Question 1

One of the major reasons for the wave of mergers in the late 1990s and early 2000s was the desire of firms to expand within their own markets.

Accepted Answer

A) True 
 B)False

Question 2

Stockholders in a corporation accept unlimited liability for the corporation's debts.

Accepted Answer

A) True 
 B)False

Question 3

Opening and operating a franchise in a different country:

Accepted Answer

A)  Is illegal according to the Clayton Antitrust Act.
B)  Is no different than setting up a franchise in the domestic market.
C)  May require the owner to adapt to social and cultural differences.
D)  Is much less risky than owning a domestically based franchise.

Question 4

Which of the following is an attractive benefit of a corporation?

Accepted Answer

A)  Corporations can enjoy double taxation.
B)  Unlike limited partnerships,all owners of corporations are passive investors.
C)  Corporations can protect its owners with unlimited liability.
D)  Corporations can attract employees by offering stock options.

Question 5

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 6

Which of the following statements identifies an advantage for women who have become franchisors in recent years?

Accepted Answer

A)  The federal government has offered a series of special financial incentives to women to encourage them to convert their businesses into franchises.
B)  Women usually have less difficulty than men obtaining the needed start-up capital to establish a franchise.
C)  Women business owners have found that operating their businesses as franchises is the best way to limit their personal liability.
D)  Women business owners have learned that becoming franchisors can help them finance the costs of business expansion.

Question 7

The reason a professional such as a lawyer or doctor would incorporate his/her business is

Accepted Answer

A)  to be assured that another professional firm would not take over and make decisions - similar to a hostile takeover.
B)  to comply with the law because insurance companies require that they be corporations.
C)  to protect his/her other assets with limited liability.
D)  to protect his/her assets with unlimited liability.

Question 8

Which of the following statements about buying a franchise is most accurate?

Accepted Answer

A)  One of the advantages of buying a franchise is that franchisors are so closely regulated that there is virtually no chance for scams to succeed.
B)  Before purchasing a franchise,the buyer should carefully evaluate the franchise,the franchisor,his or her own situation,and the nature of the market.
C)  Franchise agreements are simple to evaluate,since federal law requires that all such agreements must be written in plain English with all fees and terms clearly explained.
D)  Buying a franchise is the simplest and least expensive way to set up a business,since the franchisor has already worked out all of the details for setting up and running the business.

Question 9

Stockholders in a corporation have limited liability.

Accepted Answer

A) True 
 B)False

Question 10

Travis has agreed to invest $16,000 in a partnership with his sister and brother-in-law.He does not intend to actively work in the partnership,nor does he wish to risk any of his own assets other than the $16,000 he initially invests.The partnership has agreed to permit him to share in the profits.As an expert on forms of business ownership,you know that Travis is a ______________ in this partnership.

Accepted Answer

A)  general partner
B)  preferred stockholder
C)  secondary partner
D)  limited partner

Question 11

The stockholders in a corporation elect a board of directors to oversee the company's major policy issues.

Accepted Answer

A) True 
 B)False

Question 12

The difference between a merger and an acquisition is:

Accepted Answer

A)  A merger does not combine the assets and liabilities of firms,whereas an acquisition combines assets and liabilities.
B)  A merger combines the assets of the two firms,but each company continues to assume its own liabilities,whereas an acquisition is a total buyout of one firm by another.
C)  A merger is the joining of resources of two companies,whereas an acquisition is a buyout of one firm by the other.The new company concerns itself with merging of resources.
D)  A merger is always something smaller tagging onto something larger,like a merging lane onto an interstate,whereas an acquisition is two firms that are relatively the same size agreeing to continue as one - more like two major interstates that come together and travel as one for several miles.

Question 13

All partners in a general partnership have limited liability for the debts of their firm.

Accepted Answer

A) True 
 B)False

Question 14

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.

Question 15

A foreign corporation is chartered in a country outside the U.S.

Accepted Answer

A) True 
 B)False

Question 16

Several years ago,Regis Corporation,a very large hair styling salon company purchased 60 "Your Father's Mustache" salons.Although this was initially an acquisition,the merging of these two businesses was a(n) ___________.Regis went on to purchase several hair care product companies.Joining forces with hair care product companies would represent a ____________.

Accepted Answer

A)  conglomerate merger;horizontal merger
B)  vertical merger;horizontal merger
C)  horizontal merger;vertical merger
D)  conglomerate merger;conglomerate merger

Question 17

Jocelyn belongs to a food cooperative in her community.As a member,she can expect to have a vote in the election of the cooperative's board of directors.

