Econ Module 3 Review

What does liability refer to in a business setting?

• A company’s ability to earn revenue

• The responsibility to repay debts

• Ownership of company shares

• The ability to hire employees

If a business owner has unlimited liability, what does this mean?

• They are only responsible for a portion of the business’s debt

• They have no personal responsibility for business debt

• They are fully responsible for all business debts, even using personal assets

• They are responsible only for debts up to the value of the business

What is a key benefit of forming a Limited Liability Company (LLC)?

• It guarantees high profits

• The owners are protected from personal liability for business debts

• Owners are required to pay fewer taxes

• It simplifies the process of raising capital

In a general partnership, who is responsible for the company’s liabilities?

• Only the managing partner

• The government

• All partners share equal responsibility

• Only the partner who invested the most

What is a bond in financial terms?

• A form of stock ownership

• A loan that an investor makes to a company or government

• An agreement between two businesses

• A company’s commitment to pay dividends

How do Certificates of Deposit (CDs) function?

• They are high-risk investments with high returns

• They are savings accounts with a fixed interest rate over a set period

• They are shares of stock in a corporation

• They are government bonds that fluctuate in value

Dividends are payments made to:

• Employees based on performance

• Bondholders as part of a loan agreement

• Stockholders as a portion of a company’s earnings

• Banks for holding company assets

A key difference between a non-profit organization and a for-profit business is that a non-profit:

• Aims to provide social benefits rather than make a profit

• Distributes profits to shareholders

• Has fewer legal obligations

• Pays lower wages to employees

Which of the following would be considered a business asset?

• A company’s outstanding loans

• The building and equipment owned by the company

• Taxes owed to the government

• The company’s utility bills

What is one major advantage of a sole proprietorship?

• The owner has limited liability

• The owner makes all decisions and keeps all profits

• It is easy to raise large amounts of capital

• It requires less time to start than a partnership