Mgmt 1 Quiz 3 – Flashcards
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If a sole proprietorship fails, the owner may lose whatever was invested in the business; however, the owner's personal assets are not at risk.
A.True
B.False
answer
B
Sole proprietors have unlimited liability for the debts of their business. This means that if their business gets into financial trouble they can lose their personal assets.
question
In a limited partnership, the general partners should encourage the limited partners to take a more active role in the operations of the business. After all, the limited partner has comparable liability in the business, even though he/she may not be a partner for as long a period of time as the general partners.
A.True
B.False
answer
B
By definition, a limited partnership will consist of one or more general partners and one or more limited partners. The limited partners are passive investors. By law, they do not take an active role in the management of the business, yet they may share in the profits of the business and remain a partner for as long as the partnership exists.
question
Ted and Mark are partners in a dry cleaning business. They would like their brother Todd to join them. Unfortunately, partnership law states that only two partners can participate in a partnership.
A.True
B.False
answer
B
A partnership consists of two or more owners. Unless explicitly written in the original partnership agreement, the partnership can add partners.
question
In order to establish a C corporation, it is a requirement that investors run the company, whereas in an S corporation, this is not the case.
A.True
B.False
answer
B
In a C corporation, the investors elect the Board of Directors. The Board of Directors appoints the officers and management team. It is not a requirement that investors run the company. S corporations also have stockholders, directors, and employees, but S corporations are taxed differently from C corporations.
question
A merger is a mutual agreement where a firm joins together with another firm, whereas an acquisition is when one firm purchases the assets and obligations of another firm.
A.True
B.False
answer
A
When companies merge, there is a mutual agreement to join forces. Although the assets and obligations are combined, there is no offering of funds or stock by one company, for the other, as in an acquisition.
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Taking a firm private means turning a profit-seeking corporation into a nonprofit corporation in order to avoid a hostile takeover.
A.True
B.False
answer
B
Taking a firm private involves an effort by a group of stockholders or managers to gain control of all of a corporation's outstanding stock.
question
Joshua wants to run his own business. A friend suggested that an inexpensive way to get started is to buy a franchise, where he will have the freedom to run it exactly as he sees fit. As a recent student of business, you concur with this advice.
A.True
B.False
answer
B
The start-up costs of franchising can be quite high, so becoming a franchisee is not necessarily an inexpensive way to start a business. Moreover, although they have some authority to run their franchise, franchisees generally follow a set of rules and procedures and meet certain standards established by the franchisor. This would limit Joshua's freedom to run his business the way he wants.
question
Any debts or damages incurred by a firm organized as a sole proprietorship are:
A.the responsibility of the owner.
B.limited to the amount the owner has invested in the firm.
C.paid for out of a reserve contingency fund that sole proprietors are required by law to set up.
D.normally covered by liability insurance.
answer
A
A sole proprietor accepts unlimited liability. This means that he/she is responsible for all debts of the business. If the firm should land in bankruptcy court, the judge could liquidate the owner's personal assets to pay the debts of the business.
question
Javier is the sole proprietor of a golf shop. Because he is a sole proprietor, any profit Javier's business earns is:
A.totally tax-free.
B.taxed only as Javier's personal income.
C.taxed twice, once as business income, then again as Javier's personal income.
D.taxed only if and when it is distributed to investors.
answer
B
A tax advantage of sole proprietorships is that their earnings are only taxed once, as personal income to the owner.
question
Zach and Mac own an auto repair business that they operate as co-owners. Both take an active role in the management of the business, and each accepts unlimited liability. Zach and Mac operate as a ________.
A.joint venture
B.general partnership
C.limited partnership
D.cooperative
answer
B
Since Zach and Mac operate the business as co-owners, they have formed a general partnership. Since both will manage the firm and accept unlimited liability, they are both general partners.
question
Travis has agreed to invest $16,000 in a partnership with his sister and brother-in-law. He does not intend to actively work in the partnership, nor does he wish to risk any of his own assets other than the $16,000 he initially invests. The partnership has agreed to permit him to share in the profits. As an expert on forms of business ownership, you know that Travis is a ______________ in this partnership.
A.general partner
B.preferred stockholder
C.secondary partner
D.limited partner
answer
D
A limited partner invests in a partnership, but has limited liability and does not take an active role in managing the business.
question
The organizational structure of a corporation permits:
A.the company management to elect the Board of Directors.
B.stockholders to elect the Board of Directors.
C.stockholders to elect the officers and management team.
D.employees (by committee) to elect the officers of the company.
answer
B
Stockholders elect the Board of Directors. The Board of Directors selects the officers and top management of the firm. Officers hire managers that supervise employees.
question
Maria recently purchased 100 shares of stock in Idle Time Gaming, Inc. Maria is a(n) ______________ of this company.
A.owner
B.manager
C.creditor
D.partner
answer
A
Stock represents shares of ownership in a corporation.
question
When two firms which do not participate in the same industries, for example, a software company and a fast food restaurant company, decide to merge, the result is called a ____________ merger.
A.vertical
B.horizontal
C.linear
D.conglomerate
answer
D
A conglomerate merger involves two firms from different industries.
question
The strategy of investors who are attempting a leveraged buyout is to:
A.shape up the company for quick resale.
B.use debt to finance the buyout of the firm's stockholders and gain control of the firm themselves.
C.secure ownership of all of the existing stock in a company by issuing and selling large amounts of new stock.
