Business Chapter 4-5

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horizontal merger

When Compaq and Hewlett-Packard decided to become one company, this was an example of a(n)

open corporation

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

the ease of transfer of ownership

When Alyssa decides that she no longer wants her Radio Shack stock, she will discover that a related benefit of a corporation is

perpetual life

All of the following are disadvantages of corporations except

have at least one general partner

Legally, a partnership must

appointed by the board of directors

Corporate officers are

sole proprietorship

The simplest form of business owned and operated by one person is called a(n)


The citizens of a number of small rural owns have decided to form an association that will allow them to purchase electricity at a much cheaper rate than they are currently paying. This allowance is referred to as a(n)


A voluntary association of two or more people acting as co-owners of a business is known as a

a secretary of state

When starting a corporation, people submit articles of incorporation to

closed corporation

Nortons, Inc. is a hardware store that is owned by members of the Norton family as well as a few close friends of the family. This company is called a(n)

It ceases to exist unless the heirs take it over to sell it

When the owner of a sole proprietorship dies, what becomes of the business?

perpetual life

Unless specified in the charter, a corporation has a


The form of business organization that experiences double taxation is the

articles of incorporation; secretary of state of Illinois

Before Troy can incorporate his advertising business in Champaign, Illinois, he must have a(n)_______ approved by the ________.

proxy fight

A technique used to gather enough stockholder votes to control a targeted company is a

master limited partnership

A business partnership that is owned and managed like a corporation but taxed like a partnership is called a(n)

double taxation

All of the following are disadvantages that Sean should consider before entering a partnership agreement with his cousin except

corporation, partnership, sole proprietorship

The order of difficulty and expense, from most to least, when forming a business organization is as follows:

articles of partnership

Keisha Cook and Donna Blackman decide to go into business together. They start by working an agreement listing and explaining the terms of the business they will both own, along with both of their responsibilities

taxed like a partnership

A limited-liability company is

domestic corporation

In the state in which it is incorporated, a business is known as a(n)


A temporary association organized to perform a specific task requiring a large amount of capital is known as a(n)

unlimited liability

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


A year ago Kevin went to work for B&G. Kevin discovered there was going to be a merger between B&G, Inc and one of its major competitors. Refer to B&G Inc. B&G was going through a _____________ merger.

only risks his initial investment

As a limited partner in a construction business, Joe


When compared to partnerships and corporations, sole proprietorships account for ___ percent of total sales.

articles of partnership

The _________ is a legal document that lists and explains the terms of the partnership.

It does not pay special state and federal taxes that corporations pay.

How might sole proprietorship have a possible tax advantage?

Companies must pay taxes on their earnings, and then stockholders pay taxes on their dividends.

What does double taxation mean?

Double taxation

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

forming a joint venture

Genetech, a biotechnology firm engaging in the new field of genetic engineering, has asked your advice about remaining independent and temporarily gaining access to the marketing and manufacturing expertise it lacks from another firm. You would suggest

not for profit corporation

The Smithsonian Institution exists to preserve historical and cultural items of value and to share those items with the public; it does not exist to maximize the wealth of any shareholders. This entity is organized as a(n)


Anyone with the money can purchase shares of Coca-Cola’s stock. This makes Coca-Cola a(n) _________ corporation.

When compared to larger businesses, the lure of employee benefits is one reason why people go to work for sole proprietorships.

According to the text, which of the following statements is false?


Prudential and several other large insurance companies have joined together to underwrite an extremely large insurance policy. This sort of association is referred to as a(n)

natural resources, energy, and real estate

Most master limited partnerships are in the areas of

not-for-profit corporation

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

Sole proprietorship

Angela is tired of her boss as well as corporate America in general. She decides she would like to start a business where no one tells her what to do, and she can always make the decisions. The best form of business for Angela is a(n)

Profits are taxed as individual income

Which of the following is an advantage of a sole proprietorship?

Ownership of stock is easy to transfer

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

The purchase of Mobil Oil by Exxon

Which of the following is an example of a horizontal merger?

not-for-profit corporation

Goodwill Industries is an example of a(n)


A ______ is a form that enables stockholders to allow someone else to vote for them.

Internal Revenue Service

Not-for-profit organizations must meet specific guidelines in order to obtain tax-exempt status. These guidelines are structured by the

The S-corporation can have no more than 100 stockholders

Which of the following is a requirement for an S-corporation?

Daniel and Lucas will be able to purchase Thomas’s interest from his estate.

