Question 1

126If they form a corporation and Pat Smith gets into an accident with the
company's van and the van is not insured, George Johnson could be held
personally liable for any damages resulting from the accident.

Accepted Answer

In a corporation, shareholders like George Johnson typically have limited liability, meaning they are not personally liable for the corporation's debts or liabilities, including accidents involving company vehicles.

Question 2

A(n) _____ occurs when two companies join together and form a new company.

Accepted Answer

A merger occurs when two companies combine to form a new company.

Question 3

If George Johnson died, the company would cease to exist.

Accepted Answer

While George Johnson may have been an important and influential figure within the company, it is unlikely that the company would cease to exist solely due to his death. There are likely other individuals, systems, and structures in place that would allow the company to continue functioning even in the absence of one employee or leader.

Question 4

As a general rule it is not feasible to gain new markets or open new
distribution channels through mergers and acquisitions.

Accepted Answer

Mergers and acquisitions can provide opportunities for companies to gain new markets and open new distribution channels by acquiring the resources and assets of the target company.

Question 5

An alternative approach to traditional business growth is to merge with or
acquire another company.

Accepted Answer

Merging with or acquiring another company is a valid approach to business growth, which can bring in new resources, capabilities, and markets. This strategy can also help companies consolidate their position in a certain industry and achieve economies of scale or scope. However, M&A involves significant risks and costs, including integration challenges, cultural differences, regulatory issues, and financial implications. Therefore, this strategy should be carefully planned, evaluated, and executed based on strategic goals and due diligence.

Question 6

Companies are motivated to merge or acquire other companies for a
number of reasons, including gaining complementary products.

Accepted Answer

Companies often seek to acquire other companies to expand their product offerings and gain access to complementary products that can help them increase sales and market share.

Question 7

Who is considered hostile in a hostile takeover?

Accepted Answer

In a hostile takeover, the company that is trying to acquire the other company is considered hostile, as they are attempting to take control without the approval of the targeted company's management and board of directors. Therefore, choices A and C are also considered hostile as they are actively opposing the takeover.

Question 8

The purchase of one company by another with no new company being formed is called a(n) _____.

Accepted Answer

An acquisition refers to one company purchasing another, while maintaining separate identities. This is different from a merger, which combines two companies into a new entity, and a hostile takeover, where the acquiring company takes control against the wishes of the target company's management. Investment refers to putting money into a company with the hope of earning a return.

Question 9

A hostile takeover is a takeover that is resisted by the targeted company's management and its board of directors.

Accepted Answer

A hostile takeover is one in which the management and board of the targeted company do not willingly agree to the acquisition and may try to resist it.

Question 10

They would most likely form a public corporation.

Accepted Answer

The statement is too vague and lacks context to determine whether "they" would form a public corporation, as the decision to form a public corporation depends on specific goals, financial considerations, legal requirements, and other factors unique to the situation.

Question 11

Kraft and Heinz were an example of a(n) _____.

Accepted Answer

Kraft and Heinz merged to form one company. A merger is the combination of two or more companies to form a single entity.

Question 12

The combination of Adidas and Reebok was an example of a(n) _____.

Accepted Answer

The combination of Adidas and Reebok was an acquisition, which means one company bought another company to become a single entity. In this case, Adidas bought Reebok. A merger involves two companies coming together to form a new entity, while a joint venture is a partnership between two companies to achieve a specific goal or project. A hostile takeover involves one company acquiring another against the wishes of the target company's management.

Question 13

In Ben and Jerry's hostile takeover they feared that their _____ would end.

Accepted Answer

Ben and Jerry's is known for their commitment to social responsibility and if a hostile takeover occurred, it may jeopardize their company mission and values.

Question 14

Scenario-Based
Scuffy the Tugboat is a family-run business that makes tugboats.It is owned by three brothers, Jack, Frank, and Bob.Their first tugboat is still towing ships in Boston Harbor, and over the years, success has allowed them to grow the company by plowing money back into it.Now, however, they want to expand but they are not sure how they should do this.They are also unsure about which legal form of organization is best for them.
-Scuffy the Tugboat could not operate as a sole proprietorship.

Accepted Answer

A sole proprietorship is owned by one person, making it impossible for a business owned by three brothers to operate as a sole proprietorship.

Question 15

The corporate form of organization would give them more access to funds but
they would still be personally liable for any loans.

Accepted Answer

The corporate form of organization provides limited liability to its owners, meaning they are not personally liable for any loans or debts of the corporation.

Question 16

A rationale behind mergers and acquisitions is to grab a bigger share of the
market and improve profitability.

Accepted Answer

Mergers and acquisitions are often done to enhance market share and increase profitability through synergies and cost savings.

Question 17

Realizing more efficient economies of scale is not practical through mergers or acquisitions.

Accepted Answer

Mergers and acquisitions can lead to more efficient economies of scale by combining resources and reducing redundancies.

Question 18

An S-corporation would give them a more favorable tax treatment than a
regular corporation.

Accepted Answer

An S-corporation is a pass-through entity, meaning that the profits and losses flow through to shareholders and are taxed at their individual tax rates. This can provide a more favorable tax treatment than a regular corporation, which is taxed as a separate entity.

Question 19

The rationale behind growth through merger or acquisition is that one plus
one equals three: the combined company is more valuable than the sum of the
two separate companies.

Accepted Answer

The statement is true. Growth through merger or acquisition can bring synergy, economies of scale, and other benefits that enhance the value of the combined company.

Question 20

An acquisition occurs when two companies combine to form a new company.
A merger is the purchase of one company by another with no new company being
formed.

Accepted Answer

A merger is the combination of two companies into a single new entity, while an acquisition is the purchase of one company by another with no new entity being formed.

Quiz 3: Selecting a Form of Business Ownership

126If they form a corporation and Pat Smith gets into an accident with the company's van and the van is not insured, George Johnson could be held personally liable for any damages resulting from the accident.

A(n) _____ occurs when two companies join together and form a new company.

If George Johnson died, the company would cease to exist.

As a general rule it is not feasible to gain new markets or open new distribution channels through mergers and acquisitions.

An alternative approach to traditional business growth is to merge with or acquire another company.

Companies are motivated to merge or acquire other companies for a number of reasons, including gaining complementary products.

Who is considered hostile in a hostile takeover?

The purchase of one company by another with no new company being formed is called a(n) _____.

A hostile takeover is a takeover that is resisted by the targeted company's management and its board of directors.

They would most likely form a public corporation.

Kraft and Heinz were an example of a(n) _____.

The combination of Adidas and Reebok was an example of a(n) _____.

In Ben and Jerry's hostile takeover they feared that their _____ would end.

The corporate form of organization would give them more access to funds but they would still be personally liable for any loans.

A rationale behind mergers and acquisitions is to grab a bigger share of the market and improve profitability.

Realizing more efficient economies of scale is not practical through mergers or acquisitions.

An S-corporation would give them a more favorable tax treatment than a regular corporation.

The rationale behind growth through merger or acquisition is that one plus one equals three: the combined company is more valuable than the sum of the two separate companies.

An acquisition occurs when two companies combine to form a new company. A merger is the purchase of one company by another with no new company being formed.