67) What do both sole proprietorships and partnerships lack?
A) Trust
B) Legal standing
C) Continuity
D) Shared vision
E) Adaptable processes
68) Which of the following is a partner who actively manages a firm and has unlimited liability
for its debts?
A) Limited partner
B) General partner
C) Stockholding partner
D) Public partner
E) Silent partner
69) The choice of legal ownership of a small business should be based on what?
A) Goals of the entrepreneur
B) Tax advantages
C) Stakeholders needs
D) Legal liability
E) Ease of launch
70) Which of the following is an advantage of sole proprietorships?
A) Ease in attracting a silent partner
B) Sales and expenses are treated as part of personal finances
C) It is easier to borrow money.
D) There is increased continuity
E) Bills are paid out of pocket
71) What type of partner invests all funds in the organization but plays no role in its
management?
A) Limited partnership
B) General partner
C) Silent partner
D) Active partner
E) Master limited partnership
72) Which of the following describes an investor in a business who is liable for some of its debt,
but has no active role in its operation?
A) General partners
B) Unlimited partners
C) Master partners
D) Limited partners
E) Minority partners
73) If a business owner needs money for expansion, but does not want to give up sole control
over the business, what type of partnership would be best?
A) General partnership
B) Limited partnership
C) Active partnership
D) Master limited partnership
E) Cooperatives
74) In what type of ownership is an owner liable for debt, but only based on how much they
invested?
A) Master limited partnership
B) Cooperative
C) Limited partnership
D) Corporation
E) General partnership
75) What type of partnership allows an organization to sell shares of the partnership to investors
on a public market?
A) General partnership
B) Limited partnership
C) Cooperative
D) Master limited partnership
E) Unlimited partnership
76) When a business owner forms a master limited partnership, what responsibilities does the
master partner have toward the minority partner(s)?
A) The master partner must provide detailed operating and financial reports.
B) The master partner must allow the partners to decide all major business changes and
transactions.
C) The master partner must make all liabilities clear before the partnership is formed.
D) The master partner must give up majority ownership.
E) The master partner must allow the partners to take an active role in the business.
77) The least common type of partnership is the general partnership.
78) Low start-up costs and tax benefits are advantages of sole proprietorships.
79) By law, each general partner is liable for all debts incurred in the name of the partnership.
80) Describe three disadvantages of operating a business as a sole proprietorship.
81) Discuss the advantages and disadvantages of partnerships.
82) Discuss why a business owner would form a limited partnership instead of a general
partnership.
83) Why are lenders most willing to loan to corporations?
A) Continuity and legal status are assured
B) Links with owners and founders are established
C) Professional management teams can be changed
D) Commitment to expansion is readily available
E) Brand and marketing strategies can be diversified
84) What type of corporation issues stock that is held by only a few people and not available to
the public?
A) Limited liability
B) Subchapter S
C) Public
D) Closely held
E) Professional
85) Which form of business ownership generates the MOST sales in the United States?
A) Sole proprietorship
B) General partnership
C) Cooperative
D) Corporation
E) Limited partnership
86) Which type of business is legally considered a separate entity from its owners and is liable
for its own debts?
A) Sole proprietorship
B) Corporation
C) Limited partnership
D) Cooperative
E) General partnership
87) Who are the owners of a corporation?
A) Board of directors
B) Financial officers
C) Stockholders
D) Top managers
E) Entrepreneurs
88) To raise revenue, what can a business issue and sell to those wishing to own some of the
organization?
A) Bonds
B) Profits
C) Stocks
D) Dividends
E) Loans
89) What type of company has stock that is widely held and available for sale to the general
public?
A) Private corporation
B) Public corporation
C) General partnership
D) Limited liability corporation
E) Professional corporation
90) What types of corporations are those comprised of doctors, lawyers, or accountants MOST
likely to be?
A) Private
B) Public
C) Subchapter S
D) Professional
E) Multinational
91) Which of the following occurs when two firms combine to create a new company?
A) Acquisition
B) Takeover
C) Venture
D) Divestiture
E) Merger
92) When income is taxed at the corporate level and on shareholder returns as dividends, what is
this situation known as?
