Ch.5 – Complete Test Bank – Forms Of Business Ownership And - Contemporary Business 18e | Test Bank by Louis E. Boone by Louis E. Boone. DOCX document preview.
Package Title: Chapter 5, Testbank
Course Title: Boone, 18e
Chapter Number: 5
Question type: Multiple Choice
1) A(n) _____ joins firms in the same industry that wish to diversify, increase their customer base, cut costs, or offer expanded product lines.
b) corporation
c) merger
d) acquisition
e) horizontal merger
f) conglomerate merger
g) Cooperative
h) vertical merger
i) business incubators
j) business plan
k) alien corporation
l) preferred stock
m) Franchising
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
2) A(n) _____ occurs when one firm purchases the property and assumes the obligations of another firm.
a) small business
b) corporation
c) merger
d) acquisition
e) horizontal merger
f) conglomerate merger
g) Cooperative
h) vertical merger
i) business incubators
j) business plan
k) alien corporation
l) preferred stock
m) Franchising
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
3) A(n) _____ combines firms operating at different levels in the production and marketing process.
a) small business
b) corporation
c) merger
d) acquisition
e) horizontal merger
f) conglomerate merger
g) Cooperative
h) vertical merger
i) business incubators
j) business plan
k) alien corporation
l) preferred stock
m) Franchising
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
4) A(n) _____ is a type of business ownership formed in one country but that operates in another country.
a) small business
b) corporation
c) merger
d) acquisition
e) horizontal merger
f) conglomerate merger
g) Cooperative
h) vertical merger
i) business incubators
j) business plan
k) alien corporation
l) preferred stock
m) Franchising
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
5) During a(n) _____, two or more firms combine to form one company.
a) small business
b) corporation
c) merger
d) acquisition
e) horizontal merger
f) conglomerate merger
g) Cooperative
h) vertical merger
i) business incubators
j) business plan
k) alien corporation
l) preferred stock
m) Franchising
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
6) The form of business ownership that establishes the firm as a separate legal entity is the _____.
a) small business
b) corporation
c) merger
d) acquisition
e) horizontal merger
f) conglomerate merger
g) Cooperative
h) vertical merger
i) business incubators
j) business plan
k) alien corporation
l) preferred stock
m) Franchising
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
7) _____ is a contractual agreement that specifies the methods by which a dealer can produce and market a supplier’s good or service.
a) small business
b) corporation
c) merger
d) acquisition
e) horizontal merger
f) conglomerate merger
g) Cooperative
h) vertical merger
i) business incubators
j) business plan
k) alien corporation
l) preferred stock
m) Franchising
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
8) A(n) _____ is independently owned and operated and is responsible for more than half of the nation’s gross domestic product.
a) small business
b) corporation
c) merger
d) acquisition
e) horizontal merger
f) conglomerate merger
g) Cooperative
h) vertical merger
i) business incubators
j) business plan
k) alien corporation
l) preferred stock
m) Franchising
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
9) A(n) _____ business consists of owners who join forces to collectively operate all or part of the functions in their industry.
a) small business
b) corporation
c) merger
d) acquisition
e) horizontal merger
f) conglomerate merger
g) Cooperative
h) vertical merger
i) business incubators
j) business plan
k) alien corporation
l) preferred stock
m) Franchising
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.8
Section Reference 1: Describe public and collective ownership of business.
Standard 1: AACSB || Analytic
10) A merger of firms in unrelated industries is called a(n) _____.
a) small business
b) corporation
c) merger
d) acquisition
e) horizontal merger
f) conglomerate merger
g) Cooperative
h) vertical merger
i) business incubators
j) business plan
k) alien corporation
l) preferred stock
m) Franchising
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
11) Small start-up ventures looking for low-cost shared facilities can utilize _____, offered by local community agencies.
a) small business
b) corporation
c) merger
d) acquisition
e) horizontal merger
f) conglomerate merger
g) Cooperative
h) vertical merger
i) business incubators
j) business plan
k) alien corporation
l) preferred stock
m) Franchising
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
12) Owners of _____ have limited voting rights, but are entitled to the earliest dividends.
a) small business
b) corporation
c) merger
d) acquisition
e) horizontal merger
f) conglomerate merger
g) Cooperative
h) vertical merger
i) business incubators
j) business plan
k) alien corporation
l) preferred stock
m) Franchising
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
13) Having a(n) _____ improves the chances of success for a new business by providing an orderly statement of a company’s goals.
a) small business
b) corporation
c) merger
d) acquisition
e) horizontal merger
f) conglomerate merger
g) Cooperative
h) vertical merger
i) business incubators
j) business plan
k) alien corporation
l) preferred stock
m) Franchising
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.4
Section Reference 1: Describe the features of a successful business plan.
Standard 1: AACSB || Analytic
Question type: Essay
14) List the advantages of home-based businesses.
