Deck 5: Forms of Ownership

Question 1

The stock of a private corporation is made available for purchase by the public.

Answer 1

False
Explanation:The stock of a private corporation is owned by only a few individuals or companies and is not made available for purchase by the public.

Question 2

All owners in a general partnership and the general partners in a limited partnership face the same unlimited liability as sole proprietors.

Answer 2

True
Explanation:All owners in a general partnership and the general partners in a limited partnership face the same unlimited liability as sole proprietors.

Question 3

Board of directors has the responsibility for the overall direction of the company and the selection of top executives.

Answer 3

True
Explanation:Board of directors is a group of professionals elected by shareholders as their representatives, with responsibility for the overall direction of the company and the selection of top executives.

Question 4

Partners are responsible for each other's action in a limited liability partnership.

Question 5

Government agencies require publicly traded companies to publish extensive and detailed financial reports.

Question 6

Unlimited liability is a legal condition under which any damages or debts incurred by a business are the owner's personal responsibility.

Question 7

A corporation itself has limited liability on its transactions.

Question 8

Partnerships are subject to double taxation of income.

Question 9

The number of shareholders is limited to fifty in a limited liability company.

Question 10

Establishing a corporation is more complicated and expensive compared to establishing a sole proprietorship.

Question 11

The federal government recognizes a sole proprietorship as an independent taxable entity.

Question 12

Owner has limited personal liability for the business's financial obligations in sole proprietorships.

Question 13

Corporate officers of an organization are elected directly by the shareholders of a corporation.

Question 14

A master limited partnership is not allowed to raise money by selling units of ownership to the general public.

Question 15

An S corporation has the federal taxation advantages of a partnership.

Question 16

A benefit corporation must pursue a stated non-financial goal.

Question 17

A partnership is a company that is owned by two or more people but is not a corporation.

Question 18

A corporation is a legal entity distinct from the persons running the corporation.

Question 19

All partners have joint authority to make decisions for the firm in a general partnership.

Question 20

Liquidity is a measure of how easily and quickly an asset can be converted into cash.

Question 21

Which of the following business structures is the most complicated and expensive?

A) unlimited partnership
B) corporation
C) general partnership
D) sole proprietorship
E) limited partnership

Question 22

Which of the following is a key difference between a master limited partnership (MLP)and other forms of partnerships?

A) A MLP allows partnerships to sell units of ownership to the general public.
B) Other partnerships should have more members than an MLP.
C) Other partnerships have double-taxation disadvantage unlike an MLP.
D) A MLP allows the partners to have limited liability on their investments.
E) A MLP is characterized by double taxation unlike the other forms of partnerships.

Question 23

A major advantage of partnerships is that they ________.

A) do not require owners to take personal responsibility for their actions
B) provide limited liability protection to partners
C) have a straightforward income tax structure
D) are less vulnerable to conflicts between investors
E) allow investors to handle issues such as succession and termination better

Question 24

The chief operating officer is the highest-ranking officer of a corporation.

Question 25

A horizontal merger occurs when different companies at the same stage or level merge.

Question 26

One company buys a controlling interest in the voting stock of another company in a merger.

Question 27

Which of the following statements is true of the liability of investors in a corporation?

A) Majority investors are personally liable, whereas minority investors are not personally liable.
B) Investors have personal liability for the business transactions in corporations.
C) Investor's liability is limited to the amount invested in the corporation.
D) Investors are personally liable for transactions, whereas their property is not liable.
E) Investors' property is liable for the business transactions but investors are not personally liable.

Question 28

In a sole proprietorship,the owner ________.

A) obtains limited liability protection on the business's actions
B) is taxed more than once for the income generated
C) and the business are legally inseparable
D) has lesser responsibility compared to other forms
E) does not have personal liability for the transactions of the business

Question 29

A joint venture does not result in a separate legal entity.

Question 30

Profits of sole proprietorships ________.

A) reach shareholders through intermediaries
B) flow directly to the owners
C) are considered fixed assets
D) are taxed at corporate rates
E) are subject to double taxation

Question 31

Robert owns three restaurants in Atlanta.He pays taxes for the income from the restaurants as his personal income.Robert's business is an example of a ________.

A) personal partnership
B) sole proprietorship
C) joint venture
D) small corporation
E) limited liability firm

Question 32

A ________ is allowed to raise money by selling units of ownership to the general public in the same way corporations sell shares of stock to the public.

