Forms Of Business Organization Quiz

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  • 1/15 Questions

    The best definition of a sole trader form of business organization is:

    • The business only employs one person
    • The business is owned by one person
    • The firm has a single customer
    • There is a single firm in the industry.
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About This Quiz


When you start a business, you must make informed decisions. You must choose the appropriate form of business in which you want to participate. Some examples of this include sole proprietorship, corporation, partnership, cooperative, and limited liability. You will need to know one of the disadvantages of a sole trader business and one of the advantages of a partnership firm. You certainly must take this greatForms of business organization quiz.

Forms Of Business Organization Quiz - Quiz

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  • 2. 

    One of the disadvantages of a sole trader business is that:

    • Capital is limited to the owner’s savings and bank loans

    • Decisions take too long to make

    • As they are government-owned there is no profit motive

    • The owners may disagree.

    Correct Answer
    A. Capital is limited to the owner’s savings and bank loans
    Explanation
    The correct answer is that capital is limited to the owner's savings and bank loans. This means that a sole trader business relies solely on the personal savings of the owner and any loans they can secure from banks. Unlike corporations or partnerships, sole traders do not have the option to raise capital through selling shares or bringing in additional partners. This limitation can restrict the growth and expansion potential of the business, as the owner's personal savings and borrowing capacity may be limited.

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  • 3. 

     One of the claimed advantages of a sole trader business is that:

    • Owners have limited liability

    • Shares can be sold to raise capital

    • Decisions and responsibilities can be shared

    • The owner has independence

    Correct Answer
    A. The owner has independence
    Explanation
    The correct answer is that the owner has independence. This means that as a sole trader, the owner has complete control over all aspects of the business. They have the freedom to make decisions and set the direction of the business without having to consult or answer to anyone else. This independence allows the owner to pursue their own vision and goals for the business without interference or conflicting opinions from others.

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  • 4. 

    The main reason why the owners of many private limited companies convert into public limited companies is that:

    • They do not want to remain in the private sector

    • They want to gain the benefits of limited liability

    • They want to keep the annual accounts secret

    • They want to raise additional capital to expand the business.

    Correct Answer
    A. They want to raise additional capital to expand the business.
    Explanation
    Private limited companies may choose to convert into public limited companies in order to raise additional capital to expand their business. By becoming a public limited company, they can offer shares to the public and raise funds through the sale of these shares. This can provide the company with a significant injection of capital, which can be used to invest in new projects, expand operations, or enter new markets. This move allows the company to access a larger pool of potential investors and tap into the financial resources of the public.

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  • 5. 

    One of the advantages of a partnership form of business organization is that:

    • All partners always have limited liability

    • Shares can be sold on the Stock Exchange

    • The business survives the death of the partners

    • The business has access to more capital than a sole trader.

    Correct Answer
    A. The business has access to more capital than a sole trader.
    Explanation
    In a partnership form of business organization, multiple partners contribute to the capital of the business, which allows for a larger pool of funds compared to a sole trader. This increased access to capital provides the partnership with more financial resources to invest in the business, expand operations, or take advantage of new opportunities. Unlike a sole trader, who relies solely on their own funds, a partnership can tap into the financial resources of multiple partners, increasing its capacity for growth and development.

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  • 6. 

    One of the advantages to a business of selling a franchise is that:

    • The business can expand more quickly

    • The franchisor owns all of the shops

    • The businesses buying the franchises are certain to be successful

    • The products sold in each shop will be different.

    Correct Answer
    A. The business can expand more quickly
    Explanation
    Selling a franchise allows a business to expand more quickly because it allows them to leverage the resources and capital of the franchisees. By selling franchises, the business can open new locations without having to invest their own capital or take on additional debt. Franchisees are responsible for the costs of opening and operating the franchise, while the business benefits from the increased presence and revenue from these new locations. This allows the business to grow and expand its brand and market reach at a faster pace compared to opening new company-owned stores.

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  • 7. 

    Which of the following statements about co-operative business organizations is true?

    • All co-operatives are only concerned with retailing.

    • Profits are shared equally amongst members.

    • They are owned by shareholders.

    • Workers have no say in decision-making.

    Correct Answer
    A. Profits are shared equally amongst members.
    Explanation
    Co-operative business organizations are characterized by the principle of profit-sharing among their members. This means that the profits generated by the organization are distributed equally among the members, rather than being retained by a select few or shareholders. This equitable distribution of profits is one of the key features of co-operatives, promoting a sense of fairness and collective benefit among members.

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  • 8. 

    Which of the following statements about most public limited companies is true?

    • They are owned and controlled by the workers.

    • They are owned by the directors but controlled by the shareholders.

    • They are owned by shareholders but controlled by directors.

    • They are owned and controlled by the government.