Daniel, Thomas, and Lucas are partners in a law firm under a typical partnership agreement in which each owns an equal share of the business. Thomas dies suddenly of a heart attack. What will most likely become of the partnership?

horizontal merger

Recently there have been several mergers involving Big Four accounting firms. One such merger involved the firms of Arthur Young and Ernst & Whinney, who combined to form Ernst & Young. This is an example of a

incorporate his money

Shane is looking for ways to get more capital for his appliance sales and service business. He is very protective of his company’s information and fears that it will get into the wrong hands. Shane would probably not want to

limited partner

The partner who can lose only what he or she has invested in a business is the

the owner is responsible for all business debts.

Unlimited liability means

conglomerate merger

A merger between firms in completely unrelated industries is known as a

closed corporation

Mars, Inc., maker of M&M’s and other candy, is 100 percent owned by the Mars family and is therefore referred to as a(n)


Which of the following has a restriction on the number of owners, members, or stockholders?

easy; difficult

Jack has been saving his excess funds for several years and has contemplated entering a partnership with a friend from college. Jack hesitates because he knows that it is ______ to invest money in a partnership and ________ to get the money back out.

receive part of the profit before other classes of stock

Common stock carries all the following rights except the right to

It has unlimited liability

Which of the following is not an advantage of a sole proprietorship?

tender offer

Suppose Bill Gates, founder of Microsoft, is interested in a small software company. He may offer to purchase the stock of this company at a price that is just high enough to tempt the stockholders. This action would be called a

Not-for-profit corporation

B&G. Kevin wanted to work for a company whose main goal was to provide a service to the community, not to make a profit.

not-for-profit corporation

Habitat for Humanity and Girl Scouts are both examples of


A distribution of earnings to the stockholders of a corporation is a(n)

may incorporate in any state it chooses

When incorporating, a business

Obtain a partner or form a corporation to attract more money

After Flora has gotten all the money she can from the bank and still cannot keep up with her fast-growing business, what is she most likely to do next if she wants her company to continue growing?

together they will be able to get more capital and credit to start the business

Brian wants to start a business that provides canoe and kayak trips. He decides that it would be better to ask his brother Brad to become his partner because


Because of rising fuel costs, a group of farmers have organized a retail gasoline outlet so they can make more reasonable purchases. This type of business is referred to as a(n)


Which of the following states offers the lowest organizational costs for corporations?

horizontal merger

A merger between two firms that make and sell similar products in similar markets is known as a

pay creditors

To close a sole proprietorship, the owner must


A company generally needs more than __________ employees in order to be considered large.

are more innovative than workers in large businesses.

You have just opened a new small business. You’re really happy to learn that studies show that small-business workers

Franchises have a very high success rate compared to other small businesses.

Which statement best describes the general success rate for franchises?


In a franchise business, the party paying the franchise fee is known as the

requires huge investments in machinery and equipment

Ben has been thinking about going into business. However, he has discounted entering automobile manufacturing because it

franchise agreement

You have been running a successful art and framing shop for three years. You have decided to allow others to use your business name, materials, and methods in operating their own business for a fee. You are going to enter a

fast and selective distribution of products.

Which of the following is an advantage to the franchisor in a franchise agreement?

labor and capital, and owns and operates the outlet

The franchisee supplies

created by individual inventors and small companies

Penicillin, airplanes, and air conditioning were all

sole proprietorship

Laura wants to start a business, but she is unsure of the legal form best for her. Short of cash, she decided to take the form that is the least expensive and most flexible in terms of decision making and implementation. Which would you recommend?

what products the company will sell

Which of the following would least likely be stated in the articles o partnership?

A corporation

Tiffany is about to finish her degree in business management and wants to find a job that will provide her with opportunities to advance within an organization. What type of business organization should Tiffany work for?


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

Heidi’s personal assets will be protected in the event that the corporation fails, although she could lose her entire investment.

The retail card and gift shop chain that Heidi started has since been incorporated. Which of the following best describes the limited liability that Heidi has as the primary stockholder in this corporation?

limited partner

Mike Nettles approached Nathan Lang about becoming a partner firm that destroys environmental waste. While Mike would like to become a partner in the firm, he is concerned about his liability because he has recently inherited a lot of money. In this situation, Mike should become a

no specific legal documents

Which of the following is necessary for starting a sole proprietorship?

Ability to be your own boss.

Samantha graduated from college and needed to decide where she wanted to work. What would not be an advantage of Samantha’s aunt’s business?


The most effective form of business organization for raising capital is the


Most partnerships have _____ partners.

sole proprietorships

In the United States, approximately percent of all businesses are

board of directors

The top governing body of a corporation is known as the


The form of business organization most heavily regulated by the government is

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