Business Structures Flashcards

Front

Role of the SEC regarding corporations

Back

Regulates and oversees the stock market

Answer explanation

The Securities and Exchange Commission (SEC) regulates and oversees the stock market to ensure fair practices, protect investors, and maintain orderly markets, making this the correct choice.

Front

Impact of corporate bankruptcy on stockholders:

Back

May lose their investment.

Answer explanation

When a corporation files for bankruptcy, stockholders may lose their investment as they are last in line to be paid after creditors. This means their shares could become worthless, leading to a total loss of their investment.

Front

Role of the board of directors in a corporation?

Back

Make major decisions for the corporation.

Answer explanation

The board of directors is responsible for making all major decisions for the corporation, including setting policies and overseeing the overall direction, rather than managing daily operations or handling customer service.

Front

Factory owner buys clothing stores to sell products. Example of:

Back

Vertical integration.

Answer explanation

This is an example of vertical integration because the factory owner is expanding their business by acquiring clothing stores to sell their own products, controlling both production and distribution.

Front

Multinationals vs. single-country corporations: regulations?

Back

More regulations.

Answer explanation

Multinationals operate across multiple countries, each with its own regulations, leading to more complex compliance requirements. Therefore, they face more regulations compared to single-country corporations.

Front

Key characteristic of a sole proprietorship?

Back

Easy to start and manage.

Answer explanation

A sole proprietorship is characterized by its simplicity in formation and management, making it easy to start and run. Unlike corporations, it does not require a board of directors, and it does not face double taxation or limited liability.

Front

Advantage of a partnership?

Back

Shared decision-making and resources.

Answer explanation

One advantage of a partnership is shared decision-making and resources, allowing partners to collaborate and leverage each other's strengths, which can lead to better business outcomes.

Front

Disadvantage of a corporation?

Back

Double taxation.

Answer explanation

Double taxation is a disadvantage of a corporation because the company's profits are taxed at the corporate level and again as dividends to shareholders, unlike other business structures that avoid this issue.

Front

Sarah runs a bakery, enjoys decision-making freedom, and keeps all profits but is liable for business debts. This describes a:

Back

Sole Proprietorship

Answer explanation

Sarah's bakery is a Sole Proprietorship because she runs it alone, makes all decisions, and retains profits, but is also personally liable for any debts, which is characteristic of this business structure.

Front

John and Lisa run a law firm, sharing workload and decisions, both liable for legal issues. This is a:

Back

Partnership

Answer explanation

This scenario describes a partnership because John and Lisa share the workload and decision-making, and both are personally liable for legal issues, which is characteristic of a partnership structure.