FORMS OF BUSINESS OWNERSHIP TRUE-FALSE QUESTIONS Title: ANSWER: F REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 RATIONALE: With a sole proprietorship, the owner has unlimited liability. If the sole proprietorship acquires a legal business name, the owner then has limited liability. Title: ANSWER: T REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 One of the disadvantages of
the sole proprietorship is that the owner has unlimited liability. Title: ANSWER: F REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 RATIONALE: Sole proprietorships are not legal entities. The sole proprietorship is considered a legal entity; therefore, it is taxed separately from the owner. Title: ANSWER: F REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 RATIONALE: A
partnership can be established either in writing or through an oral agreement. For partnerships to be legal, they must be established in writing. Title: ANSWER: F REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 RATIONALE: All partners have unlimited liability. In a limited partnership, all of the partners have limited liability. Title: ANSWER: T REFERENCE: Partnerships: Sharing the Load
LEARNING OUTCOME: 2 A disadvantage of a partnership is that any partner may have to pay all of the debts of the company regardless of who incurred the debts. Title: ANSWER: F REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 RATIONALE: As a rule partnerships are easier to form than to leave. Sole proprietorships are the easiest form of business to dissolve. Dissolving a partnership is easier than dissolving a sole
proprietorship. Title: ANSWER: F REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 RATIONALE: The incorporation process differs from state to state. Registration procedures for incorporation are uniform from state to state across the U.S. Title: ANSWER: F REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 RATIONALE: This information is not included in the articles of
confederation. See Exhibit 4.4. Articles of incorporation usually specify the life of a corporation as a certain number of predetermined years. Title: ANSWER: T REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 The corporation's board of directors elects the corporate officers. Title: ANSWER: F REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 RATIONALE: Double
taxation is a distinct disadvantage. Double taxation is a distinct advantage that corporations have over other forms of ownership. Title: ANSWER: T REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 Corporations face many more government restrictions and regulations than sole proprietorships and partnerships. Title: ANSWER: F REFERENCE: Specialized Forms of Business Organizations
LEARNING OUTCOME: 3 RATIONALE: Cooperatives are a distinctly different entity from a corporation. Cooperatives are regulated with the same tax laws and rates as corporations. Title: ANSWER: F REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3 RATIONALE: The two types of cooperatives are buyer and seller. The two types of cooperatives are wholesale and retail. Title: ANSWER: T
REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3 When Ashland Plastics and Melamine Chemicals formed a joint venture to develop flame-resistant plastic sheeting, the relationship most likely ended as soon as the project was completed. Title: ANSWER: T REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5 When Addison Wilcox buys an H&R Block franchise, he becomes a franchisee. Title: ANSWER: F REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5 RATIONALE: The franchisee has to abide by the rules set by the franchisor or risk losing his or her investment. A person who buys a franchise has the same level of control as an entrepreneur who opens his or her own sole proprietorship. Title: ANSWER: T REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5 Changing demographics drive the franchise
industry growth. Title: ANSWER: T REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 In 2004, Albertson’s Inc. purchased Southern California’s premier fresh, gourmet, and specialty food retailer, Bristol Farms. This was an example of an acquisition. Title: ANSWER: F REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 RATIONALE: This is an example of a vertical merger. When Whole Foods Market,
the world's largest natural foods supermarket, acquired Select Fish, a fish processing company, it was an example of a conglomerate merger. Title: ANSWER: T REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 When companies in the same industry merge to achieve economies of scale and to expand their product lines, it is called a horizontal merger. Title: ANSWER: F REFERENCE: Mergers and Acquisitions
LEARNING OUTCOME: 6 RATIONALE: When companies in the same industry merge to achieve economies of scale and to expand their product lines, it is called a horizontal merger. When Wachovia Bank, acquired First Union Bank Dim S.A., it was an example of a conglomerate merger. Title: ANSWER: T REFERENCE: Trends in Business Ownership LEARNING OUTCOME: 7 Baby boomers are having a strong effect on the franchise industry. Title: ANSWER: T REFERENCE: Trends in Business Ownership LEARNING OUTCOME: 7 Eighty-two percent of boomers indicated that they will not retire at or before age 65. MULTIPLE CHOICE QUESTIONS Title: ANSWER: C REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 The most common form of business organization is the: Title: ANSWER: B REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 What type of business organization generates the most total sales? Title: ANSWER: B REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 RATIONALE: See Table 4.1. Of all forms of business ownership, corporations account for
the largest share of both: Title: ANSWER: B REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 RATIONALE: A sole proprietorship is a business that is established, owned, operated, and often financed by one person. Jules Sylvester had always loved reptiles. When he was asked by a movie producer if he could locate some anaconda snakes for a movie, a business was born. Sylvester is the proud owner and operator of Reptile Rentals. The California-based business, which he started with no financial help from anyone, is often called on to provide "creepy, crawly" moments in the movies. Jules Sylvester is an example of a:
Title: ANSWER: C REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 When Linda McAnem began Stirya, a New York-based computer services company, she ran it as a sole proprietorship. As a sole proprietor, McAnem:
Title: ANSWER: B REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 Which of the following is an advantage of sole proprietor ownership?
