Question 1

Xavier starts an investment management firm along with his friend Abdul.They decide to equally share the profits and have unlimited liability for the debts of their business.This firm is an example of a(n) _____.

Accepted Answer

A)  general partnership
B)  S corporation
C)  sole proprietorship
D)  limited partnership
E)  C corporationF) C) and E)
G) C) and D)

Question 2

Which of the following is a difference between partnerships and sole proprietorships?

Accepted Answer

A)  Partnerships have better access to diverse skills when compared to sole proprietorships.
B)  Partnerships are subjected to fewer government regulations than sole proprietorships.
C)  Partnerships make possible the greatest degree of secrecy,whereas sole proprietorships do not.
D)  In sole proprietorships,the owners have access to more funds and resources than in partnerships.
E)  In partnerships,the owners have complete control of the business,whereas in sole proprietorships they do not.F) A) and E)
G) C) and D)

Question 3

Michael Wong and Sanjay Patel,both lawyers,start a law firm together.Both of them have unlimited liability for the debts of the business,and the management of the firm is equally shared between them.This law firm is an example of a(n) _____.

Accepted Answer

A)  general partnership
B)  S corporation
C)  sole proprietorship
D)  limited partnership
E)  C corporationF) A) and D)
G) A) and C)

Question 4

A(n) _____ is a partnership established for a specific project or for a limited time.

Accepted Answer

A)  joint venture
B)  cooperative
C)  C corporation
D)  sole proprietorship
E)  conglomerateF) A) and B)
G) C) and D)

Question 5

Articles of partnership are legal documents that set forth the basic agreement between partners.The issues covered usually include:

Accepted Answer

A)  criteria for recruiting and hiring employees.
B)  demographic prerequisites for selecting a partner.
C)  salaries of contract employees.
D)  provisions for leaving the partnership.
E)  classes of public stock to be issued.F) B) and C)
G) All of the above

Question 6

The decision-making process in a partnership tends to be faster when:

Accepted Answer

A)  there are numerous partners,who all want to solely control the management of the business.
B)  there are two partners and both of them are involved in the day-to-day activities of the business.
C)  the partnership is a foreign corporation that conducts its business outside the state in which it was incorporated.
D)  the partnership is a domestic corporation with numerous partners.
E)  there are numerous partners and the firm has issued public stock.F) D) and E)
G) C) and D)

Question 7

In sole proprietorships,owners:

Accepted Answer

A)  have access to employees with a variety of skills.
B)  have access to limited sources of funds.
C)  do not have to pay any income tax.
D)  have to share their profits.
E)  cannot easily dissolve the business.F) A) and B)
G) A) and C)

Question 8

Which of the following is a disadvantage of a partnership?

Accepted Answer

A)  Difficulty of selling the partnership interest
B)  Difficulty of forming the business
C)  Limited liability faced by the partners
D)  Insufficient capital and credit
E)  Stringent government regulationsF) All of the above
G) A) and C)

Question 9

Josh has been asked to be a part of a new business venture that develops wind energy technologies.Since the business involves high risk,he does not want to be held completely liable for the firm's debts if the project fails.In this case,Josh is most likely to prefer to participate as a(n) :

Accepted Answer

A)  member of a cooperative.
B)  limited partner.
C)  general partner.
D)  owner of an S corporation.
E)  sole proprietor.F) B) and C)
G) A) and D)

Question 10

Which of the following is an advantage of corporations over sole proprietorships?

Accepted Answer

A)  Unlike sole proprietorships,existence of corporations is unaffected by the death or withdrawal of any of the stockholders.
B)  In corporations,all the owners have unlimited liability,whereas in sole proprietorships they have limited liability.
C)  Corporations offer the greatest degree of secrecy,whereas sole proprietorships do not.
D)  Corporations are easier and less costly to form than sole proprietorships.
E)  Unlike sole proprietorships,corporations are not subjected to double taxation.F) A) and C)
G) A) and E)

Question 11

If a firm issues a poison pill when facing a hostile takeover attempt,it:

Accepted Answer

A)  fires its board of directors for incompetence.
B)  allows stockholders to buy shares of stock at prices lower than the market value.
C)  involves the firing of the entire executive committee before a takeover.
D)  requires a majority of stockholders to approve the takeover.
E)  files a lawsuit to avoid the takeover.F) A) and C)
G) A) and E)

Question 12

It is easier to raise funds in partnerships than in sole proprietorships because:

Accepted Answer

A)  several partners mean greater earning power and credit.
B)  some of the partners will have unlimited liability.
C)  partnerships have less regulatory controls than sole proprietorship.
D)  all partners will have limited liability.
E)  partnerships can issue public stock with much less difficulty than sole proprietorships.F) A) and E)
G) B) and E)

Question 13

In the context of corporations,what is a white knight?

