BUSN10 Chapter 6 Quiz

Franchise Disclosure Document FDD) is

A document provided by a franchisor to the franchisee

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 _____.

A franchise

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

Cheif executive officer

The owner of a sole proprietorship must share any after-tax profits with the company's shareholders

False

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 management of the target firm. This is an example of a

Hostile takeover

Which of the following is a difference between limited partnerships and limited liability partnerships?

In limited liability partnerships, all the partners actively participate in the management of the company, whereas in limited partnerships, only the general partners actively manage the company

Glossamer Inc., a company owned by George and Alex, faces huge debts and is eventually shut down due to bankruptcy. The company's financial loss affects Alex personally, and his house and other personal assets are seized by the bank. However, George's personal assets are not affected. This is most likely because George is a(n)

Limited partner

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

True

A premium brand of men's wear introduces a new range of dinner suits and licenses its franchisees to sell this product. However, the brand retains the production rights. This scenario exemplifies a(n)

distributorship

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

Tania starts a bookstore with her friend. However, owing to other commitments, Tania is unable to help with the daily operations of the bookstore. Therefore, Tania proposes that she would not actively participate in managing the business but would provide financial support to the business. By doing this, she would be sharing the profits equally with her friend, without incurring any of the business debts personally. In this scenario, Tania is a(n)

limited partner

A corporation is a seperate entity from its owner where the:

owners are not personally responsible for the obligations of the company.

A(n) _____ is a form of business ownership that offers both restricted responsibility to its owners and flexible tax treatment.

quasi corporation

Albert is the owner of a car service center. As a sole proprietor, any profit that he earns is:

treated as Albert's personal income

A large film production company merges with a popular sound processing studio, resulting in the formation of a new company out of the two previously independent firms. This is most likely an example of a

vertical merger

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

C corporation

Clareese Trends, a clothing manufacturer, identifies twelve potential franchisees who would introduce the brand's outlets across eight major cities in the United States. Clareese Trends, however, has retained the production rights with itself, giving its franchisees only the right to sell the products they receive from the company at their various outlets. This scenario exemplifies a _____.

Distributorship

A corporation is a voluntary agreement under which two people act as co-owners ot a business for profit.

False

It is possible to establish a corporation by a simple verbal agreement.

False

Matisse and Oliver own an antique furniture business. They are in a form of partnership where Oliver is only a dormant partner who contributes financially to the business, whereas Matisse actively manages the business and takes care of imports and exports. Matisse and Oliver are bound by an agreement where, unlike Oliver, Matisse is personally responsible for all the debts incurred by the business. In the given scenario, Matisse and Oliver have a

Limited partnership