Title: ANSWER: E REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 7 Which type of business organization experiences the least governmental regulation? Joint venture
Title: ANSWER: A REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 The form of business ownership that is easiest to dissolve is the:
Title: ANSWER: E REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 The form of business ownership that has the most difficulty in raising capital is the:
Title: ANSWER: B REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 Paul Hyatt owns and operates DeepClean, a Florida-based company that cleans up mold and mildew in homes and businesses. As the sole proprietor of the business, he has unlimited liability, which means:
Title: ANSWER: D REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 A term that means that business damages and/or debts can also be attached to the personal assets of the owners is ______ liability.
Title: ANSWER: A REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 Which of the following is a disadvantage of sole proprietor ownership?
Title: ANSWER: D REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 Which of the following is a disadvantage of sole proprietor ownership?
Title: ANSWER: A REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 Suzanne Pogell wanted to learn to sail, but she could find no one to teach her because men were the ones who sailed, and women were their crew. She finally did convince someone to teach her to sail, and after mastering sailing, she started an all-woman sailing school called Womanship as a sole proprietorship. When she dies, the:
Title: ANSWER: B REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 Sole proprietorships:
Title: ANSWER: C REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 RATIONALE: A sole proprietorship is a business that is established, owned, operated, and often financed by one person. Tonya Thomas is tired of working for other people. She wants to start her own administrative services businesses and control her own work schedule. She wants to have sole responsibility for all business decisions. Thomas should form a(n):
Title: ANSWER: D REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 RATIONALE: A partnership is an association of two or more individuals who agree to operate a business together for profit. Pete Yankin and Ken Lowery consider themselves to be experts on hunting in the mountains in North Carolina. As a result, the two men established a company that markets hunting expeditions. Yankin and Lowery share responsibilities for booking the trips, gathering supplies, and guiding groups of five to seven hunters into locations where they can hunt for deer and bear. Since the two will share any profit equally, this would be an example of a(n):
Title: ANSWER: D REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 RATIONALE: A partnership is an association of two or more individuals who agree to operate a business together for profit. Stewed Tomatoes was an "all-girl power-pop trio." Its three members realized that many musicians feel stifled when making music in a sterile studio environment while the clock ticked away expensive hours, so the three girl band members created Materville Studios, a multimedia production house and recording studio in downtown Chicago. They share work responsibilities and profits equally. Materville Studios is a(n):
Title: ANSWER: D REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 Partnership agreements generally specify all of following EXCEPT:
Title: ANSWER: A REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 RATIONALE: A general partnership is a partnership in which all partners share in the management and profits. The growing popularity of bread machines has become a new business opportunity for Shelly Clemins and Jan Schoenbarr. The women make and sell bread machine covers and fabric gift bags to hold the bread loaves made in the machines. The women share the responsibilities of running the business (called Bread & Butter) as well as its profits equally. Bread & Butter would be an example of a(n):
Title: ANSWER: E REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 RATIONALE: One of the conditions of a partnership is equal sharing. Bob Nichol and Martha Bohner own and operate a small company that bakes and sells Thunder Muffins, gigantic muffins full of blueberries, blackberries, or raspberries. They sell the muffins at a local farm that is open to the public on weekends. Since they operate the business as a partnership, they should:
Title: ANSWER: A REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 RATIONALE: One of the conditions of a partnership is equal sharing. Croutakie seemed like a great idea. Chef Leo Nyami and Sara Rice decided to take advantage of the popularity of shitake mushrooms and create some shitake mushrooms products that could be sold to restaurant patrons and other gourmets through their new company. Nyami and Rice have recently abandoned their business because they could not pay its outstanding business debts. Since Nyami and Rice are both liable for the debts, their business was a(n):
Title: ANSWER: E REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 Which of the following statements about a general partnership is true?
