Question 1

The sole proprietorship is subject to double taxation in that any earnings are taxed both as income to the business and as income to the owner of the business.

Accepted Answer

A) True 
 B)False

Question 2

Dana wants to open her own business after completing college. As a fine arts student, she is planning to provide services as a graphic artist. Although she is nervous about risking her personal assets, she is thinking about forming a proprietorship. Which of the following provides the best advice for Dana?

Accepted Answer

A)   Forming a sole proprietorship can help you protect your personal assets, but it is a poor choice for individuals who want to be their own boss because this form of business is heavily regulated.
B)   Forming a sole proprietorship is a great idea. It gives you the ability to be your own boss while also protecting your personal assets from loss.
C)   Forming a sole proprietorship is a bad choice. Not only is a sole proprietorship subject to extensive government regulation that will limit your ability to run your business, it also exposes you to unlimited liability.
D)   Forming a sole proprietorship will enable you to be your own boss. But if you are really nervous about risking your personal assets, you might want to consider some other form of ownership because it will also expose you to unlimited liability.E) A) and B)
F) B) and C)

Question 3

Explain why general corporations have become the dominant form of business ownership.

Accepted Answer

General corporations are businesses that...

Question 4

Which of the following is a form of business ownership that is considered to be separate from its owners, who are known as shareholders?

Accepted Answer

A)   sole proprietorship
B)   corporation
C)   general partnership
D)   limited partnershipE) A) and D)
F) A) and C)

Question 5

Identify and describe three advantages of general partnerships as a form of business ownership.

Accepted Answer

Ability to pool financial resources: Wit...

Question 6

What are the three types of partnerships?

Accepted Answer

A)   specific, general, and generic
B)   general, unlimited, and general liability
C)   general, limited, and limited liability
D)   sole, general, and specificE) A) and B)
F) A) and C)

Question 7

Describe how a corporation is formed.

Accepted Answer

Forming a corporation is more complex th...

Question 8

Which of the following occurs when two or more companies agree to a combination of equals, creating one new company from the two previously independent companies?

Accepted Answer

A)   corporate integration
B)   industrial concentration
C)   merger
D)   amalgamationE) A) and B)
F) C) and D)

Question 9

A conglomerate merger is a combination of two firms in unrelated industries.

Accepted Answer

A) True 
 B)False

Question 10

What is the definition of a conglomerate acquisition?

Accepted Answer

A)   combination of firms in the same industry
B)   combination of firms at different stages in the production of a given good or service so that the firms have a buyer-seller relationship
C)   combination of firms in unrelated industries
D)   combination of firms selling conglomerate productsE) B) and C)
F) C) and D)

Question 11

Which of the following is a voluntary agreement between two or more people to jointly own a business?

Accepted Answer

A)   partnership
B)   corporation
C)   limited liability partnership
D)   sole proprietorshipE) A) and D)
F) A) and C)

Question 12

Which of the following is a serious drawback of sole proprietorships?

Accepted Answer

A)   They are heavily regulated by the federal government.
B)   They expose their owners to unlimited liability for the company's debts.
C)   They are difficult and inexpensive to form.
D)   They result in double taxation of the company's earnings.E) A) and B)
F) A) and C)

Question 13

Which of the following is a disadvantage of corporations as a form of business ownership?

Accepted Answer

A)   Their owners have unlimited liability.
B)   They have very limited ability to raise financial resources.
C)   Any earnings they distribute to shareholders are subject to double taxation.
D)   They lack permanence, since in most provinces corporate charters are only valid for 40 years.E) A) and D)
F) None of the above

Question 14

In an acquisition, the firm who is doing the buying is called the target firm.

Accepted Answer

A) True 
 B)False

Question 15

Franchising is a contractual relationship in which an established business entity allows others to operate a business using the unique resources it supplies in exchange for monetary payments and other considerations.

Accepted Answer

A) True 
 B)False

Question 16

In an acquisition, what do we call the firm being purchased?

Accepted Answer

A)   the acquiring firm
B)   the target firm
C)   the limited liability partnership
D)   the merged firmE) C) and D)
F) A) and B)

Question 17

What is the type of merger where two or more firms at different stages of production of a given product or service are combined so the firms have a buyer-seller relationship?

Accepted Answer

A)   an upward merger
B)   a horizontal merger
C)   a vertical merger
D)   a conglomerate mergerE) A) and B)
F) A) and D)

Question 18

Which of the following might be one of the services a franchisor would provide to a franchisee?

Accepted Answer

A)   selling products to customers
B)   site selection
C)   startup money
D)   hiring employeesE) B) and C)
F) A) and B)

Question 19

What is the term for when one firm buys another firm?

