Supplementary exercise 1.docx
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Supplementaryexercise1
Lecture1
TrueorFalse
(F)1.Thelegalrequirementsforestablishingasoleproprietorshipareverydifficult.
(F)2.Oneadvantageofsoleproprietorshipsisthatthisformofownershipprovideseasyaccesstoadditionalfunds.
(F)3.Limitedpartnersareinvestorsinthepartnershipandparticipateinthemanagementofthebusiness.
(F)4.Thelimitedliabilityfeatureisanadvantageofowningasoleproprietorship.
(T)5.Whenacorporationdistributessomeofitsrecentearningstostockholders,thepaymentsarereferredtoascapitalgains.
(F)6.Iftheboardofdirectorsbecomesdispleasedwiththeperformanceofthekeyofficers,theboardhasthepowertoreplacethem.
(T)7.Publiclyheldcorporationscanobtainadditionalfundsbyissuingnewcommonstock.
(F)8.Publiclyheldcorporationsarerequiredtodisclosefinancialinformationtotheinvestingpublic.
(F)9.Toincorporateabusiness,onemustadoptacorporatecharterandfileitwiththestategovernmentwherethebusinessistobelocated.
(F)10.Theformofownershipofafirmshouldnotbechangedunlesstherearemajortaxadvantages.
(T)11.Distributorships,chain-stylebusinesses,andmanufacturingarrangementsareallcommontypesoffranchises.
MultipleChoice
12.Whenentrepreneursestablishabusiness,theymustfirstdecideontheformof:
a
a)divestiture.
b)globalexpansion.
c)jointventure.
d)ownership.
13.Thefollowingarepossibleformsofbusinessownershipexceptfor:
c
a)soleproprietorship.
b)partnership.
c)bureaucracy.
d)corporation.
14.Joewantstoformhisownbusiness.Hewantstogetstartedasquicklyandinexpensivelyaspossibleandhasastrongdesiretocontrolthebusinesshimself.Heisconfidenthewillbesuccessfulandwantstokeepalltheprofitshimself.Joe’sgoalsindicatehewouldprobablychoosetooperatehisbusinessasa(n):
e
a)limitedpartnership.
b)limitedliabilitycompany.
c)S-corporation.
d)franchise.
e)soleproprietorship.
15.Abusinessownedbyasingleownerisreferredtoasa:
b
a)partnership.
b)soleproprietorship.
c)limitedpartnership.
d)corporation.
e)subchapterS-corporation.
16.Adisadvantageofasoleproprietorshipisthat:
b
a)soleproprietorshaveverylittlecontroloverthe
operationsofthebusiness.
b)soleproprietorshaveunlimitedliability.
c)itismoredifficultandexpensivetoestablish
thanotherformsofbusiness.
d)itsearningsaresubjecttohighertaxratesthan
otherformsofbusiness.
e)soleproprietorsarerequiredtosharethefirm’s
profitswithemployees.
17.Partnershaveunlimitedliabilityina:
a
a)generalpartnership.
b)corporation.
c)limitedpartnership.
d)cooperative.
18.Inalimitedpartnership:
c
a)allpartnershavelimitedliability.
b)thepartnershipexistsonlyforalimitedtimeperiod,
oruntilaspecifictaskisaccomplished.
c)thelimitedpartnersdonotparticipateinmanagement
ofthecompany.
d)thepartnersagreetooperateinalimitedgeographic
area.
e)nomorethan100partnersmayinvestinthe
companyatanyonetime.
19.Whentwoormorepeople,havingcomplementaryskills,agreetoco-ownabusiness,thisagreementisreferredtoasa:
a
a)partnership.
b)soleproprietorship.
c)cooperative.
d)corporation.
e)jointventure.
20.Afirmthathas100ownersorlessandalsomeetsothercriteriamaychoosetobeaso-called:
a
a)cooperative.
b)proprietorship.
c)jointventure.
d)S-corporation.
e)bureaucracy.
