ISOM 125 - Chapter 4 (Test 2)

Brenda runs a bookstore in her local community. She started the business with her own money and solely manages the day-to-day operations of the business. Which of the following is true in this scenario?

Brenda can easily dissolve the business whenever she wants.

Raj wants to open his own pub in his hometown that serves local spirits and food. Which of the following will he have to do to achieve this goal?

He will need to fill out paperwork to obtain the proper licenses and permits.

Stephanie is a partner in a local hair salon. Without consulting her partners, she ordered some expensive hair products that she thought would greatly improve their business. However, the products were too expensive for the salon's customers, so they sat on the shelves. What impact will Stephanie's decision have on her partners?

Her decision may put her partners' personal resources in jeopardy.

Which of the following statements is true about sole proprietorships?

Most sole proprietorships focus on services rather than on the manufacture of goods.

Which of the following is true of the distribution of profits earned by a partnership?

They are distributed in the proportions specified in the articles of partnership.

Which of the following statements is true of taxation in partnerships?

They pay taxes at the income tax rate for individuals.

Judy has realized that she does not like working for others. She wants to open a business in which she will have maximum control and the least interference from government regulations. Which of the following forms of business is best suited for Judy's needs?

a sole proprietorship

Big Lite Inc. purchases Canton Bulbs, its direct competitor, by buying most of its stock. In this scenario, Big Lite Inc. is involved in a(n)

acquisition

The legal documents that identify the basic agreements between partners are called

articles of partnership

_____ are legal documents that the state issues to companies based on information the company provides in the articles of incorporation.

corporate charters

A(n) _____ is a legal entity, created by the state, whose assets and liabilities are separate from its owners.

corporation

A corporation doing business outside the state in which it is chartered is known as a(n)

foreign corporation

At AgroCorp, each owner has unlimited liability for the debts of the business. It has several business units that focus on many product categories at once, which allowed the company to become a leader in category management in the agricultural market. AgroCorp is an example of a

general partnership

Michael Wong and Sanjay Patel, both lawyers, start a law firm together. Both of them have unlimited liability for the debts of the business, and the management of the firm is equally shared between them. This law firm is an example of a(n)

general partnership.

In sole proprietorships, owners

have access to limited sources of funds

Razor, Inc. and Tyros, Inc., two automobile companies, merge to reduce the number of corporations competing within the automobile industry. This merger is an example of a

horizontal merger

All of the following are keys to a successful partnership EXCEPT partners must

keep profit sharing equal regardless of contributions.

Which of the following is a disadvantage of sole proprietorships?

lack of continuity

Gwen is a doctor who is forming her own medical practice. She wants her practice to be flexible, simple to run, and free from required meetings, minutes, or resolutions. Her goal is to blend the best characteristics of corporations, partnerships, and sole proprietorships. What form of business ownership seems most in-line with Gwen's goals?

limited liability company.

Amanda is a professor at a local college who serves on the board of directors for EduPub, a leading academic publisher. She is a valued member of the board because she brings her unique perspective from the field, and she is qualified, knowledgeable, and independent of the company. Amanda is a(n)

outside director

The right of common stockholders to have the opportunity to purchase new shares of stock is called a

preemptive right

GloboTron is a large company that produces home entertainment technology. GloboTron has stock that anyone can buy, sell, or trade, but since it is a large company, its stockholders are far removed from its management. However, it must disclose its financial information to the public under specific laws that regulate the trade of stocks and other securities. What type of business is this?

public corporation

Which of the following forms of business ownership is the easiest to establish?

sole proprietorship

Which of the following forms of business ownership requires owners to perform many functions and possess diverse skills to make decisions?

sole proprietorship

AgroCorp is a public corporation that experienced difficulty growing its agricultural products during an especially dry summer season. Wanting the flexibility to make decisions for restructuring AgroCorp's operations, its managers bought all the stock, thus

taking it private.

_____ can be considered as both an advantage and a disadvantage of a sole proprietorship.

taxation

The income earned in sole proprietorships is:

taxed as personal income

When a corporate raider wants to acquire or take over another company, it first offers to buy some or all of the other company's stock at a premium over its current price in a(n)

tender offer

Alan, Gary, and Paul are starting a new law firm together, and they are drafting articles of partnership. All of the following are items they should include EXCEPT

the total money and assets of each partner's estate.

The decision-making process in a partnership tends to be faster when

there are two partners and both of them are involved in the day-to-day activities of the business.