Title: ANSWER: A REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 RATIONALE: A general partnership is a partnership in which all partners share in the profits and debts. Three Sisters Specialty Foods, owned by Judith Coker, Millie Humphreys, and Jade Watson, sells eggless cake mixes for people on a restricted diet. Coker recently purchased an industrial grade mixer without conferring with her sisters who were upset when they learned that they were all three liable for the payments on the mixer. Three Sisters is an example of a:
Title: ANSWER: E REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 RATIONALE: A limited partnership is a partnership with one or more general partners who have unlimited liability, and one or more limited partners whose liability is limited to the amount of their investment in the company. Thom Georges wants to open a store where he sells nothing but antique architectural features that he can salvage from old houses being torn down to make way for progress. He has an eye for the kind of doors, windows, mantels, and so forth that decorators want, but he does not have all the funding he needs to get started. He has invited his parents to invest $40,000 in the enterprise. He has told them that if they do invest, they would have liabilities in the firm equal to but no greater than their investment. Georges is trying to get them to form a _____ with him.
Title: ANSWER: D REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 Croutakie seemed like a great idea. Chef Leo Nyami and Sara Rice decided to take advantage of the popularity of shitake mushrooms and create some shitake mushrooms products that could be sold to restaurant patrons and other gourmets through their new company. The mushrooms are expensive, and there were other unexpected financial problems, so Nyami and Rice asked Bill Ng to become a limited partner. This means that Ng:
Title: ANSWER: D REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 RATIONALE: A limited partnership is a partnership with one or more general partners who have unlimited liability, and one or more limited partners whose liability is limited to the amount of their investment in the company. Karl Metzger plans to invest $5,000 in a partnership with his brother to produce and sell handcrafted violins, zithers, and other string instruments. Metzger does not plan to work in the business and wants no more liability than his investment. He should be a:
Title: ANSWER: A REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 RATIONALE: A limited partnership is a partnership with one or more general partners who have unlimited liability, and one or more limited partners whose liability is limited to the amount of their investment in the company. Fred Pittman has invested $10,000 in his son’s motorcycle repair shop, but he takes no part in its management. Pittman is a(n):
Title: ANSWER: D REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 Which of the following statements about the partnership as a form of business ownership is true?
Title: ANSWER: A REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 Ease of formation, flexibility, and diversity of management are advantages of the _____ form of business ownership.
Title: ANSWER: A REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 Which of the following is an example of a disadvantage associated with a partnership?
Title: ANSWER: B REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 Which of the following statements about the taxation of partnerships is true?
Title: ANSWER: C REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 Which of the following statements about incorporation is true?
Title: ANSWER: E REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 A corporation:
Title: ANSWER: C REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 A corporation:
Title: ANSWER: A REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 RATIONALE: A corporation is a legal entity with an existence and life separate from its owners. When Linda McAnem began Stirya, a New York-based computer services company, she ran it as a sole proprietorship. As the business grew, she realized that she did not want to be personally liable for the business's debts and wanted her business accounts to be separate from her personal accounts. Therefore, she should have:
Title: ANSWER: C REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 With its ease of registration and pro-corporate policies, _____ is called the "state of incorporation." About half of the Fortune 500 companies are incorporated there.
