Grand Canyon University BUS 100 Exam 2 (pdf) | 2026/2027 | Q&A |
Business
1. Which of the following is a key disadvantage of a sole proprietorship?
A) Ease of starting the business
B) Retention of all profits
C) Unlimited liability for business debts
D) No special taxes
Correct Answer: Unlimited liability for business debts
Rationale: A sole proprietorship offers ease of start-up and retention of
profits, but a significant drawback is unlimited liability, meaning the owner is
personally responsible for all business debts. This personal financial risk is a
major disadvantage compared to other business structures.
2. A business owned by two or more people who share equally in both
responsibility and liability is known as a:
A) Limited partnership
B) General partnership
C) Sole proprietorship
D) C Corporation
Correct Answer: General partnership
Rationale: A general partnership involves partners who share equally in both
responsibility and liability. This means each partner is personally liable for
the debts of the business, unlike a limited partnership where some partners
have limited liability.
,3. Which form of business ownership is subject to double taxation, where the
company's profits are taxed at the corporate level and again as dividends to
shareholders?
A) S Corporation
B) Limited Liability Company (LLC)
C) C Corporation
D) Sole Proprietorship
Correct Answer: C Corporation
Rationale: A C Corporation is subject to double taxation. The corporation
pays taxes on its profits, and shareholders also pay taxes on dividends they
receive. This is a key disadvantage compared to an S Corporation, which
avoids double taxation.
4. A legal document filed with a state government to establish the existence
of a new corporation is called the:
A) Bylaws
B) Partnership agreement
C) Articles of incorporation
D) Operating agreement
Correct Answer: Articles of incorporation
Rationale: Articles of incorporation are the legal documents filed with a state
government to formally establish a corporation. This document is a critical
step in the formation of a corporation and outlines the basic structure and
purpose of the business.
5. What is the primary purpose of a franchise business model?
,A) To allow a franchisee to operate a business using the franchisor's brand
and system
B) To create a partnership between two or more companies for a single
project
C) To provide a legal structure that avoids double taxation
D) To allow individuals to invest in a company without any liability
Correct Answer: To allow a franchisee to operate a business using the
franchisor's brand and system
Rationale: A franchise involves a franchisor selling the rights to use its
business model, brand, and system to a franchisee. This allows the
franchisee to operate a business with the support of an established brand
and proven operational methods.
6. The process used to accomplish organizational goals through planning,
organizing, leading, and controlling people and other organizational
resources is known as:
A) Marketing
B) Management
C) Accounting
D) Economics
Correct Answer: Management
Rationale: Management is defined as the process of accomplishing
organizational goals through planning, organizing, leading, and controlling
people and other resources. These four functions are the core of effective
management.
, 7. A management function that includes anticipating trends and determining
the best strategies and tactics to achieve organizational goals is:
A) Organizing
B) Leading
C) Controlling
D) Planning
Correct Answer: Planning
Rationale: Planning involves anticipating trends and determining the best
strategies and tactics to achieve organizational goals. It is the foundational
management function that sets the direction for the organization.
8. The management function that involves designing the structure of the
organization and creating conditions and systems in which everyone works
together is:
A) Planning
B) Organizing
C) Leading
D) Controlling
Correct Answer: Organizing
Rationale: Organizing is the management function that involves designing
the organization's structure and creating systems for people and resources to
work together effectively. This includes establishing roles, responsibilities,
and communication channels.
9. Creating a vision for the organization and guiding, training, coaching, and
motivating others to work effectively is part of which management function?
Business
1. Which of the following is a key disadvantage of a sole proprietorship?
A) Ease of starting the business
B) Retention of all profits
C) Unlimited liability for business debts
D) No special taxes
Correct Answer: Unlimited liability for business debts
Rationale: A sole proprietorship offers ease of start-up and retention of
profits, but a significant drawback is unlimited liability, meaning the owner is
personally responsible for all business debts. This personal financial risk is a
major disadvantage compared to other business structures.
2. A business owned by two or more people who share equally in both
responsibility and liability is known as a:
A) Limited partnership
B) General partnership
C) Sole proprietorship
D) C Corporation
Correct Answer: General partnership
Rationale: A general partnership involves partners who share equally in both
responsibility and liability. This means each partner is personally liable for
the debts of the business, unlike a limited partnership where some partners
have limited liability.
,3. Which form of business ownership is subject to double taxation, where the
company's profits are taxed at the corporate level and again as dividends to
shareholders?
A) S Corporation
B) Limited Liability Company (LLC)
C) C Corporation
D) Sole Proprietorship
Correct Answer: C Corporation
Rationale: A C Corporation is subject to double taxation. The corporation
pays taxes on its profits, and shareholders also pay taxes on dividends they
receive. This is a key disadvantage compared to an S Corporation, which
avoids double taxation.
4. A legal document filed with a state government to establish the existence
of a new corporation is called the:
A) Bylaws
B) Partnership agreement
C) Articles of incorporation
D) Operating agreement
Correct Answer: Articles of incorporation
Rationale: Articles of incorporation are the legal documents filed with a state
government to formally establish a corporation. This document is a critical
step in the formation of a corporation and outlines the basic structure and
purpose of the business.
5. What is the primary purpose of a franchise business model?
,A) To allow a franchisee to operate a business using the franchisor's brand
and system
B) To create a partnership between two or more companies for a single
project
C) To provide a legal structure that avoids double taxation
D) To allow individuals to invest in a company without any liability
Correct Answer: To allow a franchisee to operate a business using the
franchisor's brand and system
Rationale: A franchise involves a franchisor selling the rights to use its
business model, brand, and system to a franchisee. This allows the
franchisee to operate a business with the support of an established brand
and proven operational methods.
6. The process used to accomplish organizational goals through planning,
organizing, leading, and controlling people and other organizational
resources is known as:
A) Marketing
B) Management
C) Accounting
D) Economics
Correct Answer: Management
Rationale: Management is defined as the process of accomplishing
organizational goals through planning, organizing, leading, and controlling
people and other resources. These four functions are the core of effective
management.
, 7. A management function that includes anticipating trends and determining
the best strategies and tactics to achieve organizational goals is:
A) Organizing
B) Leading
C) Controlling
D) Planning
Correct Answer: Planning
Rationale: Planning involves anticipating trends and determining the best
strategies and tactics to achieve organizational goals. It is the foundational
management function that sets the direction for the organization.
8. The management function that involves designing the structure of the
organization and creating conditions and systems in which everyone works
together is:
A) Planning
B) Organizing
C) Leading
D) Controlling
Correct Answer: Organizing
Rationale: Organizing is the management function that involves designing
the organization's structure and creating systems for people and resources to
work together effectively. This includes establishing roles, responsibilities,
and communication channels.
9. Creating a vision for the organization and guiding, training, coaching, and
motivating others to work effectively is part of which management function?
