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Exam 4: Choosing a Form of Business Ownership

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Question 1

Multiple Choice

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

A) closed
B) open
C) domestic
D) foreign
E) alien

F) C) and D)
G) B) and C)

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Question 2

Multiple Choice

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Unlimited liability means

A) there is no limit on the amount an owner can borrow.
B) creditors will absorb any loss from nonpayment of debt.
C) the business can borrow money for any type of purchase.
D) the owner is responsible for all business debts.
E) stockholders can borrow money from the business.

F) B) and D)
G) C) and D)

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Question 3

Multiple Choice

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Legally, a partnership must

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

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?

How do management tasks differ for a general partner and a limited partner?

What do experts believe is likely to become one of the most popular types of business organizations?

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.

Why would a partnership have more capital available to it than would a sole proprietorship?

Common stock carries all the following rights except the right to

A general partner is responsible for any debts of the partnership, regardless of whether he or she was directly involved in the transaction that created the debt.

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

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

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)

Preferred stockholders receive dividends before dividends are paid to common stockholders.

A horizontal merger is a merger between firms in completely unrelated industries.

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

Samantha's Dilemma Samantha graduated from college and needed to decide where she wanted to work. She had several options. Her aunt Julie owned and operated a small business that she started about twenty years ago. Julie, an individual owner of her business, informed Samantha that she could work for her. On one hand, Samantha thought it would be a great opportunity to be able to work for her aunt, learn the business, and then run the business when her aunt retired. On the other hand, she also felt that she wanted something a little more challenging; a job where she could really use her education. Her other option would be to work for a company that a friend and her husband had started and jointly owned. It was a rapidly growing company with plenty of opportunity for advancement. However, Samantha had some reservations about this choice because she was not sure she wanted to work for friends. Her last option was to work for a large retail company, headquartered in Maryland, which had stores across the United States. After much consideration, Samantha decided she didn't want an opportunity and a job because someone knew her. She wanted to prove how motivated and hard-working she was. Once she weighed all the advantages and disadvantages of her different options, she decided to work for the large retail company so that she could gain the most experience for herself. -Refer to Samantha's Dilemma. What would not be an advantage of Samantha's aunt's business?

Describe the merger trends affecting American business.

Which of the following statements is false?