)   the coattail effect.
C)   the law of diminishing returns.
D)   management by exception.E) None of the above
F) A) and B)

Question 5

The three major forms of business ownership in the U.S. are sole proprietorships, partnerships, and corporations.

Accepted Answer

A) True 
 B)False

Question 6

Public utilities, like electricity and water, are examples of quasi-public corporations.

Accepted Answer

A) True 
 B)False

Question 7

A cooperative is simply another name for a corporation.

Accepted Answer

A) True 
 B)False

Question 8

The three major types of mergers are acquisition, joint, and connective.

Accepted Answer

A) True 
 B)False

Question 9

Three types of corporate mergers are

Accepted Answer

A)   economic, geographic, and financial.
B)   vertical, horizontal, and conglomerate.
C)   flexible, differentiated, and conditional.
D)   explicit, implicit, and intrinsic.E) B) and D)
F) A) and B)

Question 10

A ________ is an organization that is owned and controlled by the people who use it-producers, consumers, and workers with similar needs pool their resources for mutual gain.

Accepted Answer

A)   corporation
B)   limited partnership
C)   mutual fund
D)   cooperativeE) B) and C)
F) C) and D)

Question 11

Any debts or damages incurred by a firm organized as a sole proprietorship are

Accepted Answer

A)   the responsibility of the owner.
B)   limited to the amount the owner has invested in the firm.
C)   paid for out of a reserve contingency fund that sole proprietors are required by law to set up.
D)   normally covered by liability insurance.E) B) and C)
F) All of the above

Question 12

One disadvantage of a limited liability company is that it

Accepted Answer

A)   requires all earnings of the business be taxed at the corporate rate.
B)   has a limited life span.
C)   requires the owners to divide up profits and losses in a fixed proportion.
D)   has a more restrictive ownership requirement than S corporations.E) A) and B)
F) A) and C)

Question 13

In a franchise arrangement, ownership remains in the hands of the franchisor.

Accepted Answer

A) True 
 B)False

Question 14

Several small vineyard owners in the Napa Valley region of California banded together to market their grapes and wine in an attempt to get better prices. Over the years they expanded the organization to include other services such as buying and selling farm supplies and equipment and providing financial and technical services. The arrangement established by these vineyard owners is an example of a

Accepted Answer

A)   closed corporation.
B)   joint venture.
C)   limited agricultural partnership.
D)   farm cooperative.E) B) and D)
F) A) and B)

Question 15

Mac and Charlie own a car repair shop that they operate as co-owners. Both take an active role in the management of the business, and each accepts unlimited liability. Mac and Charlie operate as a

Accepted Answer

A)   joint venture.
B)   general partnership.
C)   limited partnership.
D)   cooperative.E) B) and D)
F) A) and B)

Question 16

In order to establish a C corporation, it is a requirement that investors run the company, whereas in an S corporation, this is not the case.

Accepted Answer

A) True 
 B)False

Question 17

If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate.

Accepted Answer

A) True 
 B)False

Question 18

When a group of investors take a firm private, they purchase all the company's outstanding stock.

Accepted Answer

A) True 
 B)False

Question 19

The ________ is the most common form of business ownership.

Accepted Answer

A)   partnership
B)   corporation
C)   joint venture
D)   sole proprietorshipE) A) and B)
F) B) and C)

Question 20

Double taxation is experienced by corporations that pay dividends. Which of the following scenarios is an accurate example of double taxation?

Accepted Answer

A)   If Game Guys, Inc. distributes 20% of its net profit after taxes to its stockholders, these funds will be taxed again, when each individual stockholder claims his/her portion as earnings.
B)   By law, Game Guys, Inc. is permitted to tax its executive employees twice on their earnings, and then pass those funds on to its stockholders in the form of dividends.
C)   Due to the fact that it is a corporation, the accountants of Game Guys, Inc. calculate 35% of the company's earnings, multiply it by 2, and then distribute that amount to the federal government each year for taxes.
D)   If Game Guys, Inc. fails to pay its taxes on time during any given year, it must pay the current year and the delinquent year, in order to stay in business, similar to being taxed two times.E) B) and D)
F) A) and D)

Exam 5: How to Form a Business

A cooperative is simply another name for a corporation.

Correct Answer
verified

The coattail effect refers to inevitable repercussions on your business if a fellow franchisee should fail.

