Chapter 8

Which of these is the price that an individual or a corporation pays for the use of another's money? A. Dividends B. Principal C. Capital D. Interest

Interest

How does depreciation differ from other operational expenses? A. It is paid only after taxes have been paid. B. It is an extraordinary expense that is not included on income statements. C. It both lowers a firm's taxable income and increases the firm's cash flow. D. It is paid out to individual employees rather than to banks or suppliers.

It both lowers a firm's taxable income and increases the firm's cash flow

How has social media changed the business-financing landscape? A. It has provided a way for angel investors to vet and select businesses to fund. B. It has contributed to the expansion of businesses to other countries. C. It has made it possible for companies to reach out directly to a crowd of interested investors. D. It has made it easier for companies to run background checks on employees.

It has made it possible for companies to reach out directly to a crowd of interested investors.

Which type of business offers the best chance for quick decision-making? A. Sole proprietorship B. General partnership C. Limited partnership D. Corporation

Sole proprietorship

If investors want to know about the financial health of a firm, what is one of the first things they look at? A. The amount of a firm's depreciation B. The firm's cash flow C. The firm's president D. The firm's taxes

The firm's cash flow

What is one of the main reasons why companies merge into large conglomerates? A. To achieve synergy with a newly acquired firm B. To diversify by not "putting all their eggs in one basket" C. To build customer loyalty towards a single brand D. To take advantage of a unified marketing team

To diversify by not "putting all their eggs in one basket"

Collective bargaining occurs when A. a labor union negotiates with management about worker pay and job-related issues. B. members work together to make goods available to each other at lower prices. C. a group agrees to work together to improve the community. D. a corporation's management and board of directors agree on how to run the business

a labor union negotiates with management about worker pay and job-related issues.

What is a bond, and how is it used? A. A written promise to repay borrowed money at a later date; to raise money B. A portion of the money earned by a company; to reward investors C. A percentage of a corporation that is sold; to reduce corporate taxes D. A certificate indicating that an investor owns part of a company; to reduce corporate liability

A written promise to repay borrowed money at a later date; to raise money

Which level(s) of government play a direct role in the economy? A. Only local governments B. Only state levels of government C. Only the federal level of government D. All levels of government

All levels of government

A difference between a professional association and a labor union is that A. labor unions primarily focus on public perception of their members. B. professional associations are more concerned about standards of conduct and legal issues that might affect them. C. labor unions serve the entire community. D. professional associations lead strikes.

B. professional associations are more concerned about standards of conduct and legal issues that might affect them.

This form of business provides limited liability for the owners. A. Proprietorship B. General partnership C. Corporation D. Sole proprietorship

Corporation

Which type of business involves renting or leasing a successful business model? A. Sole proprietorship B. Franchise C. Limited partnership D. Corporation

Franchise

Which of these is an advantage of a corporation? A. Corporate profits are taxed twice. B. A corporation has limited life. C. It is easier to raise financial capital. D. Shareholders help make business decisions.

It is easier to raise financial capital.

Which of the following is NOT an example of a business association? A. Chamber of commerce B. Business roundtable C. The AFL-CIO D. Better Business Bureau

The AFL-CIO

Why might someone want to purchase a franchise? A. The start-up costs are relatively low. B. The franchisee will own the business at the end of the lease term. C. The franchisee will have the opportunity to sell an established product with a national reputation. D. The franchisee will face minimal costs if he or she wants to back out of the lease agreement after two or three years.

The franchisee will have the opportunity to sell an established product with a national reputation.

Which of these is an advantage of a sole proprietorship? A. It is recognized as a separate legal entity. B. The owner does not have to share the profits of the business with anyone else. C. The proprietor does not have to pay income taxes for the business. D.I t is easy to attract qualified employees.

The owner does not have to share the profits of the business with anyone else.

Reasons for merging might include all but which of the following? A. To achieve economies of scale B. To diversify the product line C. To eliminate a rival D. To get more venture capital funding

To get more venture capital funding

What is one way that venture capitalists differ from angel investors? A. Angel investors offer expertise and connections that businesses can use to solve problems. B. Venture capitalists are more concerned with seeing a return on investment, whereas angel investors are acting more out of goodwill. C. Angel investors have more stringent requirements when making investments. D. Venture capitalists are primarily concerned with helping improve the community.

Venture capitalists are more concerned with seeing a return on investment, whereas angel investors are acting more out of goodwill.

A cooperative is intended to benefit A. only its board of directors. B. all of its members. C. the entire community. D. investors from other nations.

all of its members.

A vertical merger combines firms that A. are involved with different stages of manufacturing, marketing, or sales. B. produce complementary products. C. want to keep their own identities intact. D. produce the same kinds of products.

are involved with different stages of manufacturing, marketing, or sales.

The FDIC's role in insuring the deposits in banks is an example of the A. cooperative role of government. B. regulatory role of government. C. indirect role of government. D. direct role of government.

direct role of government.

When the government has a direct role in the economy, A. it competes with other private businesses by offering goods or services. B. it benefits individuals only indirectly. C. it acts as a consumer instead of a producer. D. it regulates economic activity.

it competes with other private businesses by offering goods or services.

Multinationals are distinct from other types of businesses because they A. operate and sell products in different countries. B. are characterized by having many horizontal mergers. C. have more synergy than other companies. D. must adhere to stricter regulations.

operate and sell products in different countries.

Day-to-day operations within a corporation are most likely controlled by the company's A. proprietors. B. president and vice presidents. C. stockholders. D. board of directors.

president and vice presidents.

Incubators provide assistance for entrepreneurs by A. locating applicable government subsidies. B. creating new business start-up kits. C. providing start-up training and guidance with obtaining potential financing. D. researching and developing new products

providing start-up training and guidance with obtaining potential financing.

The role of a labor union is to A. advocate against shareholder dividends. B. support a corporation's board of directors. C. represent the interests of workers in employment matters. D. serve as the spokesperson for a company's management.

represent the interests of workers in employment matters.

People who invest in a corporation by purchasing stock are known as A. shareholders. B. partners. C. proprietors. D. managers.

shareholders

When merging firms strive to take advantage of the best characteristics of each to create a stronger, better company, they are trying to achieve A. conglomeration. B. economies of scale. C. diversification. D. synergy.

synergy.

One reason that community organizations may be legally incorporated is A. to maximize profits for shareholders. B. to cut costs of supplying goods and services. C. for convenience in paying taxes. D. to take advantage of unlimited life and limited liability.

to take advantage of unlimited life and limited liability.

An example of the indirect role of government is A. when the government regulates firms to prevent a monopoly. B. when the government provides electric power. C. when the government provides postal service. D. when the government operates a university.

when the government regulates firms to prevent a monopoly.