    Correct Answer
    A. They are owned by shareholders but controlled by directors.
    Explanation
    Public limited companies are owned by shareholders, meaning that individuals or entities hold shares in the company. However, the day-to-day operations and decision-making are typically controlled by the directors, who are appointed to manage the company on behalf of the shareholders. This separation of ownership and control is a characteristic of public limited companies, where shareholders have the right to elect directors but do not directly control the company's operations.

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  • 9. 

    Which of the following statements best applies to a public limited company (PLC)?

    • It is owned by the government and is in the public sector.

    • It is owned by shareholders who can sell their shares on the Stock Exchange.

    • It is quick and easy to set up with few legal formalities.

    • Its accounts can be kept private, and it receives little coverage in the business

    Correct Answer
    A. It is owned by shareholders who can sell their shares on the Stock Exchange.
    Explanation
    A public limited company (PLC) is a type of company that is owned by shareholders who can freely buy and sell their shares on the Stock Exchange. This means that the ownership of the company can change hands easily and the company can raise capital by issuing more shares to the public. This is one of the key characteristics of a PLC and distinguishes it from other types of companies.

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  • 10. 

    One of the main drawbacks of many public limited companies is that:

    • There can be a loss of control by the original owners as additional shares are sold

    • Firms in the public sector are often less efficient

    • If the company were to fail, the shareholders could lose all of their assets

    • Workers have to be asked for their opinions before major decisions are taken.

    Correct Answer
    A. There can be a loss of control by the original owners as additional shares are sold
    Explanation
    As additional shares are sold in public limited companies, the original owners may experience a loss of control. This is because when new shares are issued, new shareholders come into the picture and have a say in the company's decision-making process. The original owners may find their influence diluted as more shareholders join the company. This loss of control can be seen as a drawback for the original owners who may have started the company with a specific vision and direction in mind.

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  • 11. 

    Which of the following is NOT a feature of a private limited company?

    • Shares can be issued to raise capital.

    • Shares can be bought and sold on the Stock Exchange.

    • All owners of the business have limited liability.

    • The business continues after the death of shareholders.

    Correct Answer
    A. Shares can be bought and sold on the Stock Exchange.
    Explanation
    A private limited company is a type of business structure where the number of shareholders is limited and shares cannot be freely traded on the stock exchange. This is in contrast to a public limited company where shares can be bought and sold on the stock exchange. Therefore, the statement "Shares can be bought and sold on the Stock Exchange" is not a feature of a private limited company.

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  • 12. 

    All of the following are claimed advantages of joint ventures except:

    • the costs of a new project can be split between the companies involved

    • Manufacturing costs will be divided between the firms in the venture

    • Joint ventures between firms in different countries can create new market opportunities

    • Management of the joint venture will never lead to disagreements

    Correct Answer
    A. Management of the joint venture will never lead to disagreements
  • 13. 

    The best definition of nationalization is:

    • Expanding a business to all parts of the country

    • When the government buys all of the assets of a private sector business

    • When a private limited company applies to become a public limited company

    • Opening a new division of the business in another country to become a multinational.

    Correct Answer
    A. When the government buys all of the assets of a private sector business
    Explanation
    Nationalization refers to the process in which the government acquires all the assets of a private sector business. This typically involves the transfer of ownership and control from private individuals or entities to the government. It is a significant step towards state ownership and control of industries and is often done to achieve various objectives such as economic stability, social welfare, or strategic interests.

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  • 14. 

    All of the following are claimed advantages of public corporations except:

    • In cases where monopolies are likely to occur, public corporations will be best for consumers

    • In declining industries, public corporations, with government subsidies, would attempt to avoid job losses

    • By aiming to maximize profits, public corporations will always make money for the government

    • A public corporation television service could make non-profitable programs.

    Correct Answer
    A. By aiming to maximize profits, public corporations will always make money for the government
    Explanation
    Public corporations may not always make money for the government by aiming to maximize profits. While maximizing profits is a common goal for public corporations, it does not guarantee that they will always generate revenue for the government. Factors such as market conditions, competition, and operational costs can impact the profitability of public corporations. Therefore, it cannot be claimed as an advantage of public corporations.

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  • 15. 

    One of the reasons for a business buying a franchise is because:

    • It is always much cheaper than setting up a new business venture

    • There is complete control over important decisions

    • The business can use its own name in advertisements

    • The risks of failure are lower as it is buying a well-known business idea.

    Correct Answer
    A. There is complete control over important decisions
    Explanation
    A business may choose to buy a franchise because it offers complete control over important decisions. When buying a franchise, the business owner has the freedom to make important decisions regarding operations, marketing strategies, pricing, and staff management. Unlike other business models where decisions may be restricted or influenced by stakeholders or partners, buying a franchise allows the business owner to have full autonomy in making crucial choices for the success of the business. This control can provide a sense of security and ownership, allowing the business to align its strategies and operations with its own vision and goals.

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  • Current Version
  • Mar 10, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Apr 18, 2010
    Quiz Created by
    Sachou10
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