Correct Answer
verified

Although franchise arrangements are a good source of income for the franchisee, these businesses do not contribute significantly toward job creation.

Correct Answer
verified

If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate.

Correct Answer
verified

Public utilities, like electricity and water, are examples of quasi-public corporations.

Correct Answer
verified

The ________ is the most common form of business ownership.

Correct Answer
verified

One disadvantage of a limited liability company is that it

Correct Answer
verified

Correct Answer
verified

The three major forms of business ownership in the U.S. are sole proprietorships, partnerships, and corporations.

Correct Answer
verified

Double taxation is experienced by corporations that pay dividends. Which of the following scenarios is an accurate example of double taxation?

Correct Answer
verified

Mac and Charlie own a car repair shop that they operate as co-owners. Both take an active role in the management of the business, and each accepts unlimited liability. Mac and Charlie operate as a

Correct Answer
verified

Three types of corporate mergers are

Correct Answer
verified

Zach is a franchisee with Digger's Doggies, a chain of hotdog shops. He was doing well until several other Digger's Doggies franchisees got in trouble and were forced to close their shops. Soon afterward, Zach's business declined and was also forced to close. This is an example of

Correct Answer
verified

A ________ merger unites firms at different stages of related businesses.

Correct Answer
verified

A ________ is an organization that is owned and controlled by the people who use it-producers, consumers, and workers with similar needs pool their resources for mutual gain.

Correct Answer
verified

The three major types of mergers are acquisition, joint, and connective.

Correct Answer
verified

In a franchise arrangement, ownership remains in the hands of the franchisor.

Correct Answer
verified

Any debts or damages incurred by a firm organized as a sole proprietorship are

Correct Answer
verified

When a group of investors take a firm private, they purchase all the company's outstanding stock.

Correct Answer
verified

In order to establish a C corporation, it is a requirement that investors run the company, whereas in an S corporation, this is not the case.

Correct Answer
verified

Exam 5: How to Form a Business

A cooperative is simply another name for a corporation.

Correct AnswerverifiedShow Answer

The coattail effect refers to inevitable repercussions on your business if a fellow franchisee should fail.

Correct AnswerverifiedShow Answer

Although franchise arrangements are a good source of income for the franchisee, these businesses do not contribute significantly toward job creation.

Correct AnswerverifiedShow Answer

If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate.

Correct AnswerverifiedShow Answer

Public utilities, like electricity and water, are examples of quasi-public corporations.

Correct AnswerverifiedShow Answer

The ________ is the most common form of business ownership.

Correct AnswerverifiedShow Answer

One disadvantage of a limited liability company is that it

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The three major forms of business ownership in the U.S. are sole proprietorships, partnerships, and corporations.

Correct AnswerverifiedShow Answer

Double taxation is experienced by corporations that pay dividends. Which of the following scenarios is an accurate example of double taxation?

Correct AnswerverifiedShow Answer

Mac and Charlie own a car repair shop that they operate as co-owners. Both take an active role in the management of the business, and each accepts unlimited liability. Mac and Charlie operate as a

Correct AnswerverifiedShow Answer

Three types of corporate mergers are

Correct AnswerverifiedShow Answer

Zach is a franchisee with Digger's Doggies, a chain of hotdog shops. He was doing well until several other Digger's Doggies franchisees got in trouble and were forced to close their shops. Soon afterward, Zach's business declined and was also forced to close. This is an example of

Correct AnswerverifiedShow Answer

A ________ merger unites firms at different stages of related businesses.

Correct AnswerverifiedShow Answer

A ________ is an organization that is owned and controlled by the people who use it-producers, consumers, and workers with similar needs pool their resources for mutual gain.

Correct AnswerverifiedShow Answer

The three major types of mergers are acquisition, joint, and connective.

Correct AnswerverifiedShow Answer

In a franchise arrangement, ownership remains in the hands of the franchisor.

Correct AnswerverifiedShow Answer

Any debts or damages incurred by a firm organized as a sole proprietorship are

Correct AnswerverifiedShow Answer

When a group of investors take a firm private, they purchase all the company's outstanding stock.

Correct AnswerverifiedShow Answer

In order to establish a C corporation, it is a requirement that investors run the company, whereas in an S corporation, this is not the case.

Correct AnswerverifiedShow Answer

Correct Answer
verified

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