Quiz Chapter 4

Flashcard maker : Lily Taylor
S Corporations are more flexible than traditional “C corporations.”
True
Which of the following is not a source of funds for a sole proprietorship?
Personal funds
*Selling stock or issuing bonds
Small Business Administration
Bank loans
Family members
A merger occurs when one company buys another by buying its stock.
False
Corporations distribute profits to their owners in the form of
*dividends.
retained earnings.
bribes.
tax-free dividends.
interest.
A limited partnership always has at least one general partner, who assumes unlimited liability.
True
Taking a company public means announcing its creation to the public.
False
While corporations account for the majority of businesses in the United States, they represent a small minority of profits.
False
In the US, men are twice as likely as women to start their own business.
True
About three-quarters of all businesses in the United States are sole proprietorships, and they earn somewhere around 10 percent of total business income. We may conclude that
*there are many sole proprietorships, but their average income is small.
the average sole proprietorship is large, but earns little income.
the average corporation hires many people, but makes little income.
the average corporation is small, but earns little income.
there are few sole proprietorships, and their average income is small.
Which of the following is an advantage of a partnership?
Life of partnership
Unlimited liability
Selling a partnership
Limited funding sources
*Ease of organization
Which of the following is a disadvantage of a
partnership?
Relatively fast decision making
Limited government regulation
*Difficulty of selling ownership
Specialization of partners
Ease of organizing business
Big City Financial is attempting to avoid a hostile takeover by a corporate raider by allowing stockholders to buy more shares of stock at prices lower than current market value. Which of the following methods is being used to avoid the takeover?
A white knight
A tender offer
*A poison pill
A leveraged buyout
Shark repellant
All of the following are advantages of a corporation except
limited liability.
*lower frequency of taxation.
external funding sources.
ease of transfer of ownership.
perpetual life of organization.
A sole proprietorship is a popular form of business because
it is hard to dissolve.
it is taxed more than other forms.
it is heavily regulated by the government.
the proprietor does not have direct control.
*it is easy to form.
When firms that make and sell similar products to the same customers merge, it is known as a
vertical merger.
*horizontal merger.
poison pill.
hostile takeover.
acquisition.
A corporation doing business outside the state in which it is chartered is known as a(n)
*foreign corporation.
private corporation.
multi-state corporation.
alien corporation.
domestic corporation.
Which characteristic of a sole proprietorship can be considered both an advantage and a disadvantage?
*Taxation
Continuity
Fund sources
Liability
Secrecy
Selling interest in a partnership may be difficult because
*it is difficult to place a value on a share of a partnership.
of regulatory controls.
partnerships can’t issue bonds.
partnerships are subject to unlimited liability.
of double taxation.
When a firm is facing a hostile takeover attempt, it may issue a poison pill, which is
when the executive suite quits en masse before a takeover.
a term for plummeting stock values.
*when the firm allows stockholders to buy up shares of stock at lower than market value.
when it fires its board of directors for incompetence.
merely a harshly worded letter to the company attempting to take it over expressing dismay at the maneuver.
Preferred stockholders receive dividends before common stockholders and have principle voting rights as well.
False

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