Solution: People who operate home-based firms often do so because this type of work allows them more control over their business as well as their personal time. Access to the Internet and availability of mobile computing devices and technology make it convenient to run a home-based business. Reduced overhead costs such as leasing office or warehouse space are another major attraction of home-based businesses.
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
15) Why are small businesses especially important to women and minorities?
Solution: Women, like men, have a variety of reasons for starting their own companies. Many women feel they can achieve more as small-business owners and can balance family and work more easily if they own their own fi rms. Minority business owners can receive special assistance from programs such as the SBA’s Mentor-Protégé program.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Diversity
16) Explain how small businesses help create new jobs.
Solution: Small businesses make tremendous contributions to the U.S. economy and to society as a whole. One impressive contribution is the number of new jobs created each year by small businesses. While it varies from year to year, on average two of every three new jobs are created by companies with fewer than 500 employees. A significant share of these jobs is created by the smallest companies, those with four or fewer employees. Several provisions of the recent Small Business Jobs Act may help give a further boost to these job numbers by raising the dollar amount of small business loans available to companies.
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.2
Section Reference 1: Determine the contributions of small businesses to the economy.
Standard 1: AACSB || Analytic
17) Discuss the reasons for the failure of small businesses.
Solution: One of the most common causes of small-business failure is mismanagement. These may include overconfidence, lack of people skills, inadequate knowledge of finance, inability to track inventory or sales, poor assessment of the competition or customer, or simply poor time management or the lack of time to do everything required. While large firms often have the resources to recruit specialists in areas such as marketing and finance, the owner of a small business often winds up doing too many things at once.
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.3
Section Reference 1: Discuss why small businesses fail.
Standard 1: AACSB || Analytic
18) What are the elements contained in a business plan?
Solution: A typical business plan contains the following elements: (1) an executive summary answering the who, what, why, where, when, and how questions for the business in brief; (2) an introduction stating the concept, purpose, and objectives of the proposed business, along with an overview of the industry; (3) separate financial and marketing sections that describe the firm’s target market and marketing plan as well as detailed financial forecasts of the need for funds; and (4) resumes of the principals.
Difficulty: Hard
Bloomcode: Knowledge
Learning Objective 1: 5.4
Section Reference 1: Describe the features of a successful business plan.
Standard 1: AACSB || Analytic
19) Describe ways in which the Small Business Administration (SBA) provide financial assistance. What are the sources of microloans?
Solution: Contrary to popular belief, the Small Business Administration (SBA) seldom provides direct business loans. Nor does it provide outright grants to start or expand small businesses. Instead, the SBA guarantees small-business loans made by private lenders, including banks and other institutions. The SBA also guarantees microloans of up to $50,000 to start-ups and other very small firms. The average loan is $13,000, with a maximum repayment term of six years. Microloans may be used to buy equipment or operate a business but not to buy real estate or pay off other loans. These loans are available from nonprofit organizations located in most states. Other sources of microloans include the federal Economic Development Administration, some state governments, and certain private lenders, such as credit unions and community development groups. The most frequent suppliers of credit to small firms are banks. Small-business loans are also available through SBA-licensed organizations called Small Business Investment Companies (SBICs), which are run by experienced venture capitalists. SBICs use their own capital, supplemented with government loans, to invest in small businesses. Like banks, SBICs are profit-making enterprises, but they are likely to be more flexible than banks in their lending decisions. Large companies that used SBIC financing when they were small start-ups include Apple, Federal Express, and Staples.
Difficulty: Hard
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
20) Explain how Turning Technologies was formed and how it has benefited the society.
Solution: Turning Technologies, founded in Youngstown, Ohio, has enjoyed substantial growth and brought dozens of new jobs to a city whose decline in manufacturing and steel can still be felt. The firm delivers audience-response systems (“clickers”) to K–12 schools, universities, and businesses worldwide. Audience-response systems are the wireless keypads that spectators use on TV game shows to register their opinions or answers to questions. Teachers from kindergarten through college also use Turning’s audience-response technology. Instructors can ask questions in class using other programs; have students key in answers—anonymously or not—using their remotes; and instantly collate the responses to credit attendance, measure understanding, and increase participation in the classroom. Government agencies and nonprofit organizations also use the systems for their training programs.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
21) Describe the specialized services offered by the Small Business Administration (SBA).
