Question 1

B&G, Inc.
A year ago, Kevin went to work for B&G, Inc. He has worked for the finance department ever since he started. He noticed that the corporation was only taxed as though it were a partnership. This was something that he found very odd when he first started working for the company, but he later realized it was a fairly common practic
While the job was challenging, Kevin was not happy. He wanted to work for a company whose main goal was to provide service to the community, not to make a profit. However, Kevin felt that, considering his present financial situation, he had to continue working for B&G, Inc. A week later, Kevin discovered there was going to be a merger between B&G, Inc. and one of its major competitors. Kevin's boss informed him that he would be getting a promotion and a rais
-Refer to B&G, Inc. B&G, Inc. was going through a ____ merger.
A)vertical
B)horizontal
C)conglomerate
D)hostile
E)leveraged

Accepted Answer

B&G, Inc. is merging with one of its major competitors, indicating a horizontal merger - the joining of two companies in the same industry and at the same stage of production. A vertical merger would be between two companies in different stages of production (e.g. a supplier and a manufacturer), a conglomerate merger would be between companies in unrelated industries, a hostile merger would involve the acquiring company attempting to purchase the target company without its consent, and a leveraged merger would involve significant borrowing to finance the merger.

Question 2

​What is the name given to the governing body of a corporation?
A)​Board of directors.
B)​Officers.
C)​Shareholders.
D)​Preferred shareholders.

Accepted Answer

The governing body of a corporation is called the board of directors. They are elected by the shareholders and are responsible for making strategic decisions for the company. Officers are appointed by the board of directors to oversee day-to-day operations, while shareholders are the owners of the company and have the power to elect the board of directors. Preferred shareholders have priority over common shareholders in receiving dividends but do not have a direct role in governing the company.

Question 3

Which of the following is not a disadvantage of sole proprietorships?
A)Unlimited liability
B)Lack of money
C)Double taxation
D)Lack of continuity
E)Limited management skills

Accepted Answer

Double taxation is not a disadvantage of sole proprietorships as they are not subject to corporate taxes.

Question 4

All of the following are disadvantages of corporations except
A)perpetual life.
B)double taxation.
C)lack of secrecy.
D)expensive formation.
E)heavy government regulation.

Accepted Answer

Perpetual life is actually an advantage of corporations, as they can continue to exist even if shareholders or management changes. The other options listed are all disadvantages of corporations. Therefore, the answer is A.

Question 5

Stephen decides his business will begin staying open until 7 p.m. instead of 6 p.m. The next day, the shop stays open until 7 p.m. This environment of flexibility to quickly change is characteristic of what form of business organization?
A)Corporation
B)Partnership
C)S-corporation
D)Flexible partnership
E)Sole proprietorship

Accepted Answer

The flexibility to quickly change business operations is a characteristic of sole proprietorships. As the sole owner, Stephen can make decisions and implement changes without having to consult with partners or a board of directors.

Question 6

Refer to B&G, Inc. What type of organization was Kevin considering switching to?
A)Limited-liability corporation
B)Sole proprietorship
C)S-corporation
D)Not-for-profit corporation
E)Closed corporation

Accepted Answer

Kevin was looking to switch to a not-for-profit corporation, one that focuses on serving the community rather than making a profit.

Question 7

Tracy is considering expanding his business and has several potential new investors in mind. He originally wanted to form an S-corporation to protect the liability of the investors, but he is now considering a limited-liability company instead because he knows there can be only ____ stockholders in an S-corporation.
A)10
B)25
C)50
D)100
E)108

Accepted Answer

S-corporations are limited to 100 shareholders, making them less flexible than limited liability companies (LLCs) when it comes to the number of investors or partners.

Question 8

Shares of Burger House stock cannot be purchased on any stock exchange or by just any individual. This means that Burger House is a(n)
A)alien corporation.
B)partnership.
C)open corporation.
D)family corporation.
E)closed corporation.

Accepted Answer

A closed corporation is a company whose shares are not publicly traded on stock exchanges and are owned by a limited number of individuals or entities. Burger House's shares cannot be purchased on any stock exchange or by just any individual, indicating that it is a closed corporation.

Question 9

A corporation whose stock can be purchased by anyone and is traded in stock markets is known as a(n)
A)sole proprietorship.
B)S-corporation.
C)closed corporation.
D)open corporation.
E)not-for-profit corporation.

Accepted Answer

An open corporation is a corporation whose stock is traded in stock markets and can be purchased by anyone.

Question 10

The purchase of one corporation by another is referred to as a
A)proxy.
B)cooperative.
C)joint venture.
D)syndicate.
E)merger.

Accepted Answer

The purchase of one corporation by another is referred to as a merger.

Question 11

​Maurice has been operating his business as a sole proprietorship but decides that it is too much work for him to do alone. He does not want to file a lot of government forms, but would like to bring in someone to own and operate it with him. Maurice needs a
A)​partner.
B)​wife.
C)​merger.
D)​limited-liability company.

Accepted Answer

A partner would allow Maurice to bring in someone to share the responsibilities and workload of the business without having to file a lot of government forms or changing the legal structure of the business. A merger would involve combining two separate businesses, which is not what Maurice needs. A limited-liability company would require filing government forms and changing the legal structure of the business. A wife is not relevant to the situation.

Question 12

Which of the following is an advantage of the corporate form of organization?
A)Ownership of stock is easy to transfer.
B)Forming a corporation is a complex and costly process.
C)The corporation and its stockholders pay taxes on profits.
D)A corporation must submit detailed information to government agencies.
E)It is difficult to keep operations confidential because of required reports.

