Revision Chapter 05&07

Sole proprietorship is a legal entity.

• True

• False

What does unlimited liability mean for a sole proprietor?

• The owner is only responsible for debts equal to their investment

• Business is insured by the government

• The owner is personally responsible for all business debts

• Liability is shared with employees

Mac and Charlie own a car repair shop that they operate as co-owners. Both take an active role in the management of the business, and each accepts unlimited liability. Mac and Charlie operate as a

• joint venture

• general partnership

• limited partnership

• cooperative

Minh and Nguyen open a firm as limited partnership, Minh is general partner and Nguyen is limited partner. Later, the business fails and can’t pay the debts. Which of the following statements is correct?

• Minh and Nguyen will be equally responsible for the debts

• Nguyen will only lose beyond his investment

• Banks are legally allowed to pursue the personal assets of all partners

• Minh and Nguyen will only lose beyond their investment

Which statement best reflects the disadvantage of a partnership?

• The business is taxed separately from the partners

• Partners may disagree, affecting business decisions

• It is difficult to raise capital from multiple sources

• Skills and knowledge are always limited

_______ is a state-chartered legal entity with authority to act and have liability separate from its owners (its stockholders).

• Limited liability companies

• C corporation

• S corporation

• Nonprofit corporation

Which of the following is an advantage that helps corporations grow larger than other business forms?

• Limited ability to attract investors

• Difficulty changing ownership

• Ability to raise more money through stock sales

• Personal control by each shareholder

How do owners (shareholders) influence the management of a corporation?

• By directly hiring all employees

• By setting prices and daily operations

• By electing a board of directors who oversee top management

• By managing the human resource department

What is the main difference between a merger and an acquisition?

• A merger is forced, while an acquisition is voluntary

• A merger forms a new single entity, while an acquisition involves one company taking over another

• An acquisition always involves two big companies while a merger does not

• A merger involves only the purchase of equipment while an acquisition involves purchase of equipment and services

_______ merger is the term to describe joining of a soft drink company and an artificial sweetener company.

• Horizontal

• Vertical

• Conglomerate

• Cross-functional