A) Dual costs
B) Double taxation
C) Regulatory costs
D) Double ownership
E) Financial balancing
93) What is the biggest advantage of incorporating?
A) Limited liability
B) Increased profits
C) Tax advantage
D) Increased talent pool
E) Limited tender offers
94) What is the term for the profits that are distributed to all owners of a corporation?
A) Tender
B) Interests
C) ESOP
D) Dividends
E) Yield
95) What type of ownership is created when a firm buys another outright?
A) Merger
B) Acquisition
C) Spin-off
D) Divestiture
E) Institutional
96) Who is responsible for the day-to-day management and overall performance of an
organization?
A) Officers
B) President
C) Chief Executive Officer
D) Board of Directors
E) Vice President
97) Which of the following occurs when an organization sells part of a business or operation to
another corporation?
A) Merger
B) Acquisition
C) Divestiture
D) Buy out
E) Spin off
98) Why would an organization divest some of its existing business operations?
A) To focus more on its core business
B) To create new partnerships
C) Because the divested business is more valuable as a separate company
D) To buy another firm outright
E) To create a new company from several smaller ones
99) What is formed when a corporation establishes a trust on behalf of employees for the purpose
of buying shares of ownership?
A) Institutional ownership
B) Divestiture
C) Strategic alliance
D) Corporate governance
E) Employee stock ownership plan (ESOP)
100) In order to exert influence on corporate managers, groups can pool resources to buy huge
blocks of stock. These groups are known as
A) spin offs.
B) ESOPS.
C) joint ventures.
D) institutional investors.
E) strategic alliances.
101) Most institutional investors are large investors who purchase shares of an organization
through
A) employee stock ownership plans.
B) spin offs.
C) strategic alliances.
D) joint ventures.
E) mutual funds.
102) How can competing firms collaborate on a new business without losing control of their
existing firm?
A) Establish a joint venture
B) Buy large blocks of the competitor’s stock
C) Hire a new chief executive office
D) Sell off similar operations
E) Change the corporate governance of both firms
103) Which type of corporation spans national boundaries and is subject to regulation in multiple
countries?
A) Publicly held
B) Limited liability
C) Subchapter S
D) Professional
E) Multinational
104) Which of the following is a unique feature of a multinational corporation?
A) Owners have unlimited financial liability.
B) Owners are taxed like partners.
C) It is considered to be a partnership for tax purposes.
D) Stock is held by only a few people.
E) Stock is traded on the exchanges of several countries.
105) What is created when a corporation creates a new operation with another firm?
A) Divestiture
B) Spin-off
C) Joint venture
D) Merger
E) Acquisition
106) What should competitors establish when collaborating on a project that might have mutual
gain?
A) Stock options
B) A new Board of Directors
C) A strategic alliance
D) Institutional investors
E) A spin-off
107) What is the advantage of forming a strategic alliance with a competitor or supplier?
A) Mutual gain
B) Increased shares of stock
C) The ability to influence the price of stock
D) To legally join the two organizations
E) The ability to sell a section of the business but still retain control
108) A limited liability corporation is a hybrid of a publicly held corporation and a partnership.
109) Corporations enjoy significant tax benefits when compared to sole proprietorships or
partnerships.
110) An S corporation has stock that is widely held and available for sale to the general public.
111) The board of directors of a corporation reports to the officers of the corporation.
112) An organization’s president is usually responsible for the overall performance of the firm.
113) An employee stock ownership plan allows employees to join together and influence
corporate managers and how they run the company.
114) A joint venture occurs when partners share ownership of a new enterprise.
115) Explain limited liability in a corporation.
116) Explain a tender offer.
117) A corporation must be managed on the principles of corporate governance. Explain what
this is.
118) Explain the role of a corporation’s board of directors.
119) Discuss the advantages and disadvantages of corporations.
120) Describe the three distinct bodies of corporate governance that are specified in a
corporation’s bylaws.
121) Explain the difference between mergers and acquisitions and why they are important forms
of corporate strategy.
122) Discuss the difference among a divestiture, a merger and acquisition, and a spin-off.