BUSI PRIN CHP 6 QUIZ

_____ are organizations that pool contributions from investors, clients, or depositors and use these funds to buy stocks and other securities. a. Institutional investors b. Business format franchises c. Angel investors d. Trading wealth funds

a. Institutional investors

Which of the following statements is true of limited liability companies (LLCs)? a. There is no separate tax on the earnings of the companies if they choose to be treated as a partnership. b. They fall under the category of corporations. c. Banks, insurance companies, and nonprofit organizations are the most common forms of LLCs. d. Transfer of ownership laws are uniform for LLCs in all states.

a. There is no separate tax on the earnings of the companies if they choose to be treated as a partnership.

An advantage of a general partnership is that the: a. business is taxed as the personal income of its owners. b. firm remains unaffected when an owner withdraws from the partnership. c. owners of the business have limited liability. d. potential for disagreements is rare.

a. business is taxed as the personal income of its owners.

A _____ is a licensing arrangement under which one party allows another party to use its name, trademark, patents, copyrights, business methods, and other property in exchange for monetary payments and other considerations. a. franchise b. divestiture c. purchase order d. distributor agreement

a. franchise

The _____ is a situation where the behavior of an incompetent or an irresponsible franchisee adversely affects not only the franchise as a whole but also the success of other franchisees. a. negative halo effect b. endowment effect c. pie-in-the-sky effect d. ambiguity effect

a. negative halo effect

The vast majority of limited liability companies (LLCs) elect to be taxed as: a. partnerships. b. nonprofits. c. regulatory bodies. d. sole proprietorships.

a. partnerships.

Which of the following is a disadvantage of a limited liability company (LLC)? a. Extensive paperwork requirements b. Complexity of formation c. Double taxation of earnings d. Restrictions on sale

b. Complexity of formation

From the franchisee's perspective, which of the following is an advantage offered by franchising? a. Flexibility in management b. Easy access to funding c. Low cost of formation d. Unlimited opportunities for growth

b. Easy access to funding

The _____ considers a C corporation to be a separate legal entity and taxes its earnings accordingly. a. Central Board of Direct Taxes b. Internal Revenue Service c. Revenue Cycle Management d. National Income Committee

b. Internal Revenue Service

A _____ is a form of business ownership in which the business is considered a legal entity that is separate and distinct from its owners. a. sole proprietorship b. corporation c. limited liability company d. partnership

b. corporation

An individual who decides to establish a sole proprietorship must realize that he or she would be: a. required to fill out special forms and pay a high proprietorship fee to legalize the company. b. facing unlimited personal liability for the company's debts. c. incurring the problem of double taxation. d. creating a business that is legally separate and distinct from himself or herself.

b. facing unlimited personal liability for the company's debts

A _____ refers to a corporate restructuring that occurs when two formerly independent business entities combine to form a new organization. a. bootstrap fusion b. merger c. divesture d. hostile takeover

b. merger

In the context of a limited partnership, which of the following statements is true of general partners? a. They can safeguard their personal wealth by not participating in the company's management. b. They do not contribute financially to the company. c. They have the right to participate fully in managing their partnership. d. They are free of personal liabilities for any of the company's debts.

c. They have the right to participate fully in managing their partnership.

One of the drawbacks of sole proprietorships is that the owners: a. need to pay a very high fee during the firm's formation. b. may find it difficult to withdraw from the partnerships established during the firm's formation. c. may find it difficult to attract and maintain talented employees. d. need to pay double tax.

c. may find it difficult to attract and maintain talented employees.

In the context of corporate restructuring, a _____ refers to a combination of firms that are at different stages in the production of a good or service. a. reverse merger b. horizontal merger c. vertical merger d. conglomerate merger

c. vertical merger

Which of the following statements is true of franchises set up across borders? a. The minority participation in franchises across borders, both as franchisees and franchisors, is at its peak. b. A franchisee always has exclusive rights in the geographic area in which it operates. c. Franchisees can sell their franchises to other investors without notifying the franchisor. d. The limit of a franchisee's right over a territory is decided through a franchise agreement.

d. The limit of a franchisee's right over a territory is decided through a franchise agreement.

In the context of corporations, _____ is a corporate restructuring in which one firm buys another. a. ramification b. equitization c. a divestiture d. an acquisition

d. an acquisition

In the context of business ownership, the document filed with a state government to establish the existence of a new corporation is referred to as the _____. a. bondage incorporation b. apostille stamp c. certificates of statute d. articles of incorporation

d. articles of incorporation

In accordance with corporate bylaws, stockholders elect a _____ and rely on it to oversee the operation of their company and protect their interests. a. regulatory agency b. first-line management team c. strategic alliance squad d. board of directors

d. board of directors

A _____occurs when a firm transfers total or partial ownership of some of its operations to investors or to another company. a. merger b. strategic alliance c. hostile takeover d. divestiture

d. divestiture

In the context of corporate restructuring, a _____ is defined as a combination of firms in the same industry. a. conglomerate merger b. vertical merger c. reverse merger d. horizontal merger

d. horizontal merger