Solution: Today, many government procurement programs set aside portions of government spending for small companies; an additional Small Business Administration (SBA) role is to help small firms secure these contracts. Every federal agency with buying authority must maintain an Office of Small and Disadvantaged Business Utilization to ensure that small businesses receive a reasonable portion of government procurement contracts. To help connect small businesses with government agencies, the SBA’s website offers Central Contractor Registration, which includes a search engine for finding business opportunities as well as a chance for small businesses to provide information about themselves. Set-aside programs are also common in the private sector, particularly among major corporations. In addition to help with financing and government procurement, the SBA delivers a variety of other services to small businesses. It provides information and advice through toll-free telephone numbers and its website, http://www.sba.gov. Through its SBA Learning Center, the SBA offers free online courses; sponsors inexpensive training courses on topics such as taxes, networking, and start-ups in cities and towns throughout the nation; and provides a free online library of more than 200 SBA publications and additional business resources. Business owners can find local resources by logging on to the SBA website and searching for SBA partners in their region. Local resource partners include small-business development centers, women’s business centers, U.S. export assistance centers, and veteran’s business outreach centers.
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
22) Describe the complexity of franchise agreements.
Solution: Franchise agreements can be complex. They involve an initial purchase fee plus agreed-on start-up costs. Because the franchisee is representing the franchisor’s brand, the franchisor usually stipulates the purchase of certain ingredients or equipment, pricing, and marketing efforts. The total start-up cost for a Great Clips hair salon franchise may be as low as $125,000. In contrast, McDonald’s is one of the more expensive franchises—total start-up costs can run more than $1 million. For this reason, businesspeople interested in purchasing a more expensive franchise often do so in groups.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
23) Compare and contrast the three forms of business ownership.
Solution: The three forms of business ownership are sole proprietorships, partnerships, and corporations. Sole proprietorships are the most common form of business ownership, accounting for more than 86% of all firms in the United States. A sole proprietorship offers the advantage of being able to make changes and decisions quickly. The major disadvantage is that the sole proprietor is totally responsible for all debts. A partnership spreads out the responsibilities and allows the business to grow. However, like the sole proprietor, each partner is totally financially responsible for his or her actions, as well as those of the partners. A corporation limits liability and offers expanded financial capacity, but deals with double taxation.
Difficulty: Hard
Bloomcode: Comprehension
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
24) What are the steps required when incorporating a business? Regarding incorporation, what might make a state “business-friendly”?
Solution: Creating a corporation involves the following steps: (1) deciding where to incorporate; (2) drawing up a corporate charter; and (3) preparing a set of bylaws. All states have laws regarding what elements the corporate charter and bylaws must contain. “Business-friendly” states provide a favorable legal climate and speed and simplicity of the incorporation process.
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
25) List and describe the categories of corporations.
Solution: Corporations fall into three categories: domestic, foreign, and alien. A firm is considered a domestic corporation in the state where it is incorporated. When a company does business in states other than the one where it has filed incorporation papers, it is registered as a foreign corporation in each of those states. A firm incorporated in one nation that operates in another is known as an alien corporation where it operates. Many firms—particularly large corporations with operations scattered around the world—may operate under all three of these designations.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
26) Compare mergers and acquisitions.
Solution: The terms merger and acquisition are often used interchangeably, but their meanings are different. In a merger, two or more firms combine to form one company. In an acquisition, one firm purchases the other. This means that not only does the buyer acquire the firm’s property and assets, it also takes on any debt obligations. Acquisitions also occur when one firm buys a division or subsidiary from another firm.
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
27) Identify and describe two alternatives to private ownership and give an example of each.
Solution: Public ownership and cooperatives are alternatives to private ownership. Public ownership refers to organizations owned by municipal, state, or federal governments. Examples include a local government owning a parking structure and the federal government owning and operating Amtrak. Cooperatives are organizations whose owners collectively operate all or part of the industry. Cooperatives may be organized by producers or consumers. Cabot Creamery is a cooperative of 1,200 small dairy farms spread throughout New England and upstate New York. Cabot is owned and operated by its members—farmers and their families. In addition, Cabot works with other cooperatives around the country to produce and distribute high-quality cheese, butter, and other dairy products.
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.8
Section Reference 1: Describe public and collective ownership of business.
Standard 1: AACSB || Analytic
28) What are the benefits of a limited-liability corporation? Explain.
Solution: Business owners may form limited-liability corporations (LLCs) to secure the corporate advantage of limited liability while avoiding the double taxation characteristic of corporations. An LLC combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. An LLC is governed by an operating agreement that resembles a partnership agreement, except that it reduces each partner’s liability for the actions of the other owners.
