Question 1

The joining of two car manufacturing companies will be an example of a _____.

Accepted Answer

The joining of two car manufacturing companies is an example of a horizontal merger, which is a type of merger where two companies in the same industry and at the same stage of production merge to increase their market share or reduce competition.

Question 2

Latifa is a chief financial officer in a large corporation. She has the full financial authority to make appropriations and authorize expenditures. Latifa is likely to be a member of _____ management.

Accepted Answer

Latifa's role as a chief financial officer with full financial authority indicates that she is a part of the top management team responsible for making strategic decisions and allocating resources in the organization.

Question 3

Assume that a tech firm decides to invest some of its excess cash by acquiring a coffeehouse chain. This would be a _____.

Accepted Answer

The answer of Assume that a tech firm decides to...

Question 4

_____ must verify in writing the accuracy of their corporation's financial statements.

Accepted Answer

The responsibility for verifying in writing the accuracy of their corporation's financial statements lies with the Chief Operating Officers and Chief Financial Officers. They are required to sign off on the accuracy and completeness of the financial statements, and any misstatements can result in significant legal and financial consequences. Board members and stockholders have oversight responsibilities but are not directly responsible for verifying the accuracy of the financial statements. Government officials may also have oversight responsibilities but do not have responsibility for verifying the accuracy of the financial statements.

Question 5

The vast majority of firms have fewer than 500 employees.

Accepted Answer

According to the Small Business Administration, 99.7% of US firms have fewer than 500 employees.

Question 6

Catalina owns 100 _____ stock of NxtGen Solutions, a software firm. It means that she has voting rights on company decisions at NxtGen Solutions, but only residual claims on the company's assets.

Accepted Answer

Common stock grants voting rights to the shareholders but only residual claims on the company's assets. Preferred stock, on the other hand, grants priority in receiving dividends and assets in case of liquidation but does not offer voting rights. Principal stock and management stock are not common types of stocks.

Question 7

Star Airlines' purchase of Hispania Airlines combines the resources and capabilities of both firms to create the world's largest airline. The newly formed company is an example of a _____.

Accepted Answer

Horizontal mergers involve the combination of two companies that operate in the same industry or market, which is the case with Star Airlines and Hispania Airlines merging to create the world's largest airline.

Question 8

Small businesses generate over 50 percent of new jobs.

Accepted Answer

According to the U.S. Small Business Administration, small businesses create over 50 percent of new jobs in the United States.

Question 9

An American retail chain started doing business in India by forming a _____ with one of India's leading business groups.

Accepted Answer

Forming a joint venture involves two or more businesses coming together to form a new entity, typically for a specific purpose or project. In this case, the American retail chain formed a joint venture with one of India's leading business groups to do business in India. A subsidiary involves a parent company owning a separate company, while a horizontal merger involves two companies from the same industry merging, and a vertical merger involves two companies along the same supply chain merging.

Question 10

The board of directors usually includes some individuals who are not employed by the corporation. These people are referred to as _____.

Accepted Answer

Outside directors are individuals who are not employed by the corporation but sit on the board of directors. Priority directors, stockholders, and members of top management are not the correct terms for this group.

Question 11

Businesses with fewer than 500 employees generate more than half of the nation's GDP.

Accepted Answer

According to the U.S. Small Business Administration, small businesses with fewer than 500 employees account for 44% of the economy's GDP, but when factoring in the economic impact of their supply chains, they generate more than 50% of the nation's GDP.

Question 12

An acquisition occurs when _____.

Accepted Answer

An acquisition occurs when one company purchases the property and assumes the obligations of another company. This can be done through a merger or through buying a controlling share of the company's stock. Option B refers to a stockholding relationship, while option C describes a cooperative, and option D describes a merger, which may or may not involve an acquisition.

Question 13

If JNK steel buys Ramirez Iron Ore to assure itself of a constant flow of ore, it will be an example of a _____.

Accepted Answer

JNK steel buying Ramirez Iron Ore to ensure the constant flow of ore is an example of a vertical merger, where a company acquires another company in a different stage of the production process to become more self-sufficient and gain greater control over the supply chain.

Question 14

All of the following are duties of the board of directors of a corporation EXCEPT _____.

Accepted Answer

The board of directors does not have a duty to guarantee the payment of cash dividends every year. While they may declare dividends, it is not a guarantee or obligation.

Question 15

The board of directors of a corporation is elected by the _____.

Accepted Answer

The board of directors of a corporation is elected by the stockholders.

Question 16

Nikita established a corporation in Nebraska, but she recently moved to Colorado where she now conducts her business. What type of corporation does Nikita own?

Accepted Answer

Nikita's corporation was established in Nebraska but now operates in Colorado, making it a foreign corporation in Colorado.

Question 17

Any firm with fewer than 1,000 employees is considered a small business.

Accepted Answer

The definition of a small business varies by country and industry, but it is generally defined by the number of employees, annual receipts, or both. In many cases, a small business is one with fewer than 500 employees, according to the U.S. Small Business Administration.

Question 18

News 24/7, a newspaper group, merged with Alfalah Finance, an investment firm. The two companies merged together to diversify their business and to generate more revenue. This merger will be an example of a _____.

Accepted Answer

A conglomerate merger is a type of merger where two companies that are unrelated come together to diversify their business and generate more revenue. This is exactly what happened in the case of News 24/7 and Alfalah Finance, as they belong to different industries. A horizontal merger involves two companies that operate in the same industry, while a vertical merger involves companies that operate in different parts of the same industry. A joint venture involves two or more companies coming together to form a separate entity for a specific project or business venture.

Question 19

Which type of merger is done to increase customer bases?

Accepted Answer

Horizontal merger is done between two companies in the same industry and it allows them to increase their customer base by combining their existing customer pools. This type of merger also allows for cost savings through economies of scale and eliminates competition, which can lead to pricing power for the merged company.

Question 20

When founding members of Mike & Sons wanted to regain family control of the business, they changed the company ownership from publicly held to _____, in order to control and manage corporate activities.

Accepted Answer

Closed corporations are privately held and have a limited number of shareholders. This type of ownership would allow the founding members of Mike & Sons to regain family control of the business and manage corporate activities. Limited corporations, preferred corporations, and restricted corporations are not specific types of ownership labels.

Quiz 5: Forms of Business Ownership and Organization