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Exam 5: How to Form a Business

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Question 51

True/False

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It is correct to say that if a franchisor expects a 6% royalty fee on revenue,the franchisor earns 6 cents on each dollar of revenue the franchisee generates.

A) True
B) False

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Question 52

Multiple Choice

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A distinguishing feature of a cooperative is that it:

A) Maintains a distinct separation between ownership and management.
B) Is only intended to operate for a limited period of time.
C) Is owned and operated by the people who use it.
D) Can have no more than 75 owners,all of whom must be citizens of the United States.

E) B) and D)
F) All of the above

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Question 53

True/False

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A corporation can raise financial capital by selling shares of stock to interested investors.

The income generated by S-Corporations:

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.

If a firm is advertising that it is selling franchise opportunities,the prospective franchisee can be assured that the government has performed due diligence on this company,and has deemed it a safe investment.

A closed corporation is one whose stock is held by a few people and is not available to the general public.

One of the major reasons for the wave of mergers in the late 1990s and early 2000s was the desire of firms to expand within their own markets.

Compared to sole proprietorships,partnerships offer the advantage of shared management and pooled knowledge.

Stockholders in a corporation entrust control over the company's daily operations to managers selected by the board of directors to run the company.

A quasi-public corporation is a corporation chartered by the government as an approved monopoly to perform services to the general public.

Cali owns Dog Trotters,a dog-walking business that she started to earn money after school and supplement her allowance.She planned to keep all the profits,and kept things simple,by putting a flier on the bulletin board at the local grocery store announcing that she was available to provide this service.Cali's business is a:

Eric wants to start a business.He is attracted to the idea of being his own boss,and wants to get started with a minimum of expense and hassle.He is confident in his abilities,and the market he can draw from,so he is not particularly worried about financial risks.All of these factors suggest that Eric may favor starting his business as a sole proprietorship.

A multinational corporation is a firm that operates in several countries.

A merger involving a commercial bakery and a grocery retailer would be an example of a:

A domestic corporation does business in the state in which it's chartered.

One of the major advantages for the franchisee is instant business name recognition and important management assistance from the franchisor.

When a group of investors take a firm private,they purchase all the company's outstanding stock.

A ___________ is an organization that is owned and controlled by the people who use it-producers,consumers and workers with similar needs pool their resources for mutual gain.

One reason that a firm may choose to merge or acquire another company would be diversity of products or services.