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
Question type: Multiple Choice
29) Why do small-business owners want to determine whether their companies meet the standards for small-business designation? Because:
a) they do not have to pay taxes on their profits.
b) government agencies offer benefits designed to help small businesses compete with larger firms.
c) incorporation is easier for them.
d) banks are more likely to grant them loans.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
30) Traditionally, small businesses tended to be concentrated in the _____ industry.
a) manufacturing
b) retailing
c) wholesaling
d) importing/exporting
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
31) Small businesses comprise ______% of all firms.
a) 50.5
b) 99.9
c) 75.8
d) 66.7
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
32) Small businesses generate over _______% of new jobs.
a) 25
b) 99
c) 75
d) 60
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
33) Almost 90% of U.S. farms are owned by _____.
a) the government
b) large corporations
c) individual farmers
d) small corporations
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
34) ______ is an advantage of a home-based business.
a) Greater visibility to customers
b) Lower costs
c) Less flexibility
d) Isolation
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
35) Which of the following statements regarding small businesses, compared to large businesses, is correct?
a) Small businesses are less likely to hire young employees.
b) Small businesses are less likely to develop new products.
c) Small businesses are more likely to be eligible for government loans or for government purchasing programs.
d) Small businesses are more likely to be franchises.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
36) How do small businesses contribute to the U.S economy?
a) By creating job opportunities
b) By refraining from market competition
c) By paying a professional tax higher than other businesses
d) By adhering to traditional methods of operation
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.2
Section Reference 1: Determine the contributions of small businesses to the economy.
Standard 1: AACSB || Analytic
37) How can owners of small businesses can increase their chances of success?
a) If they become an expert in legal, financial, marketing, and other related business areas.
b) If they incorporate their business.
c) If they hire only family members or friends.
d) If they understand their customers.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.3
Section Reference 1: Discuss why small businesses fail.
Standard 1: AACSB || Analytic
38) While nearly ____ percent of new businesses survive at least two years, about ______ percent make it to the five-year mark.
a) 75; 25
b) 66; 33
c) 80; 20
d) 70; 50
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.3
Section Reference 1: Discuss why small businesses fail.
Standard 1: AACSB || Analytic
39) Which of the following is a reason for Krispy Kreme’s near failure?
a) Consumers felt that its employees were incompetent.
b) The company lacked funding for its development.
c) The quality of its donuts was bad.
d) Consumers preferred its competitors’ products.
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.3
Section Reference 1: Discuss why small businesses fail.
Standard 1: AACSB || Analytic
40) Why do many businesses fail during the early years?
a) Niche marketers
b) Inadequate financing
c) Unmotivated owners
d) Poor planning
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.3
Section Reference 1: Discuss why small businesses fail.
Standard 1: AACSB || Analytic
41) Who are the largest lenders to small businesses?
a) Commercial banks
b) Retail chains
c) Venture capitalists
d) Investors
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.3
Section Reference 1: Discuss why small businesses fail.
Standard 1: AACSB || Analytic
42) A business plan for a small business typically contains all of the following EXCEPT _____.
a) a statement of the company’s goals
b) an executive summary
c) separate financial and marketing sections
d) a time frame for selling stock to investors
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.4
Section Reference 1: Describe the features of a successful business plan.
Standard 1: AACSB || Analytic
43) A(n) ___________ is a written document that provides an orderly statement of a company’s goals, the methods by which it intends to achieve these goals, and the standards by which it will measure its achievements.
a) mission statement
b) executive summary
c) business incubator
d) business plan
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.4
Section Reference 1: Describe the features of a successful business plan.
Standard 1: AACSB || Analytic
44) Yashmi wants to start an event management firm with two of her friends. She decides to create a business plan that will help her in securing financing for her firm. Which of the following should she include in the business plan?
a) A list of her previous clients
b) A list of the potential lenders
c) An introduction that includes the objectives of her business
d) A time frame for selling stock to investors
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.4
Section Reference 1: Describe the features of a successful business plan.
Standard 1: AACSB || Analytic
45) Which of the following is one of the criteria for borrowers to qualify for a Small Business Administration-backed loan?
a) The borrower should not be a financial service provider.
b) The borrower should not be a home-based business.
c) The borrower should be unable to secure conventional commercial financing.
d) The borrower should be a not-for-profit organization that focuses on energy conservation.
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
46) Which of these uses their own capital supplemented with government loans to invest in small businesses?
a) Franchisors
b) Small Business Investment Companies (SBICs)
c) Joint ventures
d) Freemium business models
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
47) The management of Bank-of-Us Investments wants to create more job opportunities in their city. They believe that the best way to create more jobs is to help people start their own business. They invest a portion of the company’s profit, along with money received through government loans, to support people trying to start their own business. Bank-of-Us Investments is an example of:
a) Unit investment trusts (UITs).
b) Small Business Investment Companies (SBICs).
c) Joint ventures.
d) Business incubators.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
48) Sumi is the owner of a very small technology start-up. She shares clerical staff, computers, and other business services with other small business owners. Sumi is part of a:
a) business incubator.
b) venture capital company.
c) joint venture.
d) microloan company.