Accepted Answer

A) True 
 B)False

Question 18

Tess and Tijuana have considered starting their own business but are concerned about the possibility of losing their personal assets if the business fails.One way for Tess and Tijuana to avoid this risk would be to organize their firm as a(n) :

Accepted Answer

A)  General partnership.
B)  Limited partnership.
C)  Corporation.
D)  Sole proprietorship.

Question 19

The purpose of a conglomerate merger is to diversify operations and investments.

Accepted Answer

A) True 
 B)False

Question 20

A limited partnership refers to a partnership set up for a temporary purpose,such as a real estate development project.

Accepted Answer

A) True 
 B)False

Exam 5: How to Form a Business

The difference between a merger and an acquisition is:

Correct Answer
verified

One of the major reasons for the wave of mergers in the late 1990s and early 2000s was the desire of firms to expand within their own markets.

Correct Answer
verified

Stockholders in a corporation have limited liability.

Correct Answer
verified

The purpose of a conglomerate merger is to diversify operations and investments.

Correct Answer
verified

A limited partnership refers to a partnership set up for a temporary purpose,such as a real estate development project.

Correct Answer
verified

Tess and Tijuana have considered starting their own business but are concerned about the possibility of losing their personal assets if the business fails.One way for Tess and Tijuana to avoid this risk would be to organize their firm as a(n) :

Correct Answer
verified

Correct Answer
verified

Which of the following statements identifies an advantage for women who have become franchisors in recent years?

Correct Answer
verified

The stockholders in a corporation elect a board of directors to oversee the company's major policy issues.

Correct Answer
verified

Opening and operating a franchise in a different country:

Correct Answer
verified

Stockholders in a corporation accept unlimited liability for the corporation's debts.

Correct Answer
verified

The reason a professional such as a lawyer or doctor would incorporate his/her business is

Correct Answer
verified

Which of the following statements about buying a franchise is most accurate?

Correct Answer
verified

Correct Answer
verified

Which of the following is an attractive benefit of a corporation?

Correct Answer
verified

A foreign corporation is chartered in a country outside the U.S.

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

Jocelyn belongs to a food cooperative in her community.As a member,she can expect to have a vote in the election of the cooperative's board of directors.

Correct Answer
verified

Three types of corporate mergers are:

Correct Answer
verified

All partners in a general partnership have limited liability for the debts of their firm.

Correct Answer
verified

Exam 5: How to Form a Business

The difference between a merger and an acquisition is:

Correct AnswerverifiedShow Answer

One of the major reasons for the wave of mergers in the late 1990s and early 2000s was the desire of firms to expand within their own markets.

Correct AnswerverifiedShow Answer

Stockholders in a corporation have limited liability.

Correct AnswerverifiedShow Answer

The purpose of a conglomerate merger is to diversify operations and investments.

Correct AnswerverifiedShow Answer

A limited partnership refers to a partnership set up for a temporary purpose,such as a real estate development project.

Correct AnswerverifiedShow Answer

Tess and Tijuana have considered starting their own business but are concerned about the possibility of losing their personal assets if the business fails.One way for Tess and Tijuana to avoid this risk would be to organize their firm as a(n) :

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements identifies an advantage for women who have become franchisors in recent years?

Correct AnswerverifiedShow Answer

The stockholders in a corporation elect a board of directors to oversee the company's major policy issues.

Correct AnswerverifiedShow Answer

Opening and operating a franchise in a different country:

Correct AnswerverifiedShow Answer

Stockholders in a corporation accept unlimited liability for the corporation's debts.

Correct AnswerverifiedShow Answer

The reason a professional such as a lawyer or doctor would incorporate his/her business is

Correct AnswerverifiedShow Answer

Which of the following statements about buying a franchise is most accurate?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is an attractive benefit of a corporation?

Correct AnswerverifiedShow Answer

A foreign corporation is chartered in a country outside the U.S.

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

Jocelyn belongs to a food cooperative in her community.As a member,she can expect to have a vote in the election of the cooperative's board of directors.

Correct AnswerverifiedShow Answer

Three types of corporate mergers are:

Correct AnswerverifiedShow Answer

All partners in a general partnership have limited liability for the debts of their firm.

Correct AnswerverifiedShow Answer

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