Title: ANSWER: A REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 The first step to incorporating a company is to:
Title: ANSWER: B REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 Rebecca Siddoway own and operate Country Candies. Siddoway specializes in making rich, creamy toffees that she packages in attractive gift boxes and sells through the mail. What would her first step be if she decides to incorporate her business to make it easier to find investors?
Title: ANSWER: B REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 Which of the following provides the legal and managerial guidelines for operating the firm?
Title: ANSWER: E REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 Who owns a corporation?
Title: ANSWER: B REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 Articles of incorporation do NOT include:
Title: ANSWER: D REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 A firm's stockholders have the right to do all of the following EXCEPT:
Title: ANSWER: C REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 Aaron Medford has invested $600 in the corporate stock of a manufacturer of offshore oil drilling equipment. If the company goes bankrupt, the most Medford could lose would be:
Title: ANSWER: D REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 A corporation’s board of directors:
Title: ANSWER: E REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 Why do most large companies have outside directors on their boards?
Title: ANSWER: D REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 RATIONALE: A corporation is a legal entity with an existence and life separate from its owners. Jack Smith and four other people own Persimmon Hill Farm, an agric-entertainment farm which provides corn mazes, bonfires, hay rides, and food treats to paying visitors. All of the owners have limited financial risk. Persimmon Hill Farm is a(n):
Title: ANSWER: C REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 The fact that a corporation has limited liability means:
Title: ANSWER: E REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 A corporation has:
Title: ANSWER: D REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 Rebecca Siddoway own and operate Country Candies. Siddoway specializes in making rich, creamy toffees that she packages in attractive gift boxes and sells through the mail. What would be the advantage to Siddoway if she decides to incorporate her business?
Title: ANSWER: A REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 A corporation's earnings are taxed as corporate earnings and as dividends to the stockholders. This is known as:
Title: ANSWER: B REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 Double taxation in a corporation means:
Title: ANSWER: E REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 Which of the following describes a disadvantage associated with a corporation?
Title: ANSWER: B REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 Before selling stock to the public, a corporation must register with the:
Title: ANSWER: A REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 The C Corporation is another term for:
Title: ANSWER: B REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 An S corporation is generally set up to:
Title: ANSWER: C REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 To avoid double taxation, a new entrepreneur may elect to organize as a(n):
Title: ANSWER: C REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 An S corporation:
Title: ANSWER: D REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 A type of business entity that provides liability protection but is taxed like a partnership is a:
Title: ANSWER: E REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 Which of the following statements about limited liability companies (LLCs) is true?
Title: ANSWER: A REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 A _____ offers the same liability protection as a corporation but may be taxed as either a partnership or a corporation.
Title: ANSWER: B REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3 _____ are organizations formed by individuals or businesses with similar interests to achieve greater economies of scale and economic power through collective ownership.
Title: ANSWER: D REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3 A group of cotton growers in North Georgia and North Alabama pooled their resources to build a cotton gin and storage area for the ginned cotton. They marketed their cotton to textile mills under one label. This collective ownership organization is a:
Title: ANSWER: A REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3 The two types of cooperatives are:
Title: ANSWER: A REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3 Which of the following statements about cooperatives is true?
Title: ANSWER: C REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3 A _____ is when two or more companies form a special entity to undertake a specific project, usually for a specific period of time.
Title: ANSWER: C REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3 RATIONALE: In a joint venture, two or more companies form an alliance to pursue a specific project for a specified time period. The development of new drugs is very expensive. For this reason Genentech, a large biotechnical company, has entered into a _____ with Swiss-owned Roche to develop a vaccine for tuberculosis. When the vaccine is developed or when the two biotechnical companies determine the vaccine cannot be developed using their current methodology, this relationship will dissolve.
REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3 RATIONALE: In a joint venture, two or more companies form an alliance to pursue a specific project for a specified time period. Hard Rock Cafe International and Sol Melia Hotels and Resorts have allied to develop a multimillion-dollar hotel. This relationship is a _____ because their alliance will end as soon as the hotel is completed.