Difficulty: Easy
Bloomcode: Application
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
49) The Small Business Administration (SBA) provides all of the following EXCEPT _____.
a) loan guarantees
b) information and advice through toll-free telephone numbers
c) loans for natural disaster recovery
d) business incubators
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
50) Adolpho requires funding for a shopping portal that he launched recently. He wants to secure a government procurement contract to ensure adequate funding. Which of the following organizations can help Adolpho avail the contract?
a) Limited-liability corporation
b) Center for Women’s Business Research
c) Small Business Administration
d) International Franchise Association
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
51) In exchange for an ownership share, small businesses receive financing from a group of investors known as _____,
a) microloan investors
b) franchisors
c) Small Business Investment Companies
d) venture capitalists
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
52) American Foods International, a fast food chain, offers a contractual business arrangement in various countries around the world. This fast food chain will be an example of a(n) international _____.
a) franchise
b) acquisition
c) merger
d) not-for-profit corporation
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
53) Which of the following is a benefit of franchising?
a) The failure of one franchise does not affect the brand.
b) It offers several opportunities for the expansion of a business.
c) It does not require any start-up cost.
d) The founder of the business has absolute control over every franchise.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
54) The two principal parties in a franchising agreement are the _____.
a) manager and worker
b) franchiser and partners
c) franchisor and franchisee
d) venture capitalist and SBA
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
55) The franchisor provides all of the following services EXCEPT _____.
a) business training
b) marketing programs
c) name recognition
d) on-site management
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
56) Which of these is a drawback of franchising?
a) It necessitates the development of new business models for every franchise.
b) It provides no opportunities for expansion.
c) It restricts the business to a single geographical location.
d) It deprives the franchisor of absolute control over his or her business.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
57) Franchising offers all of the following advantages EXCEPT _____.
a) a recognizable company name
b) prior performance record
c) training
d) guaranteed level of profitability
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
58) Which of the following statements regarding franchising is FALSE?
a) Franchises are riskier than other forms of business ownership.
b) Franchisees have the benefit of name recognition.
c) Franchisors provide a wide range of support to franchisees.
d) Benefits for the franchisor include opportunities for expansion that might not otherwise be available.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
59) Roshni owns Express FoodMart, the franchisee of a local retail shop. Which of the following will be one of Roshni’s chief concerns regarding owning the franchise?
a) The franchisor does not provide her with the required supplies.
b) The franchising agreement is too restrictive.
c) The franchise has the benefit of name recognition.
d) The franchisor can negotiate better deals on ingredients, supplies, and real estate, because of its financial strength.
Difficulty: Easy
Bloomcode: Application
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
60) Which of the following is TRUE of a business with sole proprietorship?
a) It involves several owners.
b) It is difficult to form and dissolve.
c) Its owner has maximum management flexibility.
d) Its owner is exempt from corporate franchise taxes.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
61) Sole proprietorships have all of the following advantages EXCEPT _____.
a) unlimited life
b) ease of formation
c) profits subject only to a single tax
d) ease of liquidation
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
62) Adelina is the owner of an electronic repair shop. She creates the marketing strategy for her shop, pays all the required taxes, and is also the only person who enjoys the profits generated by the shop. Adelina’s business ownership in this scenario can be regarded as a _____.
a) sole proprietorship
b) partnership
c) corporation
d) franchise
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
63) The stocks of Novelties-R-Us, a toy store, are completely owned by the Garcias. When the family elected to move from a sole proprietorship to a corporation, the greatest concern was _____.
a) there might be family squabbles
b) how to limit liability
c) choosing work assignments
d) double taxation
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
64) One of the disadvantages of partnerships is that:
a) the partners are not covered by life insurance.
b) all partners should have expertise in every area.
c) the partners are exposed to unlimited financial liability.
d) they are difficult to form and dissolve.
Difficulty: Easy
Bloomcode: Comprehension
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
65) If business owners in a partnership wish to limit liability, they have the option to _____.
a) pledge funds
b) limit expenditure
c) set up a limited-liability partnership
d) dissolve the partnership
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
66) Rashmi and Karina opened a restaurant in partnership. Two years later, Karina left the restaurant, and Rashmi discovered that Karina had incurred numerous expenses to their account. These expenses resulted in thousands of dollars’ worth of debt for the restaurant. From the following, identify an accurate statement about this situation.
a) Rashmi doesn’t have to worry because, according to law, everyone is responsible for his/her own debts.
b) Rashmi doesn’t have to worry because business creditors will pursue Karina alone since her signature authorized payments.
c) Business creditors will expect Rashmi to pay at least half the debt since she owns 50% of the business.
d) Business creditors will expect full payment from Rashmi.