Accepted Answer

A)  A more acceptable firm that is willing to acquire the firm threatened by a hostile takeover
B)  An attempt to fend off a hostile takeover by selling stock at prices below the market value
C)  An attempt to fend off a hostile takeover by requiring the deal to be approved by a majority of shareholders
D)  An attempt to fend off a hostile takeover by raising capital through an initial public offering
E)  A group of investors who have borrowed money to acquire a firmF) None of the above
G) B) and D)

Question 14

The income earned in sole proprietorships is:

Accepted Answer

A)  taxed twice.
B)  exempted from tax.
C)  taxed as personal income.
D)  quasi-taxable.
E)  taxed as business income.F) A) and B)
G) D) and E)

Question 15

A sole proprietor has limited liability in meeting the debts of his or her business.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following forms of business is associated with unlimited liability to the owners?

Accepted Answer

A)  Cooperatives
B)  Quasi-public corporations
C)  S Corporations
D)  Sole proprietorships
E)  C CorporationsF) A) and B)
G) None of the above

Question 17

An acquisition occurs when one company purchases another company by buying most of its stock.

Accepted Answer

A) True 
 B)False

Question 18

A corporation doing business outside the state in which it is chartered is known as a(n) _____.

Accepted Answer

A)  vertical corporation
B)  horizontal corporation
C)  domestic corporation
D)  alien corporation
E)  foreign corporationF) A) and B)
G) A) and D)

Question 19

Which of the following is a disadvantage of sole proprietorships?

Accepted Answer

A)  Sharing of profits with major stockholders
B)  Lack of continuity
C)  Lack of business control
D)  Stringent government regulations
E)  Absence of a tax-exempt retirement accountF) A) and B)
G) C) and D)

Question 20

_____ are legal documents that the state issues to companies based on information the company provides in the articles of incorporation.

Accepted Answer

A)  State bonds
B)  Corporation contracts
C)  Corporate charters
D)  Articles of proprietorship
E)  Articles of partnershipF) C) and E)
G) A) and D)

Exam 4: Options for Organizing Business

A(n) _____ is a partnership established for a specific project or for a limited time.

Correct AnswerverifiedShow Answer

In the context of corporations,what is a white knight?

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_____ are legal documents that the state issues to companies based on information the company provides in the articles of incorporation.

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An acquisition occurs when one company purchases another company by buying most of its stock.

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A sole proprietor has limited liability in meeting the debts of his or her business.

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Which of the following is a disadvantage of a partnership?

Correct AnswerverifiedShow Answer

It is easier to raise funds in partnerships than in sole proprietorships because:

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Which of the following is a disadvantage of sole proprietorships?

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The income earned in sole proprietorships is:

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A corporation doing business outside the state in which it is chartered is known as a(n) _____.

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Which of the following is an advantage of corporations over sole proprietorships?

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Josh has been asked to be a part of a new business venture that develops wind energy technologies.Since the business involves high risk,he does not want to be held completely liable for the firm's debts if the project fails.In this case,Josh is most likely to prefer to participate as a(n) :

Correct AnswerverifiedShow Answer

Which of the following is a difference between partnerships and sole proprietorships?

Correct AnswerverifiedShow Answer

Xavier starts an investment management firm along with his friend Abdul.They decide to equally share the profits and have unlimited liability for the debts of their business.This firm is an example of a(n) _____.

Correct AnswerverifiedShow Answer

The decision-making process in a partnership tends to be faster when:

Correct AnswerverifiedShow Answer

Articles of partnership are legal documents that set forth the basic agreement between partners.The issues covered usually include:

Correct AnswerverifiedShow Answer

Michael Wong and Sanjay Patel,both lawyers,start a law firm together.Both of them have unlimited liability for the debts of the business,and the management of the firm is equally shared between them.This law firm is an example of a(n) _____.

Correct AnswerverifiedShow Answer

In sole proprietorships,owners:

Correct AnswerverifiedShow Answer

Which of the following forms of business is associated with unlimited liability to the owners?

Correct AnswerverifiedShow Answer

If a firm issues a poison pill when facing a hostile takeover attempt,it:

Correct AnswerverifiedShow Answer

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