Test Chapter 4, 5
• Due Monday by 11:59pm
• Points 50
• Available Jun 23 at 12am – Jun 27 at 11:59pm 5 days
Answer the following questions on a scantron and submit it Monday June 27, 2016
Chapter 4—Choosing a Form of Business Ownership
MULTIPLE CHOICE
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.
01. Refer to Samantha’s Dilemma. What type of company does Samantha‘s friend operate?
a.
Incorporation
b.
Partnership
c.
Franchise
d.
Corporation
e.
Sole proprietorship
02. Refer to Samantha’s Dilemma. What wouldnotbe an advantage of Samantha’s aunt’s
business?
a.
Pride of ownership
b.
Retention of profits
c.
No special taxes
d.
Ability to be your own boss
e.
Unlimited liability
03. Glenn owns and operates a large hardware store in Missouri that employs about fifty
people. He delegates some of the decision making to two managers, but he remains the only
owner. Glenn’s business is organized as a
a.
corporation.
b.
partnership.
c.
sole proprietorship.
d.
limited partnership.
e.
limited-liability corporation.
04. 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.
05. Which of the following is necessary for starting a sole proprietorship?
a.
A contract
b.
An agreement
c.
An application to the secretary of state
d.
Articles of proprietorship
e.
No specific legal documents
06. Thomas wants to make money, so he starts his own business as a sole proprietor. He likes
this form of business because
a.
he will get to keep all of the profits the business makes.
b.
profit is guaranteed since he will be the only owner.
c.
it will provide a steady income for him.
d.
he has to split the profits with only one other person.
e.
he has to pay small dividends to the other owners.
07. 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
08. 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.
09. When the owner of a sole proprietorship dies, what becomes of the business?
a.
The employees take over the business.
b.
It ceases to exist unless the heirs take it over or sell it.
c.
It is automatically auctioned to the highest bidder.
d.
It ceases to exist, and no one may legally take it over.
e.
It may continue existing but only under a new name.
10. A voluntary association of two or more people acting as co-owners of a business is known
as a
11. The partner who can lose only what he or she has invested in a business is the
a.
general partner.
b.
sole proprietor.
c.
manager.
d.
employee.
e.
limited partner.
12. With respect to combined business skills and knowledge, which of the following
partnerships isbest?
a.
Joe, Louis, and Raul own a bakery. They are able bakers by trade. Each wants to
spend all of his time baking items.
a.
partnership.
b.
corporation.
c.
sole proprietorship.
d.
conglomerate.
e.
syndicate.
the business.
business course, but they are willing to learn.
and mother. Carter has worked as an auto mechanic for ten years.
about store operations. Linda is wealthy and can provide investment capital.
a.
difficult; difficult
b.
easy; difficult
c.
easy; impossible
