Entrepreneurship Chapter 7

A corporation's board of directors is responsible for all of the following EXCEPT A) electing the corporation's officers B) setting the corporation's rules for conducting business C) determining the salaries of company executives D) the day-to-day management of the corporation

D) the day-to-day management of the corporation

All of the following information is included in a Franchise Disclosure Document EXCEPT: A) the franchise fees and royalties B) the terms of the franchise agreement C) a brief history of the franchise D) the name, address, and phone number of all current franchisees

D) the name, address, and phone number of all current franchisees

The costs associated with beginning a business, such as renting a facility, equipping the outlet, and purchasing inventory, are called __________ costs.

Start-up

A(n) ___________________ is a business that has the legal rights of a person but is independent of its owners.

corporation

Owners of a limited liability company are know as _____________

members

A business owned by two or more people is a(n) ___________________--

partnership

A franchisee A) is dependent on the performance of other franchisees in the chain B) can never have his/her franchise agreement terminated once it is signed C) can typically plan on paying more for equipment and supplies than other entrepreneurs D) has more freedom to make decisions than other entrepreneurs

A) is dependent on the performance of other franchisees in the chain

The MAIN reason entrepreneurs set up corporations is because: A) liability is limited to the amount of money each shareholder invested in the company B) they are the easiest and least-expensive form of business ownership C) it is easier to raise money as a corporation than as a partnership or sole proprietorship D) they are much more prestigious than other forms of ownership

A) liability is limited to the amount of money each shareholder invested in the company

If you are considering buying an existing business, ask the current owner to provide you with a complete financial accounting of operations for at least A) the past three years B) the past year C) the past ten years D) the past six months

A) the past three years

Essay: Describe two advantages and two disadvantages of working for a family business.

Advantages: highly stable, loyalty from employees, more flexible Disadvantages: less freedom to make decisions, family politics, and no exit strategy

This law protects small businesses from unfair pricing practices A) Sherman Act B) Robinson-Patman Act C) Clayton Act D) Wheeler-Lea Act

B) Robinson-Patman Act

A unit of ownership in a corporation is called a A) bond B) share of stock C) dividend D) certificate of deposit

B) share of stock

Local governments control the types of buildings that can be built in different areas through the use of A) licenses B) zoning regulations C) copyrights D) trademarks

B) zoning regulations

Which of the following is NOT an advantage to buying an existing business? A) there are prior records of revenues, expenses, and profits, making financial planning easier B) Financial arrangements can be easier C) capital is not required because the business already exists D) the seller may be willing to train the new owner

C) capital is not required because the business already exists

A business owned exclusively by one person is called a A) partnership B) corporation C) sole proprietorship D) limited liability company

C) sole proprietorship

_____________________ are distributions of corporate profits to the shareholders

Dividends

T/F: A legally binding agreement between two or more persons or parties is called a license

False

T/F: Fewer than 100,000 people in the United States own franchises, and the popularity of franchise ownership is declining rapidly

False

T/F: Income earned by a sole proprietorship is taxed twice: once as a company income and again as individual income

False

T/F: Initial franchise fees are usually refundable if the franchise owner later decides to go into another line of business

False

T/F: The Fair Credit Billing Act of 1974 requires all banks to calculate credit costs in the same way

False

T/F: The Federal Bureau of Investigation is the government agency that monitors activities such as false or misleading advertising and price setting by competitors

False

T/F: The copyright on a book remains in effect until the author dies

False

T/F: starting your own new business offers a low level of risk because you depend on your own business talents.

False

A(n) _______________ is a legal agreement that fives an individual the right to market a company's products or services in a particular area

Franchise

An existing business may have built up a considerable amount of __________ ___________, or customer loyalty

Good will

Short Answer: Give at least three reasons why a business owner might put his/her business up for sale

No money, retiring, partner dies

A(n) ______________ is the grant of a property right to an inventor to exclude others from making,using, or selling his or her invention

Patent

Short Answer: What is the most common form of business ownership in the US? Why?

Proprietorship because it is the easiest

A(n) _______________ is a name, symbol, or special mark used to identify a business or brand of product

Trademark

T/F: According to some estimates,as many as 90 percent of all businesses, including the vast majority of small- and medium-sized companies, are owned by families

True

T/F: Antitrust laws make monopolies in certain industries illegal; they also ban other types of business activities that do not promote competition

True

T/F: At some point, an entrepreneur may have to hire a lawyer to assist with legal issues affecting the business

True

T/F: Comparing franchises is a good idea because some franchisers help buyers with marketing, merchandising, and site selection

True

T/F: State and federal laws require that the franchiser provide the Franchise Disclosure Document (FDD) to prospective franchisees 14 days before the franchisee signs a contract

True

T/F: if you are buying an existing business, you should ask the current owner for important information in written form

True

T/F: intellectual property is the original, creative work of an artist or inventor and may include such things as songs, novels, artistic designs, and inventions

True

A(n) _________________ is an expert on determining the value of a business and can help an entrepreneur determine a price to offer for an existing business

Valuator

Short Answer: Name three advantages of starting your own business

You are the boss, your keep the profits, freedom

Short Answer: What is the purpose of a partnership agreement ?

to write down rights and responsibilities of the owners