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
67) Although _____ are the most common type of business ownership, the greatest revenues come from _____.
a) sole proprietorships; partnerships
b) sole proprietorships; corporations
c) corporations; partnerships
d) partnerships; corporations
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
68) Corporations have all of the following advantages EXCEPT _____.
a) favorable tax treatment
b) limited liability
c) expanded financial capacity
d) limited legal risk
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
69) Alejandro is a stockholder in a software consulting firm. He gets a share of the earnings of the firm, on which he has to pay taxes. Moreover, the firm pays taxes on its earnings. As an individual, Alejandro is not legally liable to pay off the debts that might be incurred by the firm. In this scenario, the software consulting firm can be regarded as a _____.
a) sole proprietorship
b) partnership
c) corporation
d) franchise
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
70) The maximum number of shareholders is limited to _____ for a firm to qualify as a subchapter S corporation.
a) 25
b) 50
c) 75
d) 100
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
71) Which of the following statements is true regarding employee-owned corporations?
a) The number of employee-owned corporations is declining in the United States.
b) Employee-owned corporations may not publicly trade their stock.
c) Employees buy shares of stock in the company that employs them.
d) Stock prices in employee-owned corporations typically decrease.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
72) Three members of Santiago’s family work at BioTechno, a multi-national drug manufacturer. Each of them owns 5% shares of the company respectively. In fact, most of the employees of BioTechno, like Santiago and his family members, are stockholders of the company. BioTechno can be regarded as a _____.
a) sole proprietorship
b) employee-owned corporation
c) family-owned business
d) partnership
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
73) PUR Water is a company that designs and implements innovative water purification solutions using simple and inexpensive methods. All its decision-making focuses on a better environment. While the company manages to make profits, its vision is set beyond financial gains. Its adherence to its goals is verified by a third-party auditor. Which of the following types of corporations does this scenario illustrate?
a) B corporation
b) S corporation
c) Employee-owned corporation
d) Not-for-profit corporation
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
74) Brady decides to start a trust-run hospital to help the poor get expensive treatments for free. Which of the following is most likely to be true of the hospital?
a) It has a high profit margin.
b) It issues stock certificates.
c) It pays dividends to owners.
d) It is exempt from corporate taxes.
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
75) Which of the following statements regarding family-owned businesses is true?
a) Only a small percentage of family-owned businesses survive into the second or third generation.
b) Family-owned companies must submit a written agreement to the state in which it organizes.
c) All family-owned companies must be closed corporations.
d) Family-owned companies are an example of a not-for-profit corporation.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
76) The arrangement, when a government unit owns and operates an organization, is known as _____.
a) private ownership
b) a cooperative
c) public ownership
d) employee ownership
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.8
Section Reference 1: Describe public and collective ownership of business.
Standard 1: AACSB || Analytic
77) An example of public ownership is:
a) A movie theater
b) The city sewer system
c) A trucking company
d) A television company
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.8
Section Reference 1: Describe public and collective ownership of business.
Standard 1: AACSB || Analytic
78) Alternatives to private ownership include _____.
a) public ownership and collective ownership
b) employee ownership and foreign corporations
c) foreign corporations and public ownership
d) employee ownership and collective ownership
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.8
Section Reference 1: Describe public and collective ownership of business.
Standard 1: AACSB || Analytic
79) Mateo is the owner of a small mushroom farm in Pennsylvania. He would like to join hands with other growers to create an organization that will promote and distribute mushrooms. The form of ownership that would be most suited for Mateo and other growers will be a(n) _____.
a) joint venture
b) open corporation
c) government-owned collective
d) cooperative
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.8
Section Reference 1: Describe public and collective ownership of business.
Standard 1: AACSB || Analytic
80) Sushma established a corporation in Nebraska, but she recently moved to Colorado where she now conducts her business. What type of corporation does Sushma own?
a) Alien corporation
b) Domestic corporation
c) Foreign corporation
d) National corporation
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
81) Who elects the board of directors of a corporation?
a) Corporation’s employees
b) Bondholders and other creditors
c) Corporate officers
d) Stockholders
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
82) Bianca owns a company that provides laundry services. She ensures that only her family members are the stockholders of her company. She also allows them to control and manage all of the company’s activities. In this scenario, Bianca owns a _____.
a) public corporation
b) closed corporation
c) not-for-profit corporation
d) limited-liability corporation
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
83) Isabella owns 100 _____ stock of NxtGen Solutions, a software firm. It means that she has voting rights on company decisions at NxtGen Solutions, but only residual claims on the company’s assets.
a) preferred
b) principal
c) management
d) common
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
84) Which of the following is a function of the board of directors of a corporation?
a) Evaluating the performance of employees
b) Hiring the chief executive officer
c) Assigning specific tasks to employees
d) Maintaining personnel records
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
85) The board of directors usually includes some individuals who are not employed by the corporation. These people are referred to as _____.
a) priority directors
b) outside directors
c) stockholders
d) members of top management
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
86) Luciana is a chief financial officer in a large corporation. She has the full financial authority to make appropriations and authorize expenditures. Luciana is likely to be a member of _____ management.
a) Middle
b) advisory
c) supervisory
d) Top
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
87) _____ must verify in writing the accuracy of their corporation’s financial statements.
a) Board members
b) Stockholders
c) Chief operating officers and chief financial officers
d) Governmental officials
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
88) An acquisition occurs when _____.
