Chapter 5 Study Guide

Corporations raise money by issuing

• real estate
• commodities
• stocks or bonds
• debts or loans

Why would someone be willing to share the economic right to business ownership by forming a general partnership

• To limit the liability of each partner
• To pool resources, share risks, benefit from complementary skills and expertise, and potentially grow the business faster.
• To reduce competition in the market
• To increase personal control over business decisions

What happens to the stockholder when a corporation files for bankruptcy

• Stockholders are guaranteed a fixed return on their investment
• Stockholders may lose their entire investment in the company.
• Stockholders receive double the value of their investment
• Stockholders become the new owners of the corporation

What does the board of directors in a corporation do

• The board of directors in a corporation is responsible for marketing strategies
• The board of directors in a corporation handles day-to-day operations
• The board of directors in a corporation makes major decisions, sets company policies, and oversees the overall direction of the organization.
• The board of directors in a corporation focuses on employee training

What risk do limited partners face that general partners do not

• Limited partners face the risk of having decision-making power
• Limited partners face the risk of losing only the amount they have invested.
• Limited partners face the risk of being personally liable for all debts
• Limited partners face the risk of unlimited liability

What disadvantage do partners and franchises share

• Limited control over certain aspects of the business operations
• High initial investment costs
• Guaranteed success and profitability
• Unlimited control over all aspects of the business operations

What is the major advantage of a limited liability corporation

• Unlimited personal liability
• Tax advantages
• Ease of formation
• Limited personal liability

How might the inability to provide fringe benefits affect a sole proprietor's ability to run a business

• It can improve employee satisfaction and loyalty.
• It can hinder employee recruitment and retention.
• It can lead to increased productivity and efficiency.
• It can result in better work-life balance for employees.

What is a consumer cooperative and how Is it beneficial to its members

• A consumer cooperative is a for-profit organization focused on maximizing shareholder returns
• A consumer cooperative is a charity organization that provides free products to its members
• A consumer cooperative is a government-owned entity that restricts access to its services
• A consumer cooperative is owned and operated by its members who are also its customers, providing access to quality products or services at lower prices, a sense of community and ownership, and a say in decision-making.

Define Vertical merger

• Merger between companies operating in the same region
• Merger between companies operating in different industries
• Merger between companies operating at different stages of the production process for a specific product or service.
• Merger between companies operating in the same industry