A) master limited partnership
B) general partnership
C) sole proprietorship
D) unlimited proprietorship
E) limited liability partnership

Question 33

A sole proprietorship ________.

A) is taxed as a separate corporation
B) requires immense paperwork
C) does not have a legal status
D) is owned by only one person
E) gives reduced control to the owner

Question 34

A ________ is a partnership in which each partner has unrestricted accountability only for his or her own actions and at least some degree of responsibility for the partnership as a whole.

A) master limited partnership
B) general partnership
C) sole proprietorship
D) combined proprietorship
E) limited liability partnership

Question 35

Which of the following is a key advantage of incorporating a business as a sole proprietorship?

A) Owners receive tax exemptions when a business is a sole proprietorship.
B) It helps proprietors file taxes separately from their personal income.
C) It is easy to establish and requires less paperwork than other structures.
D) Owner's risk is limited to the extent he/she has invested in the business.
E) Risk associated with sole proprietorship is less compared to other structures.

Question 36

In a general partnership,________.

A) all partners have joint authority to make decisions
B) all partners have limited liability
C) the number of partners is limited to five
D) units of ownership are sold to the general public
E) risk is limited to the amount invested in a partnership

Question 37

Proxy is a document that authorizes another person to vote on behalf of a shareholder in a corporation.

Question 38

Which of the following is a key difference between a corporation and a sole proprietorship?

A) Establishing a corporation is easier compared to establishing a proprietorship.
B) Unlike a corporation, a proprietorship is subject to double taxation.
C) Regulatory requirements are less severe for corporations than sole proprietorships.
D) Unlike a sole proprietorship, a corporation is subject to limited liability.
E) Establishing a sole proprietorship has complex legal requirements unlike a corporation.

Question 39

Edwin runs an antique retail shop that is registered as a sole proprietorship.The liability exposure of Edwin's business ________.

A) is limited to the amount he has invested on fixed assets
B) refers to the amount invested on variable assets
C) is more if the size of transactions is limited
D) refers to the total fixed investments made by him
E) is unlimited for the business's personal obligations

Question 40

A ________ is an unincorporated company owned by two or more people.

A) limited company
B) partnership
C) corporation
D) S corporation
E) proprietorship

Question 41

A corporation primarily or wholly owned by another company is known as a(n)________.

A) domestic company
B) alien company
C) subsidiary
D) parent company
E) holding company

Question 42

Corporate officers are the ________.

A) people who elect directors of a company
B) official representatives of shareholders
C) top executives who run a corporation
D) middle level managers of a corporation
E) lower level employees of an organization

Question 43

A(n)________ has most of the attributes of a regular corporation but adds the legal requirement that the company must also pursue a stated non-financial goal.

A) limited liability corporation
B) general partnership
C) S corporation
D) sole proprietorship
E) benefit corporation

Question 44

The board of directors are ________.

A) the highest-ranked managers of a corporation
B) elected by corporate officers
C) representatives of the shareholders
D) the top executives running a corporation
E) elected by the employees of an organization

Question 45

A potentially significant disadvantage of a partnership is that ________.

A) it involves double taxation of the income generated
B) income tax is not straightforward and is complex
C) it has more chances for disagreement and conflict
D) it does not present opportunities to share costs
E) the amount of money generated in a partnership is low

Question 46

Pacific Electronics is a Swiss corporation doing business in the U.S.It was incorporated in Switzerland,in the year 1997.The company sells products such as electronic measuring devices,microprocessors,and microcontrollers.Pacific Electronics is called a(n)________.

A) alien corporation
B) foreign corporation
C) domestic corporation
D) external company
E) unlimited company

Question 47

RK Associates is a firm incorporated in the state of Delaware.The company has operations in thirteen states.However,the company does not have any facilities in countries other than the United States.RK Associates is a(n)________.

A) international company
B) local corporation
C) domestic company
D) alien corporation
E) foreign corporation

Question 48

Robex Retail is a retail chain that has more than 390 stores in the United States.The directors of the company decide to launch operations in Italy to increase the company's market reach.Many of the shareholders think that this decision is not appropriate in light of the economic slowdown in Europe.A group of shareholders unite to pressurize the board of directors to change their decision.This is an example of ________.