a) one company purchases the property and assumes the obligations of another company
b) one corporation owns 8% of the stock of another corporation
c) owners of small companies band together to operate their businesses collectively
d) two or more firms combine to form a single company
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
89) Nova Airlines’ purchase of Emu Airlines combines the resources and capabilities of both firms to create the world’s largest airline. The newly formed company is an example of a _____.
a) vertical merger
b) joint venture
c) horizontal merger
d) conglomerate company
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
90) If ABC steel buys NextGen Iron Ore to assure itself of a constant flow of ore, it will be an example of a _____.
a) conglomerate company
b) domestic company
c) vertical merger
d) subsidiary corporation
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
91) The joining of two computer manufacturing companies will be an example of a _____.
a) conglomerate company
b) horizontal merger
c) vertical merger
d) joint venture
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
92) News 24/7, a newspaper group, merged with Alfalah Finance, an investment firm. The two companies merged together to diversify their business and to generate more revenue. This merger will be an example of a _____.
a) conglomerate merger
b) horizontal merger
c) vertical merger
d) joint venture
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
93) Top Gear Comp, a tech firm decides to invest some of its excess cash by acquiring a coffeehouse chain. This would be a _____.
a) conglomerate company
b) vertical merger
c) horizontal merger
d) joint venture
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
94) Which type of merger is done to increase customer bases?
a) Vertical merger
b) Conglomerate company
c) Joint venture
d) Horizontal merger
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
95) Walmart, an American retail chain, started doing business in India by forming a _____ with one of India’s leading retail business groups.
a) joint venture
b) subsidiary
c) horizontal merger
d) vertical merger
Difficulty: Medium
Bloomcode: Application
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
Question type: True/False
96) The vast majority of firms have fewer than 500 employees.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
97) Over 50% of new jobs are generated by small businesses.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
98) Four out of five businesses without paid employees are home-based.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
99) Approximately 50 percent of all small businesses are minority-owned.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
100) Any firm with fewer than 1,000 employees is considered a small business.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
101) Government agencies offer benefits designed to help small businesses compete with larger firms.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
102) Most managers of home-based businesses struggle to establish business hours that correspond with customer availability.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Technology
103) Because of technology and online resources, many small-business start-ups are more competitive.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.1
Section Reference 1: Discuss why most businesses are small businesses.
Standard 1: AACSB || Analytic
104) Small businesses are more likely to employ older workers than large businesses, but not the youngest ones.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.2
Section Reference 1: Determine the contributions of small businesses to the economy.
Standard 1: AACSB || Diversity
105) One reason small businesses are so successful is also the reason they might fail—their founders are willing to take a risk.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.3
Section Reference 1: Discuss why small businesses fail.
Standard 1: AACSB || Analytic
106) Direct SBA loans are available in only a few special situations, such as natural disaster recovery and energy conservation.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
107) Interestingly, research finds that larger firms prove more successful than smaller firms in offering innovative products to consumers.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.2
Section Reference 1: Determine the contributions of small businesses to the economy.
Standard 1: AACSB || Analytic
108) 20th century innovations developed by small businesses include the personal computer and the zipper.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.2
Section Reference 1: Determine the contributions of small businesses to the economy.
Standard 1: AACSB || Analytic
109) Unfortunately, more than half of all small businesses fail within the first year.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.3
Section Reference 1: Discuss why small businesses fail.
Standard 1: AACSB || Analytic
110) Nearly 7 out of every 10 new businesses survive at least two years and about 50% make it to the five-year mark.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.3
Section Reference 1: Discuss why small businesses fail.
Standard 1: AACSB || Analytic
111) A major problem for most small businesses is securing adequate financing.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.3
Section Reference 1: Discuss why small businesses fail.
Standard 1: AACSB || Analytic
112) First-time business owners often overestimate the funds their firms will generate from initial sales to allow for operations to continue.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.3
Section Reference 1: Discuss why small businesses fail.
Standard 1: AACSB || Analytic
113) Most owners of small businesses rely on loans from financial institutions for their start-up funds.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.3
Section Reference 1: Discuss why small businesses fail.
Standard 1: AACSB || Analytic
114) Taxes and government regulations are more significant issues for small businesses than for large businesses.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.3
Section Reference 1: Discuss why small businesses fail.
Standard 1: AACSB || Analytic
115) With less money to spend on employees, marketing, inventory, and other business costs, successful small companies need to be creative.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.3
Section Reference 1: Discuss why small businesses fail.
Standard 1: AACSB || Analytic
116) Fortunately, small businesses are not required to pay workers’ compensation or Social Security.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.3
Section Reference 1: Discuss why small businesses fail.
Standard 1: AACSB || Analytic
117) One of the most important tasks for an entrepreneur is to create a business plan.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.4
Section Reference 1: Describe the features of a successful business plan.
