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Exam 5: How to Form a Business

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Question 71

Multiple Choice

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Silver Screen Pictures, Inc. recently bought Superstar Entertainment, Inc. for an undisclosed amount of money. It now owns all of Superstar Entertainment's properties and obligations. This is an example of a(n)

A) merger.
B) combination.
C) expropriation.
D) acquisition.

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Question 72

Multiple Choice

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People who form cooperatives

A) believe the government should play a larger role in the economy.
B) dislike the notion of having owners, managers, and customers as separate individuals with separate goals.
C) see competitive behavior as the key to ensuring rapid economic growth.
D) want to find a way to supply basic necessities free of charge to everyone.

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Question 73

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One of the strengths of the sole proprietorship is its ability to sustain rapid growth by raising large amounts of financial resources.

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 limited liability company is similar to an S corporation, but without the special eligibility requirements.

Which of the following statements best summarizes the experience of American franchisors in foreign countries?

Which of the following is an advantage of the corporate form of business when compared to sole proprietorships and partnerships?

Like stockholders of a C corporation, owners of a limited liability company (LLC) are free to sell their ownership without the approval of other members.

Three types of corporate mergers are

Mini-Case Genna Raiter's passion has always been cars, cars, cars! As a teen, she would spend hours with her dad fixing the family car, and he taught her how to change the oil and make minor repairs. While still in high school, Genna got a job at a local garage. After high school graduation, she completed the auto mechanics degree at a local community college and quickly decided she wanted to be her own boss. She quit her job at her first garage, borrowed some money from her dad, and created her own repair shop, the Car Keepers Garage. Genna's hard work gradually attracted a loyal clientele of satisfied customers. Her success has her thinking about expanding and opening garages in two other locations, but she lacks the financial resources needed for development. Furthermore, the success of her business is forcing Genna to spend more time managing the business and less time doing the actual technical work she still enjoys. She wants to find business partners who can help her with management and provide additional financial resources. She has approached a couple of friends she met in high school: Al Ternator and Lou Banfilter, to see if they would like to join the business. -When Genna confided in Lou and Al that she too was concerned about adding additional risk, Lou suggested that they explore the possibility of a different type of business ownership, a(n) ________, which has very flexible ownership rules and would give them more choices in how the company's earnings are taxed while still protecting all owners from high levels of risk.

Katie and her siblings created a design company called Homeward Bound LLP. Although key business functions are centralized, each sibling is a licensed architect that designs, builds, and installs residential and commercial buildings for his/her own clients. Unfortunately, a recent design of Katie's that was ultimately created and installed for one of their clients resulted in water damage to the basement of the client's new home. The limited liability partnership

The ________ is usually the easiest form of business to start and end.

A franchise can be formed

Which of the following statements about S corporations is most accurate?

A major advantage of S corporations is that they

Many franchisors have rules that prohibit franchisees from sponsoring their own websites.

________ comprise about 20% of all businesses but account for about 81% of U.S. business receipts.

A master limited partnership (MLP) is

Which of the following statements about partnerships is most accurate?

The S corporation form of business would be particularly attractive to fast-growing companies that want to attract thousands of new stockholders.