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Chapter 5: Choosing A Form Of Business Ownership

10 Questions
Business People Quizzes & Trivia

Chapter 5 quiz from Understanding Business text book.

Questions and Answers
  • 1. 
    The ________ is usually the easiest form of business to start and end.
    • A. 

      Sole proprietorship

    • B. 

      Limited partnership

    • C. 

      Corporation

    • D. 

      Cooperative

  • 2. 
    Mara plans to open a shop specializing in foods and cultural items from the Middle East. She wants to be the firm's only general partner, but she is trying to get several friends to participate as limited partners. Apparently Mara wants to:
    • A. 

      Limit her personal liability to the amount she personally invests in the company

    • B. 

      Be the only person allowed to share in the firm's profits

    • C. 

      Obtain a strong financial base for the firm while maintaining personal control over the firm's management

    • D. 

      Meet the legal requirements of the Uniform Partnership Act

  • 3. 
    Jamie and Maria invested all their savings in a small pizzeria they opened outside the University of Western Kentucky. They operated the business as a general partnership. After 11 months the business went broke and Jamie and Maria were left with outstanding bills of $37,500, which is more than their investment in the company. Jamie and Maria can:
    • A. 

      Lose their personal assets as the result of their company's financial problems

    • B. 

      Lose only the funds they originally invested in their company

    • C. 

      Lose only the total value of the assets actually used to operate the business

    • D. 

      Avoid any liability for these debts since a partnership is considered to be a business entity that is separate and distinct from the partners who own it

  • 4. 
    A separation between ownership and management is most likely to occur in a:
    • A. 

      Sole proprietorship

    • B. 

      General proprietorship

    • C. 

      Corporation

    • D. 

      Limited liability partnership

  • 5. 
    One reason limited liability companies have become so popular is that they:
    • A. 

      Can be taxed either as a corporation or as a partnership, so owners can choose the tax treatment that is most advantageous for their situation

    • B. 

      Allow owners to sell their interests in the company without requiring approval from other owners

    • C. 

      Have unlimited life

    • D. 

      Allow owners to avoid paying self-employment taxes on the company's profits

  • 6. 
    In a leveraged buyout, the managers of a firm, its employees, or other investors attempt to:
    • A. 

      Move the company elsewhere and start over

    • B. 

      Obtain the assets of the company through bankruptcy proceedings

    • C. 

      Use borrowed funds to buy out the firm's stockholders

    • D. 

      Negotiate a merger with another firm to create a conglomerate

  • 7. 
    Trans Globe Airlines has recently looked into a merger with Royal Blue Airlines, a financially troubled rival. The firms believe the merger will create a stronger company that can offer travelers more flights to a wider variety of destinations. This proposed merger is an example of a: 
    • A. 

      Conglomerate merger

    • B. 

      Leveraged buyout

    • C. 

      Horizontal merger

    • D. 

      Joint venture

  • 8. 
    An evaluation of franchising would conclude that this type of arrangement:
    • A. 

      Has become the dominant form of business organization in the United States because it has many advantages and almost no disadvantages

    • B. 

      Appeals to people who want to own a business, but are not comfortable starting a company from scratch

    • C. 

      Has a much higher risk of failure than independent companies

    • D. 

      Has little chance of success outside the United States because many foreign countries do not allow such arrangements

  • 9. 
    Midas Muffler sells franchises to prospective businesspersons who want to use the Midas name and offer Midas products. In a franchise agreement, Midas would be the _______, and the buy of the franchise is the________.
    • A. 

      Owner; limited partner

    • B. 

      Co-signer; co-signee

    • C. 

      Franchisor; franchisee

    • D. 

      Wholesaler; retailer

  • 10. 
    A _______ is an organization that is owned and controlled by the people who use it---producers, consumers and workers with similar needs who pool their resources for mutual gain.
    • A. 

      Corporation

    • B. 

      Limited partnership

    • C. 

      Mutual fund

    • D. 

      Cooperative