BUS10 Ch. 4-5

Allied Services is a transportation company that operates in most of the United States. If Allied Services decided to incorporate, in which state would it incorporate?

Any state that the company chooses

Daniel, Thomas, and Lucas are partners in a law firm under a typical partnership agreement in which each owns an equal share of the business. Thomas dies suddenly of a heart attack. What will most likely become of the partnership?

Daniel and Lucas will be able to purchase Thomas's interest from his estate.

Tim owns a McDonald's franchise that is having some troubles. Where is Tim most likely to go for advice and guidance?

The franchisor

Which of the following is an example of a horizontal merger?

The purchase of Mobil Oil by Exxon

A common tactic of corporate raiders is to start a proxy fight.

True

A tender offer is an offer to purchase stock from existing stockholders.

True

Profits of a large corporation are taxed twice, once as corporate income and again as personal income of stockholders.

True

Service industries make up about 48 percent of all small businesses.

True

Statistically, one can expect about two out of every three new businesses to fail within six years of their founding.

True

The disadvantages of franchising mainly affect the franchisee because the franchisor retains a great deal of control.

True

The incidence of innovation among small-business workers is significantly higher than that among workers in large businesses.

True

There is much less likelihood of failure with a franchised outlet than with an independently owned small business.

True

The following statement answers which major question that a business plan should address? "This business will serve over 200 customers by the end of the year and employ seven full-time employees."

What are the goals for the business?

When many banks join together to lend money to developing countries such as Bangladesh and Malaysia, they seek to spread out the risk of default. This is called

a syndicate.

An individual or organization granting a license to operate an individually owned business as though it were part of a chain of outlets or stores is a(n)

franchisor

Thomas wants to make money, so he starts his own business as a sole proprietor. He likes this form of business because

he will get to keep all of the profits the business makes.

Megan always knew she wanted to start her own business. She was very passionate and wanted to create something new. Megan's primary motivation for starting her own business is

her entrepreneurial spirit.

Recently there have been several mergers involving Big Four accounting firms. One such merger involved the firms of Arthur Young and Ernst & Whinney, who combined to form Ernst & Young. This is an example of a

horizontal merger

When Compaq and Hewlett-Packard decided to become one company, this was an example of a(n)

horizontal merger

Susan has a commercial laundry service that has been growing rapidly. She wants to continue to grow the business, but she needs access to more money and does not want to risk her personal assets. Susan contacts her lawyer to see if all the legal requirements are met to start the process of

incorporating

Mike Nettles approached Nathan Lang about becoming a partner in a firm that destroys environmental waste. While Mike would like to become a partner in the firm, he is concerned about his liability because he has recently inherited a lot of money. In this situation, Mike should become a

limited partner

The partner who can lose only what he or she has invested in a business is the

limited partner

The Smithsonian Institution exists to preserve historical and cultural items of value and to share those items with the public; it does not exist to maximize the wealth of any shareholders. This entity is organized as a(n)

not-for-profit corporation

The major reason why businesses change from sole proprietorships to other forms of ownership is to

obtain help and eliminate the problem of too much to do in one day

As a limited partner in a construction business, Joe

only risks his initial investment.

A limited-liability company is

taxed like a partnership.

Kerry wants to start a business to sell handmade jewelry. She is very competent at making the jewelry and teaching others to make it, and she has saved a reasonable amount of money to start the business. Who of the following would make the best partner for Kerry?

Natalie, who has business experience with accounting, management, and marketing

What do franchisees typically have to pay to the franchisor?

One-time franchise fee and monthly royalties based on sales

What is the main advantage of small business that helps retain effective employees who could earn more at a larger firm?

Personal relationships with employees

A banker or lender is more likely to make sizable loans to a sole proprietor than to a partnership.

False

All franchisors give geographical protection to their franchise holders.

False

Articles of partnership are a legal document issued by the secretary of state.

False

Financial experts agree that takeovers enhance corporate profitability and productivity.

False

Most stockholders attend a corporation's annual meeting and vote in person.

False

The purchaser of a franchise is called the franchisor.

False

Not-for-profit organizations must meet specific guidelines in order to obtain tax-exempt status. These guidelines are structured by the

Internal Revenue Service.

How might a sole proprietorship have a possible tax advantage?

It does not pay special state and federal taxes that corporations pay

Which of the following statements is true regarding the profitability of new businesses?

It may take several years for a new business to begin showing a profit.

What do experts believe is likely to become one of the most popular types of business organizations?

Limited-liability companies

Judy Barnes, Betty Turley, and Bob Turner want to obtain limited liability for their business, but they want to avoid double taxation. Which type of business ownership would you recommend?

S-corporation

Which of the following has a restriction on the number of owners, members, or stockholders?

S-corporation

What organization issues management, marketing, and technical publications of interest to present and prospective small-business managers that can be obtained from the U.S. Government Printing Office?

SBA

The acronym SCORE stands for

Service Corps of Retired Executives

John and Ruby Couch just opened a computer store in a small community. Before opening the store, they listened to their SBA counselor's warnings about the importance of having balanced experience, that is, marketing, finance, and personnel experience in the computer-store business because

about two out of three small firms close within five years of their founding.

The SBA makes a special effort to

assist minorities wanting to start small businesses or expand existing ones.

You stop at a SUBWAY to get a sandwich for lunch and you notice that they now have TCBY yogurt. This is an example of a

dual-branded franchise

A hostile takeover is a situation in which

the management and board of directors of the targeted firm disapprove of the proposed merger.

Most partnerships have ____ partners.

two