21.Ageneralpartnershipthatprotectsapartner’spersonalassetsfromthenegligenceofotherpartnersiscalleda:
d
a)limitedliabilitycompany.
b)cooperative.
c)privatecorporation.
d)masterlimitedpartnership.
e)protectedpartnership.
22.Acorporationis:
d
a)easiertoformthanothertypesofbusinesses.
b)astate-charteredentitythatislegallydistinct
fromitsowners.
c)abusinessthatisownedandoperatedbya
governmentagency.
d)aformofbusinessthatislegallyexemptfrom
payingtaxesonearnings.
e)simplyanothertermforalargesole
proprietorship.
23.The___hasthemostpotentialforraisingalargeamountoffunds:
b
a)proprietorship.
b)corporation.
c)limitedpartnership.
d)unlimitedpartnership.
e)S-corporation.
24.Importantaspectsofacorporation,suchasthenameofthefirm,informationaboutthestockissued,andadescriptionofthefirm’soperations,arecontainedina:
c
a)mission.
b)policy.
c)charter.
d)plan.
e)venture.
25.Themembersoftheboardofdirectorsofacorporationarechosenbythecorporation’s:
d
a)presidentandchiefexecutiveofficer.
b)creditors.
c)generalpartners.
d)stockholders.
e)chartermembers.
26.Whenownershipofasmallcorporationisrestrictedtoasmallgroupofinvestors,itis:
d
a)publiclyheld.
b)governmentowned.
c)bureaucratic.
d)privatelyheld.
e)perfectlycompetitive.
27.Whenacorporation’ssharescanbeeasilypurchasedorsoldbyinvestors,itis:
e
a)publiclyheld.
b)privatelyheld.
c)institutionalized.
d)monopolized.
e)franchised.
28.Peoplebecomeownersofacorporationbypurchasing:
b
a)sharesofstock.
b)corporatebonds.
c)retainedearnings.
d)inventory.
e)accountsreceivable.
29.Agencyproblemsareleastlikelyin:
d
a)soleproprietorships.
b)limitedliabilitycompanies.
c)generalpartnerships.
d)publiclyheldcorporations.
e)privatelyheldcorporations.
30.Whenstockholdersofacorporationsellsharesofstockformorethantheypaidforthem,theyreceivea:
a
a)dividend.
b)premium.
c)capitalgain.
d)discount.
e)stockoption.
31.Thereturnoninvestmentinafirmisderivedfromthefirm’sabilitytoearn:
c
a)assets.
b)liabilities.
c)profits.
d)expenses.
32.Thetotalamountinvestedinacompanybyitsownersiscalled:
c
a)thecorporatemargin.
b)equity.
c)workingcapital.
d)thestockpremium.
e)treasurystock.
33.Thedegreeofuncertaintyaboutfutureearnings,whichreflectsanuncertainreturntotheowners,isknownas:
c
a)certainty.
b)profits.
c)risk.
d)equity.
e)dividends.
34.Anarrangementwherebybusinessownersallowotherstousetheirtrademark,tradename,orcopyrightunderspecifiedconditionsisa:
e
a)franchise.
b)laborunion.
c)bureau.
d)jointventure.
e)cartel.
35.Abusinessthatisallowedtousethetradenameofacompanyandfollowsguidelinesrelatedtothepricingandsalesoftheproductsisa:
c
a)jointventure.
b)monopoly.
c)chain-stylebusiness.
d)soleproprietorship.
36.Allofthefollowingarecommontypesoffranchisearrangementsexcept:
a
a)businessagencies.
b)chain-stylebusinesses.
c)manufacturingarrangements.
d)distributorships.
37.Sharingprofitsandlesscontrolofthebusinessownershiparetwocommondisadvantagesof:
c
a)soleproprietorships.
b)downsizing.
c)divestiture.
d)franchising.
38.Advantagesofbusiness-to-businessfranchisesincludeallofthefollowingexcept:
b
a)taxadvantages.
b)smallerinitialinvestment.
c)abilityforhome-basedwork.
d)substitutionofcomputertechnologyforemployees.