Appendix H for Unit Eight
Questions on the Features
N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.
N A question new to this edition of the Test Bank.
+ A question modified from the previous edition of the Test Bank.
= A question included in the previous edition of the Test Bank.
CHAPTER 36—INSIGHT INTO ETHICS:
INFORMATION ON POTENTIAL EARNINGS PROVIDED BY FRANCHISORS
B1. Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under
the Jumbo Juice trade name as a member of a select group of dealers that engage in
retail juice sales. To potential investors, the franchisor must provide
a. actual earnings figures.
b. hypothetical earnings figures.
c. projected earnings figures.
d. none of the choices.
542 TEST BANK B—UNIT EIGHT: BUSINESS ORGANIZATIONS
CHAPTER 38—INSIGHT INTO ETHICS:
FIDUCIARY DUTIES OF LLC MANAGERS
B2. Simone is a manager of Rolling Hills Resort LLC, a limited liability company. Rolling
Hills is formed in a state that does not explicitly create fiduciary duties for LLC
managers but does require the exercise of good business judgment. Unless a court
rules otherwise, Simone owes fiduciary duties to
a. Rolling Hills’s members.
b. Rolling Hills’s suppliers.
c. Rolling Hills’s customers.
d. none of the choices.
CHAPTER 39—SHIFTING LEGAL PRIORITIES FOR BUSINESS:
THE LATEST RECESSION RE-IGNITES THE INTERNET TAXATION DEBATE
B3. Beyond Gamez, Inc., a video game retailer based in California, does business in all fifty
states exclusively online. According to New York state tax law, an out–of-state online
retailer must collect and remit state taxes to New York if the retailer
a. plans to establish a substantial physical presence in New York.
b. targets a potential marketing base in New York.
c. maintains a Web site accessible in New York.
d. pays a party within New York to solicit business for its products.
APPENDIX H FOR UNIT EIGHT 543
CHAPTER 40—INSIGHT INTO ETHICS:
IS THE BUSINESS JUDGMENT RULE OVERLY PROTECTIVE?
B4. Far Afield Inc. announces its intent to acquire Eversmall Company. Despite this
announcement, Eversmall’s directors do not prepare for a buyout—they do not
determine a price or seek out other buyers, and negotiate with Far Afield for only a
short time. Former Eversmall shareholders allege that the directors breached their
fiduciary duties. The directors’ best defense is
a. the right to indemnification
b. the business judgment rule.
c. the shareholders’ preemptive rights.
d. the limited liability of the corporation.
CHAPTER 42—SHIFTING LEGAL PRIORITIES FOR BUSINESS:
SEC DISCLOSURES AND CLIMATE CHANGE
B5. Ray-On Corporation makes inexpensive, highly efficient, solar energy cells. A
anticipates a change in the demand for its products as a consequence of climate
change. According to the Securities and Exchange Commission, Ray-On should
a. disclose this information.
b. keep this information confidential.
c. reveal this information to insiders only if asked.
d. release this information to current shareholders only.
544 TEST BANK B—UNIT EIGHT: BUSINESS ORGANIZATIONS
UNIT EIGHT—FOCUS ON ETHICS:
BUSINESS ORGANIZATIONS
B6. Ilya is an officer with Jetspeed, Inc. Ilya is in a position to acquire assets that would
benefit Jetspeed if acquired in its name. Ilya’s usurping this opportunity may violate
the duty of
a. acting in one’s own interest.
b. agency.
c. care.
d. loyalty.
B7. Rea, an officer with Sel-Mart Company, misappropriates the firm’s property through
fraud. Later, Rea and Sel-Mart agree to a mutual release of claims. Still later, Sel-Mart
discovers Rea’s fraud and files a suit to recover the misappropriated property. Most
likely, the court will rule that Rea
a. breached her duty of loyalty by failing to disclose her misconduct.
b. is not liable due to Rea’s duty to act in her own self-interest.
c. is not liable due to Sel-Mart’s failure to timely discover the fraud.
d. is not liable due to the mutual release of claims.