Business Test 2

Large firms generally buy parts and assemblies from smaller firms because

it is less expensive than making their own

To gain access to one another's markets, several U.S. and Japanese automobile manufacturers (for example, Chrysler and Mitsubishi) are engaging in temporary alliances to manufacture and market certain models of cars. These types of partnerships are known as

joint ventures

A franchisor supplies all of the following except

land to place the business on

Mike Nettles approached Nathan Lang about becoming a partner in a firm that destroys environmental waste. While Mike would like to become a partner in the firm, he is concerned about his liability because he has recently inherited a lot of money. In this situation, Mike should become a

limited partner

The Smithsonian Institution exists to preserve historical and cultural items of value and to share those items with the public; it does not exist to maximize the wealth of any shareholders. This entity is organized as a(n)

non-for-profit corporation

As a limited partner in a construction business, Joe

only risks his initial investment

As a businessperson planning to open a new small business, you know that the business plan should not contain

pages and pages of detailed facts and figures.

Darrell inherited a large amount of money from his uncle. Darrell wishes to start his own business, and his lawyers encourage him to make it a corporation. What disadvantage of a sole proprietorship are the lawyers trying to avoid?

unlimited liability

A is a merger between firms operating at different but related levels in the production and marketing of a product.

vertical merger

The top governing body of a corporation is known as the

board of directors

Statistically, approximately what percentage of all new businesses can be expected to fail within their first seven years?

69%

Which form of franchising is the most common today?

A franchisor supplies brand names, techniques, or other services instead of a complete product

Which of the following has a restriction on the number of owners, members, or stockholders?

S-Corporation

Natalie owns a highly successful bakery and coffee shop, Mocha & Muffins. Others have expressed interest in starting nearly identical shops at various locations. Natalie decides to sell franchises of Mocha & Muffins. Why is this option a less expensive way to increase the distribution of her treats?

She will not incur the high costs of constructing and operating more shops

Which of the following statements is not true about small businesses?

Small businesses create cyclical unemployment

The following statement answers which major question that a business plan should address? "This business will serve over 200 customers by the end of the year and employ seven full-time employees."

What are the goals for the business?

"This business will create a caring, learning environment for elementary school children after regular school hours to meet the needs of working parents." This statement answers which of the following issues that should be addressed in a business plan?

What is the nature and mission of the business?

Imagine that you want to open your own small business. You will probably be most concerned with having

a good source of capital and good management skills

You have just opened a new small business. You're really happy to learn that studies show that small-business workers

are more innovative than workers in large businesses

Walters Company, LLC, is a wholesale distributor of industrial packaging. A primary advantage that Walters enjoys as an LLC that corporations do not have is

avoiding double taxation

A new small business, Underwater Wildlife, has opened to sell tours of underwater sites around the country and in South America. However, money has to be paid up front by the Underwater staff to book hotels and other travel arrangements before its clients have paid for the tours. That means Underwater is facing a potential

cash-flow problem

Janis starts a small quilting and embroidery business. She purchases a technologically advanced quilting machine and an embroidery machine for a combined $25,000. Her monthly payments on the equipment are $500, but she has only one client at this time. Janis is facing a potential

cash-flow problem

Which of the following is not a reason for starting a small business?

desire for a guaranteed financial return

A distribution of earnings to the stockholders of a corporation is a(n)

dividend

Which of the following is not a disadvantage of sole proprietorships?

double taxation

You have been running a successful art and framing shop for three years. You have decided to allow others to use your business name, materials, and methods in operating their own business for a fee. You are going to enter a

franchise agreement

An individual or organization granting a license to operate an individually owned business as though it were part of a chain of outlets or stores is a(n)

franchisor

The person who assumes full co-ownership of a partnership, including unlimited liability, is a

general partner

All of the following are reasons people go into business except the

guaranteed return on investment

Victor owns his own motorcycle and ATV store. He notices that many of his customers talk about golf while in his store. He quickly adds golf carts and golf clubs to his merchandise selection. Rapidly adjusting to the needs of his customers is possible because small businesses

have the ability to quickly adapt to change

Wade serves on Foot Locker's board of directors. How did Wade get this position?

he was elected by the company's stockholders

A merger between two firms that make and sell similar products in similar markets is known as a

horizontal merger

Recently there have been several mergers involving Big Four accounting firms. One such merger involved the firms of Arthur Young and Ernst & Whinney, who combined to form Ernst & Young. This is an example of a

horizontal merger

When Compaq and Hewlett-Packard decided to become one company, this was an example of a(n)

horizontal merger

Your friend Steve owns a considerable amount of common stock in Microsoft, a computer software company. He wants to cast his votes on various issues at the annual stockholders' meeting in Seattle, but he does not have the time to travel a great distance to the meeting. Instead of attending the meeting, Steve decides to register his votes by

proxy

Judy Barnes, Betty Turley, and Bob Turner want to obtain limited liability for their business, but they want to avoid double taxation. Which type of business ownership would you recommend?

s-corporation

Laura wants to start a business, but she is unsure of the legal form best for her. Short of cash, she has decided to take the form that is the least expensive and most flexible in terms of decision making and implementation. Which would you recommend?

sole proprietorship

The fact that insulin and power steering both originated with individual inventors and small companies is testimony to the power of small businesses as providers of

technical innovation.

When Alyssa decides that she no longer wants her Radio Shack stock, she will discover that a related benefit of a corporation is

the ease of transfer of ownership

An individual's desire to create a new business is referred to as

the entrepreneurial spirit