Accepted Answer

Ownership of stock in a corporation is easy to transfer, which means that shares can be easily bought and sold on the stock market, making it attractive to investors.

Question 13

The form of business organization that experiences double taxation is the
A)partnership.
B)corporation.
C)venture company.
D)syndicated partnership.
E)sole proprietorship.

Accepted Answer

Corporations are subject to double taxation, meaning the company pays taxes on its profits and then shareholders pay taxes on any dividends received from those profits.

Question 14

Local residents have always thought the mom-and-pop store on the corner of Locust and Congress was a partnership between Mr. and Mrs. Jones. But Mr. Jones is the real owner. This probably means that the store is a
A)limited partnership.
B)sole proprietorship.
C)corporation.
D)cooperative.
E)joint venture.

Accepted Answer

A sole proprietorship is a type of business structure where a single individual owns and operates the business. In this case, Mr. Jones is the sole owner of the store, making it a sole proprietorship.

Question 15

As a limited partner in a construction business, Joe
A)has input only on major company decisions.
B)contributes only his time and not his money.
C)does not receive any portion of the profits.
D)only risks his initial investment.
E)cannot lose his investment in the partnership.

Accepted Answer

As a limited partner, Joe's liability and risk are limited to his initial investment in the partnership. He also does not have much say in the company's decision-making process and does not receive any portion of the profits.

Question 16

Legally, a partnership must
A)have at least one limited partner.
B)have at least one general partner.
C)make all owners general partners.
D)not have any general partners.
E)designate a limited partner to be responsible for all debts of the partnership.

Accepted Answer

Legally, a partnership must have at least one general partner who has unlimited personal liability for the debts and obligations of the partnership. However, a partnership can also have limited partners who have limited liability for the partnership's debts and obligations. Therefore, option B is the correct answer.

Question 17

All of the following are advantages of the partnership form of organization except
A)unlimited liability.
B)retention of profits.
C)combined skills and knowledge.
D)better access to capital and credit.
E)ease of start-up.

Accepted Answer

Unlimited liability is a disadvantage of the partnership form of organization, as each partner is personally responsible for the debts and liabilities of the business.

Question 18

A corporation organized to provide a social, educational, religious, or other nonbusiness service is known as a(n)
A)authority.
B)merger.
C)quasi-government corporation.
D)S-corporation.
E)not-for-profit corporation.

Accepted Answer

The term "not-for-profit corporation" or "nonprofit corporation" refers to a corporation organized for a social, educational, religious, or other nonbusiness purpose. The organization must use any profits or other income for the benefit of its members or for the purpose it was formed, rather than distributing them as profit or dividends to shareholders.

Question 19

A hostile takeover is a situation in which
A)the management and board of directors of the targeted firm disapprove of the proposed merger.
B)stockholders are paid a golden parachute.
C)the targeted firm is dismantled to avoid the merger.
D)the government makes the decision that the corporate raider can purchase the targeted firm.
E)the corporate raider receives a sum of money to leave the targeted firm alone.

Accepted Answer

A hostile takeover occurs when the management and board of directors of the targeted firm do not approve of the proposed merger, and the acquiring company attempts to buy enough shares of the target company to gain control without the approval of the current management. This is typically done by a corporate raider who believes that they can increase the value of the target company by making changes such as selling off assets or restructuring operations.

Question 20

The form of business organization that accounts for 82 percent of all sales revenues in the United States is the
A)sole proprietorship.
B)partnership.
C)corporation.
D)joint venture.
E)syndicate.

Accepted Answer

According to the Small Business Administration, corporations account for 82 percent of all sales revenues in the United States. Therefore, the best choice is C, which stands for corporation.

Quiz 4: Choosing a Form of Business Ownership

​What is the name given to the governing body of a corporation?

Which of the following is not a disadvantage of sole proprietorships?

All of the following are disadvantages of corporations except

Stephen decides his business will begin staying open until 7 p.m. instead of 6 p.m. The next day, the shop stays open until 7 p.m. This environment of flexibility to quickly change is characteristic of what form of business organization?

Refer to B&G, Inc. What type of organization was Kevin considering switching to?

Shares of Burger House stock cannot be purchased on any stock exchange or by just any individual. This means that Burger House is a(n)

A corporation whose stock can be purchased by anyone and is traded in stock markets is known as a(n)

The purchase of one corporation by another is referred to as a

​Maurice has been operating his business as a sole proprietorship but decides that it is too much work for him to do alone. He does not want to file a lot of government forms, but would like to bring in someone to own and operate it with him. Maurice needs a

Which of the following is an advantage of the corporate form of organization?

The form of business organization that experiences double taxation is the

Local residents have always thought the mom-and-pop store on the corner of Locust and Congress was a partnership between Mr. and Mrs. Jones. But Mr. Jones is the real owner. This probably means that the store is a

As a limited partner in a construction business, Joe

Legally, a partnership must

All of the following are advantages of the partnership form of organization except

A corporation organized to provide a social, educational, religious, or other nonbusiness service is known as a(n)

A hostile takeover is a situation in which

The form of business organization that accounts for 82 percent of all sales revenues in the United States is the

What is the name given to the governing body of a corporation?

Maurice has been operating his business as a sole proprietorship but decides that it is too much work for him to do alone. He does not want to file a lot of government forms, but would like to bring in someone to own and operate it with him. Maurice needs a