Chapter 5

Compared to a sole proprietorship, which of the following is considered an advantage of a general partnership?

A) Ability to pool financial resources.

One disadvantage of _________ is the initial cost of starting this form of business organization.

A) corporations

Marie recently purchased 100 shares of stock in the McBun Development Corporation. Marie has become a(n)_____________ of McBun Development.

A) owner

One reason franchises have become so popular is that this arrangement provides the franchisee with:

B) a nationally recognized name and product.

Which of the following statements is the most accurate? Sole proprietorships:

B) are easy to start and end.

A ___________ is an arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory

B) franchise agreement.

A person who buys the right to use a business name and sell a product within a given territory is called a:

B) franchisee.

A significant disadvantage of owning a sole proprietorship is the:

B) overwhelming time commitment often required of the owner.

The board of directors for a corporation is elected by its:

B) owners.

One of the major disadvantages of a sole proprietorship is the:

B) unlimited liability the owner has for the debts of the firm.

Which of the following statements about partnerships is the most accurate?

C) A major drawback of a partnership is that it is difficult to terminate.

A separation between ownership and management is most likely to occur in a:

C) corporation.

The form of business ownership that is best suited to raising large amounts of money for expansion is the:

C) corporation.

Todd and Jorge have considered starting their own business but are concerned about the possibility of losing their personal assets if the business fails. One way for both Todd and Jorge to avoid this risk would be to organize their firm as a(n):

C) corporation.

Starting a new business as a sole proprietorship:

C) is usually simpler and less expensive than starting other forms of ownership.

The result of two firms combining to form one company is called a:

C) merger.

Mergers and acquisitions:

C) often involve companies trying to expand within their own field or enter new markets.

In a leveraged buyout, the managers of a firm, its employees, or other investors attempt to:

C) use borrowed funds to buy out the firm's stockholders.

A(n) _________ occurs when one company buys the property and obligations of another company.

D) acquisition.

Excursion Corporation recently bought out Suburban Engineering for an undisclosed amount of money. It now owns all of Suburban's properties and obligations. This is an example of a(n):

D) acquisition.

Which of the following is normally considered a major disadvantage of the corporate form of business?

D) double taxation of earnings.

A(n) _____________ is someone who has a good idea for a business and who sells the right to use the business name and sell a product or service within a given territory.

D) franchisor

When comparing partnerships to sole proprietorships, an advantage of partnerships is that they:

D) give the firm a stronger financial foundation.

A difference between partnerships and sole proprietorships is that partnerships:

D) have a greater chance of long term survival.

Which of the following is an advantage of the corporate form of business when compared to sole proprietorships and partnerships?

D) limited liability of owners

The ___________ is the most common form of business ownership.

D) sole proprietorship

An owner of a corporation is known as a(n):

D) stockholder.

To many businesspeople, one of the major attractions of a sole proprietorship is:

D) the chance to be their own boss

Joe Jackson operates a sole proprietorship, but he is in poor health and may be unable to continue running the business. If Joe becomes incapacitated, his business:

ceases to exist unless sold or taken over by Joe's heirs.