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Exam 6: Forms of Business Ownership

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Question 101

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Today,franchising accounts for nearly 40 percent of the national retail sales in Canada.

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Question 102

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A merger between two businesses in different stages of related businesses is known as a vertical merger.

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Question 103

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The process and policies that determine how an organization interacts with its shareholders is known as corporate governance.

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

Although most new firms start out as sole proprietorships,few large firms are organized this way.Why is the sole proprietorship such a popular form of ownership for new firms? What features of the sole proprietorship make it unattractive to growing firms?

Corporations are subject to double taxation.

In a partnership,a(n) __________ partner is an owner who is active in managing the company and has unlimited liability for claims against the firm.

The __________________ is usually the easiest form of business to start and end.

Which of the following statements is the most accurate? Sole proprietorships:

When two companies in completely unrelated industries combine,the result is called a:

The workers at Scrappy's Metal Fabrication,Inc.,have learned that the firm is about to close down.They have devised a plan to use debt financing to buy the company's stock from current shareholders with the intention of keeping the company in business,thus saving their jobs.This strategy is called a leveraged buyout.

Which of the following is an advantage of the corporate form of business when compared to sole proprietorships and partnerships?

Ram is a stockholder in Endrun Investments,which is organized as a corporation.Endrun recently lost a major court decision and will probably be forced into bankruptcy.In fact,the damages awarded are so great that,even if all of its assets are sold and the proceeds are used to pay its debts,Endrun is likely to still owe money to its creditors.If Endrun does go bankrupt,Ram and the other stockholders will:

Compared to partnerships and sole proprietorships,a major advantage of a public corporation as a form of business ownership is that it:

Mehdi operates a sole proprietorship,but he is in poor health and may be unable to continue running the business.If Mehdi becomes incapacitated,his business:

In a conglomerate merger,firms in the same industry merge to expand their share of the market.

The profits of a sole proprietorship are taxed as the personal income of the owner.

Alphonzo has agreed to become a partner in his brother's new clothing store and has provided 30 percent of the start-up capital for Remora's Clothiers.Since he provided 30 percent of the money to start the firm,he is entitled to 30 percent of any the profits the firm earns during its first year of operations.

Franchising is popular in Canada,but legal barriers have limited its popularity in foreign countries.

Why is it easy to start or end your own business? i.e.a sole proprietorship