D.use investment tax credits from the government to acquire all of the physical assets owned by the firm
answer
B
In a leveraged buyout, the objective of the investors is to use debt financing to gain control of the firm's stock for themselves.
question
Independence, challenge, and opportunity are among the key reasons given by those who assume the risks of entrepreneurship.
A.True
B.False
answer
A.
Many factors encourage people to accept the risks associated with entrepreneurship, including the opportunities, independence, and challenges associated with starting and operating a business. Clearly the potential of profits is also a great motivator for entrepreneurs.
question
Jacques has eliminated the risk of entrepreneurship by preparing a detailed business plan.
A.True
B.False
answer
B
Entrepreneurs must be able to take calculated risk because there are no guarantees of success. Successful entrepreneurs must be willing to accept uncertainty. However, they should take only calculated risks if they can help it.
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An effective business plan analyzes the competition and identifies the resources required to profitably serve a target market.
A.True
B.False
answer
A
An effective business plan must consider all the aspects of operating a new business in detail.
question
When writing a business plan, prospective entrepreneurs should remember to omit details regarding their experience and education since investors are only interested in the proposed business.
A.True
B.False
answer
B
A business plan should include information about the resources and qualifications of the owner.
question
As opposed to venture capitalists, angel investors prefer to target their investments in new firms requiring large sums of money.
A.True
B.False
answer
B
Venture capitalists often invest in businesses in need of large sums of money. Angel investors are private individuals investing their own money. The amount of money invested by angel investors tends to be less than amounts invested by venture capital firms.
question
If you plan to meet face-to-face with a banker or venture capitalist, it is not necessary to submit a business plan.
A.True
B.False
answer
B
A business plan is mandatory when talking to bankers and investors.
question
Successful entrepreneurs are self-nurturing. This means they:
A.look to others for strength and encouragement.
B.self-finance their business with no assistance from others.
C.perform all business operations by themselves.
D.believe in themselves and their ideas.
answer
D
Self-nurturing individuals have the ability to believe in an idea when no one else does, and to replenish their enthusiasm.
question
Which of the following statements is characteristic of entrepreneurs?
A.They like certainty.
B.They have the ability to visualize a clear path.
C.They look at problems and see opportunities.
D.They prefer to be inventive rather than worry about whether the invention solves a customer need.
answer
C
A common characteristic of entrepreneurs is that they like to solve problems. They view a problem or a need as an opportunity.
question
Successful entrepreneurial teams:
A.quickly organize themselves like large corporations.
B.assign only one person to new product innovation.
C.bring a variety of talent to the business venture.
D.outsource most of the details of innovation.
answer
C
As its name implies, members of an entrepreneurial team operate as a team. Everyone works together to conceive, develop, and market the product. Team members can combine their talents and creative skills, and bring a variety of expertise to the team
question
Which of the following best describes the difference between an intrapreneur and an entrepreneur?
A.Intrapreneurs start nonprofit organizations while entrepreneurs start profit-seeking businesses.
B.Intraprenuers are practical while entrepreneurs are creative.
C.Intrapreneurs work within existing corporations while entrepreneurs assume the risks of starting their own business.
D.Intrapreneurs limit their efforts to financial investments, while entrepreneurs are involved in the management of all areas of a business.
answer
C
Intrapreneurs are creative people who work within a corporation to develop new products and generate new profits for the firm. Entrepreneurs start their own businesses, without any financial tie to a larger company.
question
Enterprise zones are:
A.government-owned properties that are available for entrepreneurial ventures at a reduced cost.
B.similar to incubator facilities but strictly run by city and state governments.
C.blighted areas that contain toxic materials making them unsuitable for business operations.
D.specific locations across the U.S. where entrepreneurs can set up shop and receive tax breaks for operating in these areas.
answer
D
Enterprise zones are geographic areas where the government would like to encourage business development. City and state governments will provide business owners tax concessions for developing businesses in these area.
question
State and city governments have promoted facilities where new businesses can open up shop and share common services such as secretarial, accounting, and legal services. Due to their remarkable success rate, _______________ continue to grow in popularity.
A.enterprise zones
B.incubators
C.intrapreneurial development centers
D.venture farms
answer
B
Incubator facilities offer new businesses low-cost office space with shared receptionist/secretarial, legal, and accounting services.
question
Kyra recently quit a job with a large corporation to start her own business. While she realizes that her decision comes with risk, she is excited at the chance to be independent and by the challenges of running her own firm. Kyra is an example of a(n):
A.intrapreneur.
B.entrepreneur.
C.venture capitalist.
D.raconteur.
answer
B
An entrepreneur is someone who accepts the risks of starting and running a business.
question
Keaton is an intrapreneur for a multinational electronics company. As an intrapreneur Keaton:
A.is expected to recruit new managerial talent for his firm.
B.will use the firm's existing resources to develop new products.
C.is concerned mainly with improving the firm's public image.
D.will concentrate on creating new ventures that can be spun off to become independent firms.
answer
B
An intrapreneur uses a firm's existing financial, human, and physical resources to create new products and generate new profits.
question
Entrepreneurs applying for a bank loan should realize that bankers will:
A.expect to receive a share of ownership in the business in exchange for their loan.
B.expect the entrepreneur to provide a business plan.
C.generally make loans only to small businesses in dot-com related industries.
D.offer only short-term financing
answer
B
A well-prepared business plan is mandatory when seeking financial assistance from a bank or other investors.