Title: ANSWER: C Title: ANSWER: C REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5 The purchaser of a franchise is called the:
Title: ANSWER: D REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5 The headquarters, seller, and supplier of the service or method of operation of a franchise is called the:
Title: ANSWER: C REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5 The franchise agreement:
Title: ANSWER: D REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5 The franchisor generally does NOT provide the franchisee with:
Title: ANSWER: E REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5 Kayla Langton is considering the purchase of a Bonus Building Care franchise. Langton is likely to get assistance from the commercial cleaning franchisor in which of the following areas?
Title: ANSWER: C REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5 Clarence Danvers is buying a Cinnabon franchise at the airport in Tulsa. Danvers knows that he will get all of the following benefits EXCEPT:
Title: ANSWER: C REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5 Which of the following is a disadvantage for the fast-food franchisee?
Title: ANSWER: A REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5 Jayson Tully is contemplating the purchase of a Popeye's Chicken franchise. Tully has made a list of the disadvantages that he assumes he will face as a new business owner. Which of the following is actually an advantage?
Title: ANSWER: C REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5 A disadvantage of franchising to the franchisee is:
Title: ANSWER: E REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5 Restricted operating freedom in franchising means that the franchisee must conform to:
Title: ANSWER: E REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5 Franchisors in foreign countries must be aware of:
Title: ANSWER: B REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 The combination of two companies that join to form one company is called a:
Title: ANSWER: B REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 RATIONALE: The combination of two companies that join to form one company is called a merger. Ottens Flavors, Philadelphia, announced its combination with MK Flavors & Co., Mexico City. The Mexican operation will offer the U.S.-based company an increased market presence in Central and South America. The new company will be renamed MK Ottens Flavors. MK Ottens Flavor was created through a(n):
Title: ANSWER: E REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 RATIONALE: An acquisition is the purchase of a corporation by another group. Often the identity of the acquired company is lost. IBM purchased MRO Software Inc. for $740 million. MRO was a niche provider of software and services to help customers including nuclear power plants and oil companies. IBM, plans to fold MRO into its software unit. This is an example of a(n):
Title: ANSWER: E REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 RATIONALE: An acquisition is the purchase of a corporation by another group. Often the identity of the acquired company is lost. Fairmount Food Group purchased Swissrose International Inc., market of several brands of specialty and food service cheese from ConAgra. The _____ will make Fairmount the largest U.S. importer and marketer of specialty and deli-style cheese.
Title: ANSWER: C REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 RATIONALE: A horizontal merger is a merger of companies at the same stage in the same industry. North American Van Lines and Allied Van Lines combined in a _____ merger that will create the world’s largest moving company. Prior to the merger, North American was the leading company in moving high-end merchandise such as computer and hospital equipment, while Allied specialized in households.
Title: ANSWER: C REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 RATIONALE: A horizontal merger is a merger of companies at the same stage in the same industry. International Association of Food Industry Suppliers has completed its _____ merger with the Food Processing Machinery Association. The action represents a coming together of equals in which both boards and staffs are committed to creating a new association that is stronger and better equipped to serve its members’ growing needs to more effectively compete in their marketplaces.
Title: ANSWER: E REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 RATIONALE: A vertical merger is a merger of companies at different stages in the same industry. The merger of McKesson, the leading U.S. drug wholesaler, and HBOC, a producer of health-care inventory software, is an example of a(n) _____ merger.
Title: ANSWER: E REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 RATIONALE: A vertical merger is a merger of companies at different stages in the same industry. Back in the late 19th century, the Carnegie Steel company controlled not only the mills where the steel was manufactured, but also the mines where the iron ore was extracted, the coal mines that supplied the coal, the ships that transported the iron ore and the railroads that transported the coal to the factory. Through several _____ mergers the steel company gained control of the various resources it needed to product steel.
