Chapter 7 + 8 Quiz

According to the National Business Ethics Survey published in 2013 that tracks the experiences of employees within the organizations regarding business ethics, _____ percent of the 6,420 employees reported that they had observed misconduct or unethical behavior in the past year.

41

Which of the following statements is incorrect regarding common stock?

Common stock is issued more narrowly than preferred stock.

Stock options are a special form of incentive compensation.

True

A firm's working capital is its ________.

current assets minus its current liabilities

Which of the following is typically not included in the founders' agreement for a firm?

Buyback clause

Which of the following statements is incorrect regarding sole proprietorships?

Liquidity of the investment is high.

________ is the process in which an impartial third party helps those involved in a dispute reach an agreement.

Mediation

Which of the following is an advantage of a C Corporation?

Stock is liquid if traded on a major stock exchange.

Which of the following is not one of the standards that a business must meet to qualify for status as a subchapter S corporation?

The business must be a subsidiary of another corporation.

Which of the following is not an advantage of a general partnership?

The liquidity of each partner's investment is low.

Which of the following was not identified as one of the four main financial objectives of a firm?

Timeliness

The most important thing that any entrepreneur, or team of entrepreneurs, can do to build a strong ethical culture in their organization is to hire an aggressive attorney.

True

The vast majority of corporations in the United States are public corporations.

True

A corporation is formed by filing ________ with the Secretary of State's office in the state of incorporation.

articles of incorporation

The single most important thing the founders of an entrepreneurial venture can do is

avoid ethical misconduct is to establish a strong ethical culture for their firms.

Most C corporations have two classes of stock— ________ and ________.

common; preferred

The ________ is a form of business organization that is rapidly gaining popularity in the United States. The concept originated in Germany and was first introduced in the United States in the state of Wyoming.

limited liability company

According to the textbook, ________ are common in real estate development, oil and gas exploration, and motion picture ventures.

limited partnerships

A firm's profit margin, or return on sales, is computed by dividing ____

net income by net sales

In regard to budgets, which of the following statements is not true?

Budgets are a poor tool for financial control

Which of the following is not one of the four factors identified in the textbook as critical in selecting a form of business ownership?

Accounting considerations

Which of the following statements about limited partnerships is incorrect?

Both the limited partners and the general partners are responsible for the debts and obligations of the partnership.

Which of the following is true regarding common and preferred stock?

Common stock is issued more broadly than preferred stock.

The balance sheet reflects the results of the operations of a firm over a specified period of time.

FALSE

A disadvantage of a general partnership is that the liquidity of each partner's investment is low.

False

Corporations are organized as either C corporations, T corporations, or subchapter S corporations.

False

Which of the following statements regarding business licenses and permits is incorrect?

If a business will be run out of a home, a home occupation business license is often required.

Which of the following is a disadvantage of a C Corporation?

Income is subject to double taxation.

________ stock is typically issued to conservative investors who have preferential rights over common stockholders in regard to dividends and to the assets of the corporation in the event of liquidation.

Preferred

Which of the following statements about pro forma financial statements is incorrect?

Pro forma financial statements are required by the SEC.

Which of the following is an example of a long -term liability?

Real estate mortgage

Which form of business ownership is a particularly poor choice for an aggressive entrepreneurial firm?

Sole proprietorship

A separate legal entity organized under the authority of a state is referred to as a ________.

corporation

The What Went Wrong? feature in Chapter 7 focuses on Fitbit. Fitbit makes wearable activity trackers that measure data such as number of steps walked, quality of sleep, and other personal metrics. The feature centered on a product that Fitbit made (the Fitbit Force) that caused some users to develop skin rashes. The ethical issue at stake was whether Fitbit ________.

cut corners and used inferior material in producing the product

A disadvantage of C corporations is that they are subject to ________, which means that a corporation is taxed on its net income and when the same income is distributed to shareholders in the form of dividends it is taxed again on shareholders' personal income tax returns.

double taxation

Southwest Airlines uses its assets very productively. Its turnaround time, or the time that its airplanes sit on the ground while they are being loaded and unloaded, is the lowest in the airline industry. In terms of the primary financial objectives of a firm, this attribute is a measure of Southwest's _______

efficiency

A situation that involves doing something that is beneficial to oneself or the organization, but may be unethical, is called a(n) ________.

ethical dilemma

Partnerships are organized as either ________ or ________ partnerships.

general; limited

Steven Diaz just took a job with Harley Davidson. As part of his employment agreement, Harley Davidson required Steven to sign an agreement, which states that if he leaves Harley Davidson, he will not work for a firm that competes against Harley Davidson for at least two years. The agreement that Steven signed is called a ________ agreement.

noncompete

Jessica Marsh just took a job with Instagram. As part of her employment contract, Jessica signed an agreement that states that he will not disclose any of Instagram's trade secrets. The agreement that Jessica signed is called a(n) ________ agreement.

nondisclosure

If the owners of a corporation don't file their annual paperwork, neglect to pay their annual fees, or commit fraud, a court could ignore the fact that a corporation has been established and the owners could be held personally liable for the actions of the corporation. This chain of events is referred to as ________.

piercing the corporate veil

The four main financial objectives of a firm are _____

profitability, liquidity, efficiency, and stability

GymFlow, the company profiled in the opening feature in Chapter 8, created a mobile app that shows how busy a gym is at any given point in time. According to the case, in regard to financial management, the cofounders of GymFlow found that ________ was one of their most difficult challenges.

projecting future expenses

All of the following are advantages of a sole proprietorship except ________.

unlimited liability