A) shareholder protection
B) shareholder activism
C) hostile takeover
D) corporate governance
E) shareholder resolution

Question 49

RSS Bank is registered as a corporation in Maryland.Apart from its financial objectives,the company has also formed a legal requirement to work for the welfare of the elderly citizens in the state.The bank is obligated to work for the cause even if there is a change in ownership.Based on this information,it can be concluded that RSS bank is a(n)________.

A) public corporation
B) benefit corporation
C) unlimited company
D) S corporation
E) not-for-profit company

Question 50

A company that is incorporated in one state (frequently the state of Delaware,where incorporation laws are more lenient)but that does business in several other states where it is registered is called a(n)________.

A) foreign corporation
B) domestic corporation
C) global corporation
D) alien corporation
E) international corporation

Question 51

Which of the following is a key advantage that corporations have over sole proprietorships and partnerships?

A) Management is less likely to lose control of operations in corporations than proprietorships and partnerships.
B) Reporting requirements of corporations are simpler than sole proprietorships and partnerships.
C) Forming corporations involves less cost over sole proprietorships and partnerships.
D) Investments in corporations have more liquidity than partnerships and sole proprietorships.
E) Corporations have a less complex structure compared to sole proprietorships and partnerships.

Question 52

A group of college graduates starts a business.They want to give their business a structure such that their risk is limited to the amount they have invested in the business.They also want to avoid double taxation of the income that they generate from the business.Which of the following structures is most suitable to satisfy these wants?

A) sole proprietorship
B) corporation
C) direct partnership
D) S corporation
E) general partnership

Question 53

Which of the following is a valid observation of corporations?

A) A corporation cannot own property of its own.
B) All corporations should sell its stock to the public.
C) The owners of a corporation are called directors.
D) A corporation is distinct from the people running it.
E) A corporation must be owned by less than fifty people.

Question 54

A disadvantage of the corporate structure is that it ________.

A) limits the business's ability to raise capital
B) limits the liquidity that businesses have
C) increases the risk of conducting business
D) involves strict reporting requirements
E) imposes unlimited liability on the owners

Question 55

In the United States,a corporation is called a domestic corporation if it ________.

A) does business only in the state where it is chartered
B) files income taxes with the U.S. government
C) does business only within the United States
D) has more than 5 subsidiaries in the United States
E) has incorporated its business in any of the U.S. states

Question 56

S corporation is a type of corporation that ________.

A) combines limited liability of a corporation with the federal taxation advantages of a partnership
B) does not have such advantages as limited liability of investments
C) does not split the ownership into smaller units
D) files income tax returns in a country other than the country of operation
E) combines limited ownership of a proprietorship with the capital-raising options of a corporation

Question 57

A public corporation refers to a corporation ________.

A) that is allowed to sell stock only to a limited number of investors
B) whose stock is sold to general people
C) that is owned solely by the federal government
D) that is owned solely by state/federal government
E) whose stock is not traded in stock exchanges or other markets

Question 58

Which of the following is a key difference between private corporations and public corporations?

A) Private corporations are legally a group of people, whereas public corporations are distinct from any individual persons.
B) Private corporations cannot own property, whereas public corporations can own property.
C) Public corporations cannot own property, whereas private corporations can own property.
D) Private corporations do not have the power to run business of its own, whereas public corporations can run a business of its own.
E) Private corporations are owned by a few people, whereas public corporations can be owned by anyone who has the means to buy stake.

Question 59

Who is the highest-ranked officer of a corporation?

A) chief information officer
B) chief financial officer
C) chief operating officer
D) chief executive officer
E) chief technology officer

Question 60

Which of the following is a document that authorizes another person to vote on behalf of a shareholder in a corporation?

A) agency agreement
B) proxy
C) draft
D) affidavit
E) share certificate

Question 61

Froxer Electronics is an electronic appliance manufacturer.The company merges with a food manufacturer to form a larger company.This is an example of a ________ merger.

A) product-extension
B) vertical
C) retail
D) market-extension
E) conglomerate

Question 62

A ________ merger occurs when different companies at the same stage or level merge.

A) standardized
B) horizontal
C) conglomerate
D) vertical
E) operational

Question 63

In a(n)________,one company simply buys a controlling interest in the voting stock of another company.

A) limited partnership
B) consolidation
C) acquisition
D) joint venture
E) strategic alliance

Question 64

In a(n)________,two companies create a new,third entity that then purchases the two original companies.

