FBP post class ch6

Which of the following statements is true of a franchisor-franchisee relationship?

A franchisor limits the franchisee's territory from expanding into other areas.

Sarcosine Chemicals Corp. issues stock in one of its operating units and sets it up as a separate company called Prussic Corp., with its own board of directors and corporate officers. Sarcosine Chemicals Corp. then distributes the stock in Prussic Corp. to its existing stockholders. Which of the following forms of divestitures does this scenario exemplify?

A spin-off

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

Shareholders have limited liability in the firm.

A Franchise Disclosure Document (FDD) is:

a document provided by a franchisor to the franchisee.

A sole proprietorship is a form of business ownership in which:

a single owner actively manages the company.

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.

spin-off

Which of the following is a difference between limited liability companies (LLCs) and corporations?

LLCs are subject to fewer reporting requirements than corporations

Which of the following statements is true of forming C corporations?

They require the adoption of corporate bylaws.

Charles wants to start a décor business and takes a loan of $35,000 from the bank to set up the business. Once the business is up and running, Charles will have full control of the business and its profits. However, he will also be responsible for any losses that the business incurs. In this scenario, which of the following forms of business ownership is Charles planning to start?

a sole propeitorship

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 _____.

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 participate in the election. In this scenario, the _____ of the company take part in the voting process.

common stockholders

John and Lena sign a contract with the owner of Little Fairy, a well-known preschool chain, to start a preschool in their city. They take permission from the owner to use the name and products of Little Fairy. They also furnish their preschool in Little Fairy's trademark style. In this scenario, John and Lena are starting a _____.

franchise

Clara and Sandra collaborate to open a cafe. They come to an arrangement wherein Sandra manages the cafe from Monday to Wednesday, Clara manages it from Thursday to Saturday, and both jointly manage it on Sunday. Both Clara and Sandra share the profits of the business equally while facing a personal liability for any debts or losses that the cafe may incur. In this scenario, Clara and Sandra most likely _____.

have a general partnership

Tangypop and Fizzmania, two giant soft drink companies in Brazil, join together to form a new company out of the two previously independent firms. They take this step to reduce competition, leverage economies of scale, and increase their size and market power within the soft drink industry. This association is most likely an example of a _____.

horizontal merger

Lancelock Inc. buys a less accomplished firm by directly signing a deal with the target firm's shareholders. The move is vehemently opposed by the board of directors and the top management of the target firm. This is an example of a _____.

hostile takeover

FoodieGo, a catering company, is owned by foreign investors and local businessmen. Its earnings are equally divided among its members. It does not face the problem of double taxation as taxes are only levied on the personal income of the members. The owners of FoodieGo do not have personal liability for any debts incurred by the company. In the given scenario, FoodieGo is an example of a _____.

limited liability company

A _____ is a partnership arrangement that includes at least one general partner and at least one limited partner.

limited partnership

Green Haven is an organization whose earnings are exempt from federal and state income taxes. Individuals who contribute money to the organization can avail the benefit of tax deduction. However, the organization is barred from distributing dividends to its members. Given this information, Green Haven is most likely a(n):

not-for-profit corporation.

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:

only pays taxes on his income as the owner.

Ronnie is the owner of a pet store and manages the store by himself. Any profit that Ronnie's store earns is:

treated as Ronnie's personal income.