Accepted Answer

A)   acquisition
B)   conglomeration
C)   joint venture
D)   mergerE) A) and D)
F) B) and C)

Question 20

Which form of business ownership offers its owners limited liability?

Accepted Answer

A)   sole proprietorship
B)   partnership
C)   corporationD) A) and C)
E) A) and B)

Exam 5: Business Formation: Choosing the Form That Fits

Which of the following is a serious drawback of sole proprietorships?

Correct Answer
verified

The sole proprietorship is subject to double taxation in that any earnings are taxed both as income to the business and as income to the owner of the business.

Correct Answer
verified

In an acquisition, the firm who is doing the buying is called the target firm.

Correct Answer
verified

Which of the following is a voluntary agreement between two or more people to jointly own a business?

Correct Answer
verified

Identify and describe three advantages of general partnerships as a form of business ownership.

Correct Answer
verified
Ability to pool financial resources: Wit...
View Answer

Franchising is a contractual relationship in which an established business entity allows others to operate a business using the unique resources it supplies in exchange for monetary payments and other considerations.

Correct Answer
verified

Which of the following is a disadvantage of corporations as a form of business ownership?

Correct Answer
verified

Which of the following occurs when two or more companies agree to a combination of equals, creating one new company from the two previously independent companies?

Correct Answer
verified

Which of the following might be one of the services a franchisor would provide to a franchisee?

Correct Answer
verified

What are the three types of partnerships?

Correct Answer
verified

What is the term for when one firm buys another firm?

Correct Answer
verified

A conglomerate merger is a combination of two firms in unrelated industries.

Correct Answer
verified

In an acquisition, what do we call the firm being purchased?

Correct Answer
verified

Correct Answer
verified

Describe how a corporation is formed.

Correct Answer
verified
Forming a corporation is more complex th...
View Answer

Explain why general corporations have become the dominant form of business ownership.

Correct Answer
verified
General corporations are businesses that...
View Answer

Which form of business ownership offers its owners limited liability?

Correct Answer
verified

What is the type of merger where two or more firms at different stages of production of a given product or service are combined so the firms have a buyer-seller relationship?

Correct Answer
verified

Which of the following is a form of business ownership that is considered to be separate from its owners, who are known as shareholders?

Correct Answer
verified

What is the definition of a conglomerate acquisition?

Correct Answer
verified

Exam 5: Business Formation: Choosing the Form That Fits

Which of the following is a serious drawback of sole proprietorships?

Correct AnswerverifiedShow Answer

The sole proprietorship is subject to double taxation in that any earnings are taxed both as income to the business and as income to the owner of the business.

Correct AnswerverifiedShow Answer

In an acquisition, the firm who is doing the buying is called the target firm.

Correct AnswerverifiedShow Answer

Which of the following is a voluntary agreement between two or more people to jointly own a business?

Correct AnswerverifiedShow Answer

Identify and describe three advantages of general partnerships as a form of business ownership.

Correct AnswerverifiedAbility to pool financial resources: Wit...View AnswerShow Answer

Franchising is a contractual relationship in which an established business entity allows others to operate a business using the unique resources it supplies in exchange for monetary payments and other considerations.

Correct AnswerverifiedShow Answer

Which of the following is a disadvantage of corporations as a form of business ownership?

Correct AnswerverifiedShow Answer

Which of the following occurs when two or more companies agree to a combination of equals, creating one new company from the two previously independent companies?

Correct AnswerverifiedShow Answer

Which of the following might be one of the services a franchisor would provide to a franchisee?

Correct AnswerverifiedShow Answer

What are the three types of partnerships?

Correct AnswerverifiedShow Answer

What is the term for when one firm buys another firm?

Correct AnswerverifiedShow Answer

A conglomerate merger is a combination of two firms in unrelated industries.

Correct AnswerverifiedShow Answer

In an acquisition, what do we call the firm being purchased?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Describe how a corporation is formed.

Correct AnswerverifiedForming a corporation is more complex th...View AnswerShow Answer

Explain why general corporations have become the dominant form of business ownership.

Correct AnswerverifiedGeneral corporations are businesses that...View AnswerShow Answer

Which form of business ownership offers its owners limited liability?

Correct AnswerverifiedShow Answer

What is the type of merger where two or more firms at different stages of production of a given product or service are combined so the firms have a buyer-seller relationship?

Correct AnswerverifiedShow Answer

Which of the following is a form of business ownership that is considered to be separate from its owners, who are known as shareholders?

Correct AnswerverifiedShow Answer

What is the definition of a conglomerate acquisition?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Ability to pool financial resources: Wit...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Forming a corporation is more complex th...
View Answer

Correct Answer
verified
General corporations are businesses that...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified