Ch 4 Quiz

Corporations face many more government restrictions and regulations than sole proprietorships and partnerships.

True

Eighty-two percent of boomers indicated that they will not retire at or before age 65.

True

The corporation's board of directors elects the corporate officers.

True

Why would a company choose to engage in a conglomerate merger instead of a vertical or horizontal merger?

A conglomerate merger is done to reduce risk.

Articles of incorporation do NOT include:

a list of all stockholders' names

Which of the following demographic groups is having the greatest impact on the growth of the franchising industry?

baby boomers

Who owns a corporation?

everyone who owns a share of stock in the corporation

The purchaser of a franchise is called the:

franchisee

Why do most large companies have outside directors on their boards?

to bring a fresh view to all of the corporation's activities

To avoid double taxation, a new entrepreneur may elect to organize as a(n):

S corporation

A person who buys a franchise has the same level of control as an entrepreneur who opens his or her own sole proprietorship.

False

Cooperatives are regulated with the same tax laws and rates as corporations.

False

Which of the following statements about limited liability companies (LLCs) is true?

All of the above statements about LLCs are true.

Which of the following statements about incorporation is true?

Articles of incorporation may vary slightly from state to state.

What type of business organization generates the most total sales?

Corporation

A type of business entity that provides liability protection but is taxed like a partnership is a:

S corporation

Which type of business organization experiences the least governmental regulation?

Sole proprietorship

When Ashland Plastics and Melamine Chemicals formed a joint venture to develop flame-resistant plastic sheeting, the relationship most likely ended as soon as the project was completed.

True

Which of the following describes a disadvantage associated with a corporation?

all of the above

Hard Rock Cafe International and Sol Melia Hotels and Resorts have allied to develop a multimillion-dollar hotel. This relationship is a _____ because their alliance will end as soon as the hotel is completed.

joint venture

Fairmount Food Group purchased Swissrose International Inc., market of several brands of specialty and food service cheese from ConAgra. The _____ will make Fairmount the largest U.S. importer and marketer of specialty and deli-style cheese.

acquisition

Bob Nichol and Martha Bohner own and operate a small company that bakes and sells Thunder Muffins, gigantic muffins full of blueberries, blackberries, or raspberries. They sell the muffins at a local farm that is open to the public on weekends. Since they operate the business as a partnership, they should:

agree to share the business's profits and losses

Jack Smith and four other people own Persimmon Hill Farm, an agric-entertainment farm which provides corn mazes, bonfires, hay rides, and food treats to paying visitors. All of the owners have limited financial risk. Persimmon Hill Farm is a(n):

corporation

Double taxation in a corporation means:

earnings of the corporation and dividends of the shareholders both are taxed

The headquarters, seller, and supplier of the service or method of operation of a franchise is called the:

franchisor

Which of the following statements about the taxation of partnerships is true?

Partnerships file tax returns but pass profits and losses on to partners who report them on their tax returns.

Suzanne Pogell wanted to learn to sail, but she could find no one to teach her because men were the ones who sailed, and women were their crew. She finally did convince someone to teach her to sail, and after mastering sailing, she started an all-woman sailing school called Womanship as a sole proprietorship. When she dies, the:

business dies with her

A corporation's earnings are taxed as corporate earnings and as dividends to the stockholders. This is known as:

double taxation

The growing popularity of bread machines has become a new business opportunity for Shelly Clemins and Jan Schoenbarr. The women make and sell bread machine covers and fabric gift bags to hold the bread loaves made in the machines. The women share the responsibilities of running the business (called Bread & Butter) as well as its profits equally. Bread & Butter would be an example of a(n):

general partnership

A disadvantage of franchising to the franchisee is:

restricted operating freedom

Jules Sylvester had always loved reptiles. When he was asked by a movie producer if he could locate some anaconda snakes for a movie, a business was born. Sylvester is the proud owner and operator of Reptile Rentals. The California-based business, which he started with no financial help from anyone, is often called on to provide "creepy, crawly" moments in the movies. Jules Sylvester is an example of a:

sole proprietorship

The form of business ownership that has the most difficulty in raising capital is the:

sole proprietorship

Tonya Thomas is tired of working for other people. She wants to start her own administrative services businesses and control her own work schedule. She wants to have sole responsibility for all business decisions. Thomas should form a(n):

sole proprietorship

Rebecca Siddoway own and operate Country Candies. Siddoway specializes in making rich, creamy toffees that she packages in attractive gift boxes and sells through the mail. What would her first step be if she decides to incorporate her business to make it easier to find investors?

to write the articles of incorporation

A term that means that business damages and/or debts can also be attached to the personal assets of the owners is ______ liability.

unlimited

Which of the following is an example of a disadvantage associated with a partnership?

unlimited liability

Baby boomers are having a strong effect on the franchise industry.

True

A corporation has:

all of the above

Restricted operating freedom in franchising means that the franchisee must conform to:

all of the above

U.S. Lumber Company's purchase of EnviroPlastics, a manufacturer of plastic cutlery, is an example of a _____ merger.

conglomerate

A group of cotton growers in North Georgia and North Alabama pooled their resources to build a cotton gin and storage area for the ginned cotton. They marketed their cotton to textile mills under one label. This collective ownership organization is a:

cooperative

Three Sisters Specialty Foods, owned by Judith Coker, Millie Humphreys, and Jade Watson, sells eggless cake mixes for people on a restricted diet. Coker recently purchased an industrial grade mixer without conferring with her sisters who were upset when they learned that they were all three liable for the payments on the mixer. Three Sisters is an example of a:

general partnership

A firm's stockholders have the right to do all of the following EXCEPT:

get discounts on the company's product or service

The franchisor generally does NOT provide the franchisee with:

help in employee selection

Thom Georges wants to open a store where he sells nothing but antique architectural features that he can salvage from old houses being torn down to make way for progress. He has an eye for the kind of doors, windows, mantels, and so forth that decorators want, but he does not have all the funding he needs to get started. He has invited his parents to invest $40,000 in the enterprise. He has told them that if they do invest, they would have liabilities in the firm equal to but no greater than their investment. Georges is trying to get them to form a _____ with him.

limited partnership

The combination of two companies that join to form one company is called a:

merger

Partnership agreements generally specify all of following EXCEPT:

methods of taxation of each partner

Stewed Tomatoes was an "all-girl power-pop trio." Its three members realized that many musicians feel stifled when making music in a sterile studio environment while the clock ticked away expensive hours, so the three girl band members created Materville Studios, a multimedia production house and recording studio in downtown Chicago. They share work responsibilities and profits equally. Materville Studios is a(n):

partnership

The development of new drugs is very expensive. For this reason Genentech, a large biotechnical company, has entered into a _____ with Swiss-owned Roche to develop a vaccine for tuberculosis. When the vaccine is developed or when the two biotechnical companies determine the vaccine cannot be developed using their current methodology, this relationship will dissolve.

joint venture OR limited partnership

Which of the following is a disadvantage for the fast-food franchisee?

royalty fees

Which of the following statements about cooperatives is true?

Cooperatives increase their members buying power.

With its ease of registration and pro-corporate policies, _____ is called the "state of incorporation." About half of the Fortune 500 companies are incorporated there.

Delaware

Which of the following is a disadvantage of sole proprietor ownership?

Difficulty in raising capital

Articles of incorporation usually specify the life of a corporation as a certain number of predetermined years.

False

Dissolving a partnership is easier than dissolving a sole proprietorship.

False

Double taxation is a distinct advantage that corporations have over other forms of ownership.

False

For partnerships to be legal, they must be established in writing.

False

If the sole proprietorship acquires a legal business name, the owner then has limited liability.

False

In a limited partnership, all of the partners have limited liability.

False

The sole proprietorship is considered a legal entity; therefore, it is taxed separately from the owner.

False

The two types of cooperatives are wholesale and retail.

False

The two types of cooperatives are:

buyer and seller

A corporation:

is accurately described by all of the above OR does not have a size limitation

Back in the late 19th century, the Carnegie Steel company controlled not only the mills where the steel was manufactured, but also the mines where the iron ore was extracted, the coal mines that supplied the coal, the ships that transported the iron ore and the railroads that transported the coal to the factory. Through several _____ mergers the steel company gained control of the various resources it needed to product steel.

vertical

The merger of McKesson, the leading U.S. drug wholesaler, and HBOC, a producer of health-care inventory software, is an example of a(n) _____ merger.

vertical

The fact that a corporation has limited liability means:

owners' liabilities are limited to the amount invested

When Whole Foods Market, the world's largest natural foods supermarket, acquired Select Fish, a fish processing company, it was an example of a conglomerate merger.

False

Which of the following is an advantage of sole proprietor ownership?

Freedom from government regulation

_____ are corporate takeovers financed by large amounts of borrowed money.

Leveraged buyouts

Fred Pittman has invested $10,000 in his son's motorcycle repair shop, but he takes no part in its management. Pittman is a(n):

limited partner

Croutakie seemed like a great idea. Chef Leo Nyami and Sara Rice decided to take advantage of the popularity of shitake mushrooms and create some shitake mushrooms products that could be sold to restaurant patrons and other gourmets through their new company. The mushrooms are expensive, and there were other unexpected financial problems, so Nyami and Rice asked Bill Ng to become a limited partner. This means that Ng:

agrees not to participate in day-to-day management of the firm

Jayson Tully is contemplating the purchase of a Popeye's Chicken franchise. Tully has made a list of the disadvantages that he assumes he will face as a new business owner. Which of the following is actually an advantage?

assistance in building plans

North American Van Lines and Allied Van Lines combined in a _____ merger that will create the world's largest moving company. Prior to the merger, North American was the leading company in moving high-end merchandise such as computer and hospital equipment, while Allied specialized in households.

horizontal

Miniature Precision Corporation, a microprocessor manufacturer, recently acquired Cameron-Price, a plastics mold manufacturer. Miniature Precision financed the transaction with 90 percent borrowed money and used Cameron-Price's assets as collateral. This type of merger is commonly known as a(n):

leveraged buyout

Pete Yankin and Ken Lowery consider themselves to be experts on hunting in the mountains in North Carolina. As a result, the two men established a company that markets hunting expeditions. Yankin and Lowery share responsibilities for booking the trips, gathering supplies, and guiding groups of five to seven hunters into locations where they can hunt for deer and bear. Since the two will share any profit equally, this would be an example of a(n):

partnership