business unit 6

In the context of an acquisition, when the acquiring firm buys the target firm despite the opposition of the target's board and top management, the result is called a _____. a. creeping acquisition b. hostile takeover c. bootstrap acquisition d. lobster trap

hostile takeover

Norman owns a large number of shares in a telecommunications corporation. Despite that, he does not have the right to vote in a meeting held specifically to elect the CEO of the company. In this scenario, Norman is most likely a _____. a. general partner b. limited partner c. common stockholder d. preferred stockholder

limited partner

Which of the following is an advantage of an S corporation? a. Its stockholders have limited liability. b. It can be owned by foreigners or other corporations. c. Its earnings are exempt from federal and state income taxes. d. It can have more than 100 stockholders.

Its stockholders have limited liability.

Corporations are by far the most common type of business organization in the United States.

false

All owners of a _____ can actively participate in management while still having limited liability. a. statutory close corporation b. Z corporation c. general partnership d. sole proprietorship

general partnership

The stockholders of a construction firm decide to start a steel company, but they want to have limited liability. After completing the business plan, they initiate the process of establishing the company by filing articles of incorporation and paying the filing fees to the state government. In this scenario, the stockholders of the firm want to start a _____. a. franchise b. general partnership company c. limited liability company d. C corporation

c coorporation

Since sole proprietorships are extensions of their owners, they: a. lack permanence. b. offer limited liability. c. have the ability to pool financial resources. d. lack of tax advantage.

lack permanence

One of the reasons why C corporations have an edge over sole proprietorships is: a. the ease of its formation. b. because single individuals can retain the total profits of the company. c. because members have unlimited liability toward the company. d. the permanence of the business.

the permanence of the business.

The earnings of not-for-profit corporations are exempt from federal and state income taxes.

true

There is no limit on the number of partners who can participate in a general partnership.

true

A limited liability company (LLC) can elect to be taxed as a corporation.

true

One of the disadvantages of general partnerships is the lack of continuity.

true

The most common type of corporation is an S corporation.

false

In the context of corporate restructuring, a common objective of a horizontal merger is to: a. improve efficiency by eliminating duplication of facilities and personnel. b. provide tighter integration of production and increased control over the supply of crucial inputs. c. reduce risk by making a firm less vulnerable to adverse conditions in any single market. d. transfer partial ownership of operations to investors.

improve efficiency by eliminating duplication of facilities and personnel.

The choice of ownership determines the degree to which each owner has personal liability for the firm's debts.

true

Which of the following is a similarity between a general partner and a limited partner in a limited partnership? a. Both can actively participate in the management of the company. b. Both lack the protection of limited liability. c. Both have no share in the company's profits. d. Both contribute financially to the company.

Both contribute financially to the company.

Which of the following is an advantage of general partnerships? a. Partners capitalize on complementary skills. b. All partners have limited liability. c. A partner's investment stays with the company even when he or she withdraws. d. Partnerships have negligible scope for disagreements.

Partners capitalize on complementary skills.

Conall is appointed by a nine-member board of directors of a real estate company to manage the company on a daily basis. The board ensures that Conall acts in a manner that is consistent with the interests of the stockholders. Given this information, Conall is most likely a _____. a. non-executive director b. chief executive officer c. chief business officer d. human resource manager

chief executive officer

Heinrich Chemical Corporation holds an annual meeting in which it invites all individuals who hold shares in the company. The occasion is also set aside for the election of a new member to the company's board of directors. However, the company ensures that only individuals who have the right to vote to participate in the election. In this scenario, the _____ of the company take part in the voting process. a. general partners b. limited partners c. common stockholders d. preferred stockholders

common stockholders

A corporation offers more flexibility than a limited liability company (LLC) in terms of tax treatment.

false

A disadvantage of an S corporation is that it can have no more than 50 stockholders.

false

Francois is the sole owner of a photo studio and handles most of the work himself. All earnings from the studio become Francois's income. Given this information, Francois: a. is obliged to pay both personal tax and company tax. b. only pays taxes on his income as the owner. c. is free to choose the taxation policy for his company. d. has limited liability for the debts incurred by the studio.

only pays taxes on his income as the owner.

When people use the term "corporation" without specifying which type, they are generally referring to a(n) _____. a. statutory close corporation b. nonprofit corporation c. S corporation d. C corporation

s coorporation

A(n) _____, a type of divestiture, occurs when a company issues stock in one of its own divisions or operating units and sets it up as a separate company—complete with its own board of directors and corporate officers. a. spin-off b. stub c. away swing d. bowl-out

spin-off