Standard 1: AACSB || Analytic
118) The firm’s mission and goals are identified in its business plans.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.4
Section Reference 1: Describe the features of a successful business plan.
Standard 1: AACSB || Analytic
119) A mission statement is a written document that provides an orderly statement of a company’s goals, the methods by which it intends to achieve these goals, and the standards by which it will measure its achievements.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.4
Section Reference 1: Describe the features of a successful business plan.
Standard 1: AACSB || Analytic
120) A business plan should include résumés of the company’s principal owners.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.4
Section Reference 1: Describe the features of a successful business plan.
Standard 1: AACSB || Analytic
121) The major lending source for small businesses needing additional funds is the Small Business Administration (SBA).
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
122) Direct Small Business Administration (SBA) loans are rewarded to owners of small businesses 90% of the time.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
123) Small Business Investment Company (SBIC) loans are actually government loans funneled through a private organization.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
124) The average amount rewarded to owners of small businesses through Small Business Administration (SBA) microloans is $13,000.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
125) The set-aside program designates that a percentage of government contracts must be awarded to qualifying small businesses.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
126) Not-for-profit organizations focused on economic development operate most business incubators.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
127) Most of the small businesses today are run by Caucasian males.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Analytic
128) The Small Business Administration has programs targeted to minority-owned small businesses.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.5
Section Reference 1: Identify the available assistance for small businesses.
Standard 1: AACSB || Diversity
129) Successful franchises often minimize the amount of expansion opportunities.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
130) Franchisors typically experience a greater return on investment than if the firm were run entirely as a company-owned chain.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
131) The franchisor is a small business owner who sells the goods or services of the supplier
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
132) A successful franchisor can usually negotiate better pricing for ingredients, supplies, even real estate, because of its financial strength and large volume purchases.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
133) Franchising combines the freedom of business ownership with the support of a large company.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
134) Strict franchise agreements help to maintain the integrity of the brand.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.6
Section Reference 1: Explain franchising.
Standard 1: AACSB || Analytic
135) The most common form of business ownership is sole proprietorship.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
136) Partnerships, out of all forms of business, are the most challenging to establish.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
137) A sole proprietor is easy to dissolve.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
138) Dissolving a sole proprietorship is more complicated than breaking up a partnership.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
139) In a partnership, each partner is liable for the business-related debts of the other partner.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
140) According to the legal requirements, large businesses must be organized as corporations.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
141) Sole proprietorships are concentrated mainly in corporations.
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
142) Owners of corporations may owe personal income taxes on dividends, which are paid from after-tax corporate profits. This is an example of double taxation.
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
143) A company that has embraced employee ownership is Proctor & Gamble.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
144) Not-for-profit corporations do not issue stock certificates and are exempt from paying income taxes.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.7
Section Reference 1: Outline the forms of private business ownership.
Standard 1: AACSB || Analytic
145) A corporation operating outside its state of incorporation is known as a domestic corporation.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
146) A state that is considered to be “business friendly” based on tax incentives is Delaware.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
147) Preferred shareholders typically have voting rights.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
148) Owners of preferred stock receive dividends after owners of common stock.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
149) The CEO of a corporation is automatically the chair of the board of directors.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.9
Section Reference 1: Discuss organizing a corporation.
Standard 1: AACSB || Analytic
150) In order to cut costs and promote diversification, a vertical merger joins firms in the same industry.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
151) CVS Caremark, a healthcare company, recently purchased another firm’s Medicaid prescription business. It is an example of a horizontal merger.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
152) An example of a conglomerate merger is when a computer manufacturer purchases a laptop brand.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
153) A merger of unrelated firms is called a conglomerate merger.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
154) Joint ventures rarely occur between not-for-profit organizations and for-profit companies.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
155) Due to logistics and conflicting business laws, joint ventures are not ideal for international companies.
Difficulty: Medium
Bloomcode: Comprehension
Learning Objective 1: 5.10
Section Reference 1: Explain what happens when businesses join forces.
Standard 1: AACSB || Analytic
156) In public ownership a unit or agency of government owns and operates an organization.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.8
Section Reference 1: Describe public and collective ownership of business.
Standard 1: AACSB || Analytic
157) Unfortunately, cooperatives rarely exist in the field of agriculture.
Difficulty: Easy
Bloomcode: Knowledge
Learning Objective 1: 5.8
Section Reference 1: Describe public and collective ownership of business.
Standard 1: AACSB || Analytic
158) An example of financial cooperatives are commercial banks.
Difficulty: Medium
Bloomcode: Knowledge
Learning Objective 1: 5.8
Section Reference 1: Describe public and collective ownership of business.
Standard 1: AACSB || Analytic
Document Information
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Contemporary Business 18e | Test Bank by Louis E. Boone
By Louis E. Boone
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