Chapter 2 Assessment

Which of the following is NOT an advantage of a corporation?

• Limited liability

• Capable of raising funds

• Corporate bylaws

• Continued life

Which of the following is NOT an advantage of a sole proprietorship?

• Limited capacity

• Full authority of business

• Owner retains all benefits

• Inexpensive to form

Which of the following is NOT a disadvantage of a partnership?

• Unlimited liability

• Limited liability

• Limited life

• Possibility of disagreements

Corporate bylaws are written for:

• For-profit businesses

• Partnerships

• Proprietorships

• Corporations

Which of the following does not impact the way a business is organized?

• Size

• Location

• Goals

• Budget

Define the following key term from this chapter: Stock.

• A share in ownership and a claim to a portion of a corporation’s profits.

• A type of bond issued by a corporation.

• A financial instrument representing a loan made by an investor to a borrower.

• A certificate of deposit issued by a bank.

Define the following key term from this chapter: Dividend.

• A portion of a corporation’s income received by stockholders.

• A type of bond issued by a corporation.

• The interest rate charged by banks on loans.

• A government tax on corporate profits.

Organizational design for a business is important because it:

• Improves communication and efficiency

• Increases the number of employees

• Reduces the need for management

• Eliminates the need for a business plan

What is the difference between a for-profit and not-for-profit business?

• A for-profit business aims to make money for its owners, while a not-for-profit business aims to serve a public or community purpose.

• A for-profit business is always larger than a not-for-profit business.

• A not-for-profit business does not have any employees.

• A for-profit business does not pay taxes.

What are the advantages of a sole proprietorship?

• Easy to establish and manage

• Limited liability

• Double taxation

• Complex regulations