Title: ANSWER: E REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 RATIONALE: A vertical merger is a merger of companies at different stages in the same industry. Multinational oil companies such as ExxonMobil, Royal Dutch Shell, or BP are active all the way along the supply chain from locating crude oil deposits, drilling and extracting crude, transporting it around the world, refining it into petrochemicals such as gasoline, to distributing the fuel to company-owned retail stations, where it is sold to consumers. To gain this complete control of the various resources needed to product oil and gas, the companies had to have engaged in _____ mergers.
Title: ANSWER: A REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 A _____ merger brings together companies in unrelated businesses to reduce risk.
Title: ANSWER: A REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 RATIONALE: A conglomerate merger is a merger of companies in unrelated businesses. There are over 1,100 Corner Stores that market candy. When Valero Energy Corp. purchased the chain of retail stores, it was an example of a _____ merger.
Title: ANSWER: A REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 RATIONALE: A conglomerate merger is a merger of companies in unrelated businesses. U.S. Lumber Company’s purchase of EnviroPlastics, a manufacturer of plastic cutlery, is an example of a _____ merger.
Title: ANSWER: A REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 Why would a company choose to engage in a conglomerate merger instead of a vertical or horizontal merger?
Title: ANSWER: C REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 Miniature Precision Corporation, a microprocessor manufacturer, recently acquired Cameron-Price, a plastics mold manufacturer. Miniature Precision financed the transaction with 90 percent borrowed money and used Cameron-Price's assets as collateral. This type of merger is commonly known as a(n):
Title: ANSWER: D REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 _____ are corporate takeovers financed by large amounts of borrowed money.
Title: ANSWER: D REFERENCE: Trends in Business Ownership LEARNING OUTCOME: 7 Which of the following demographic groups is having the greatest impact on the growth of the franchising industry?
Title: ANSWER: E REFERENCE: Trends in Business Ownership LEARNING OUTCOME: 7 How does the current boom in mergers and acquisitions differ from ones in earlier years?
FILL-IN-THE-BLANK QUESTIONS Title: ANSWER: sole proprietorship REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1
Title: ANSWER: unlimited REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1
Title: ANSWER: general REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2
Title: ANSWER: Stockholders or Shareholders REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4
Title: ANSWER: double REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4
Title: ANSWER: S corporation REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4
Title: ANSWER: limited liability company REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4
Title: ANSWER: C corporation REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4
Title: ANSWER: cooperative REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3
Title: ANSWER: joint venture REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3
Title: ANSWER: franchisee REF Franchising: A Popular Trend LEARNING OUTCOME: 5
Title: ANSWER: merger REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6
Title: ANSWER: acquisition REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6
Title: ANSWER: horizontal REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6
Title: ANSWER: Leveraged buyouts (LBOs) REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6
SHORT ANSWER QUESTIONS Title: ANSWER: corporation REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1
Title: ANSWER: sole proprietorship, partnership, and corporation REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1
Title: ANSWER: sole proprietorship REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1
Title: ANSWER: sole proprietorship and partnership REFERENCE: Going It Alone: Sole Proprietorship and Partnerships: Sharing the Load LEARNING OUTCOME: 1 and 2
Title: ANSWER: limited and general REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2
Title: ANSWER: to select the corporation’s name REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4
Title: ANSWER: stockholders or shareholders REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4
Title: ANSWER: It is elected by the corporation’s stockholders. REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4
Title: ANSWER: Corporations must pay federal and state taxes on their profits, and any profits made to stockholders as dividends are also taxed. REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4
Title: ANSWER: S corporations are taxed like a partnership; LLCs may be taxed as either a corporation or a partnership. REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 Title: ANSWER: buyer and seller REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3
Title: ANSWER: Joint ventures are typically created to pursue some specific project, and when that project is concluded, they are dissolved. REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3
Title: ANSWER: That statement is false. One of the disadvantages of franchising is the fact that the franchisee sacrifices some control over his or her business in order to gather the other advantages of franchising. REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5
Title: ANSWER: A merger is a combination of two or more firms to form a new company, which often takes on a new corporate identity. An acquisition is the purchase of another corporation, and the purchased corporation ceases to exist as a separate entity. REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6
Title: ANSWER: vertical, horizontal, and conglomerate REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6
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