A) limited partnership
B) consolidation
C) acquisition
D) joint venture
E) strategic alliance

Question 65

Which of the following is an action that allows the companies to collaborate without formally combining?

A) strategic alliance
B) joint venture
C) merger
D) acquisition
E) amalgamation

Question 66

With the ________,a third company is invited to acquire a company that is in danger of being swallowed up in a hostile takeover.

A) poison pill defense
B) proxy fight
C) direct offer
D) tender offer
E) white knight tactic

Question 67

A vertical merger occurs when ________.

A) a merger expands the geographic range of markets that it can serve
B) different stages or levels of the same industry unite
C) different companies at the same stage or level unite
D) a merger expands the mix of goods and services available for sale
E) two companies from unrelated industries unite to become a single company

Question 68

A ________ merger occurs when companies in unrelated industries join to form a single entity.

A) product-extension
B) vertical
C) conglomerate
D) retail
E) market-extension

Question 69

Albama Associates is a consulting firm owned by a few entrepreneurs.Rogo Consulting,a large consulting firm,tries to buy shares from some of the shareholders of Albama to obtain control of the company without making a formal acquisition proposal with the management.Albama's management invites a third party to acquire the company to prevent a hostile takeover by Rogo Consulting.This approach used by Albama to prevent hostile takeover is an example of a ________.

A) white knight tactic
B) counteroffer
C) proxy fight
D) direct offer
E) poison pill defense

Question 70

Corporate officers of a company ________.

A) are hired by the board of directors of a company
B) have voting rights in directorial meetings
C) are hired by the chief executives of a firm
D) have voting rights on shareholding issues
E) are elected by the shareholders of the company

Question 71

A product-extension merger occurs when ________.

A) two companies from unrelated industries unite to become a single company
B) different stages or levels of the same industry unite
C) different companies merge to increase global reach
D) a merger expands the mix of goods and services available for sale
E) a merger expands the geographic range of markets that it can serve

Question 72

Eurotec,a manufacturer of security systems in Italy,merges with a company in China to expand its reach.This is an example of a ________ merger.

A) product-extension
B) vertical
C) conglomerate
D) retail
E) market-extension

Question 73

An electronic appliance marketing company merges with one of its suppliers to form a larger company.This is an example of a ________ merger.

A) market-extension
B) product differentiation
C) conglomerate
D) vertical
E) product-extension

Question 74

In a(n)________,two companies join to form a single entity either by pooling their resources or by one company purchasing the assets of the other.

A) limited partnership
B) acquisition
C) merger
D) joint venture
E) strategic alliance

Question 75

In a ________,the raider launches a public relations battle for shareholder votes,hoping to enlist enough votes to oust the board and management.

A) poison pill tactic
B) proxy fight
C) tender offer
D) direct offer
E) white knight tactic

Question 76

With a ________,a targeted company invokes some move that makes it less valuable to the potential raider,with the hope of discouraging the takeover.

A) white knight tactic
B) tender offer
C) proxy fight
D) direct offer
E) poison pill defense

Question 77

Integral Solutions is a firm that offers open source enterprise software services to small and medium companies.The company had a public issue two years ago and the company has shown significant growth in the current financial year.A major rival is silently amassing the company's shares to acquire majority stake in the company.In order to prevent this,the company issues shares to current shareholders at prices below the market value.This tactic used by Integral Solutions to prevent a takeover is an example of a ________.

A) poison pill defense
B) proxy fight
C) direct offer
D) tender offer
E) white knight tactic

Question 78

Which of the following is a key disadvantage of mergers and acquisitions?

A) They limit the market reach of the companies involved.
B) They reduce the chances of cross-selling products.
C) They reduce the bargaining power of the companies.
D) They might present issues related to cultural harmony.
E) They limit the geographic range of the companies involved.

Question 79

RDS Bank has been making losses for many years now.The company's management wants to continue with the same style of operations,whereas many shareholders demand a change in management.A majority of shareholders unite and vote against the management's wish to sell the company to a larger counterpart subject to pressures from an external buyer.This is an example of a(n)________.

A) forced joint venture
B) hostile takeover
C) strategic alliance
D) majority merger
E) operational alliance

Question 80

A ________ occurs when someone purchases a company's publicly-traded stock primarily by using borrowed funds,sometimes using the target company's assets as collateral for these loans.

A) leveraged buyout
B) hostile takeover
C) forced joint venture
D) consolidation
E) strategic alliance