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Exam 5: How to Form a Business

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Question 121

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Global franchising is unlikely to experience major growth due to the high costs of operations in global markets.

A) True
B) False

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Question 122

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Stock options are the right to purchase shares of the corporation for a fixed price.

A) True
B) False

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Question 123

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When two companies in the same industry agree to become one firm, the result is called a

Franchising is a key component of the U.S. economy. What are the major advantages and disadvantages of franchising?

A horizontal merger refers to a merger between two companies that serve entirely different markets.

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

After spending a summer "down under," two Oregon friends, Rick and Mick, created a general partnership to import emu from Australia to the U.S. After a year, Rick found himself at the mercy of Mick, who seemed to keep the books and seldom share the financial results, even though Rick was out selling the emu idea to farmers and ecologically conscious consumers and shipments were increasing. As their consultant, one of the first things that you inquire about is whether they are familiar with the UPA (Uniform Partnership Act), specifically the right to participate in managing the operations of the business.

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

One method to avoid conflicts between partners is to solicit the services of a lawyer to create a well-written partnership agreement.

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

It is said that corporations have perpetual life.

Taking a company private means turning a profit-seeking corporation into a nonprofit corporation in order to avoid a hostile takeover.

The form of business ownership best suited to raising large amounts of money for expansion is the

Once a business is established, it's almost impossible to change from one form of business ownership to another.

Which of the following statements is the most accurate?

Unlike partnerships, if sole proprietorships find themselves in bankruptcy, they don't need to worry about a court requiring them to sell off personal assets to pay for the debts of the firm.

The most popular type of business for franchising is

Franchisees are not always pleased with management regulations handed down from the franchisor. In some cases, franchisees have been known to band together to express concern over marketing and management direction.

One result of taking a firm private is

A(n) ________ occurs when one company buys the property and obligations of another company.