BUS 115 EXAM #2 QUESTIONS &
ANSWERS
Sole proprietorship - ANSWER One person starting a business
Advantages of starting a sole proprietorship - ANSWER 1. Flexibility
2. Simplicity
3. Individual Tax
4. Secrecy
5. Dissolved easily
Disadvantages of a sole proprietorship - ANSWER 1. Unlim. liability
2. Lack of funds
3. Lim. Skills
4. Hard to cont
Partnership - ANSWER Two or more people sharing a business
Types of partnerships - ANSWER 1. General
2. Limited
General partnership - ANSWER Shared responsibility ("50/50")
Limited partnership - ANSWER Unequal responsibility; one has less investment in the
company
Advantages of partnerships - ANSWER 1. Combined knowledge
2. Easy to form
3. Easy to raise funding
Disadvantages of partnerships - ANSWER 1. Unlim. Liability
2. Disagreements
3. Life span
4. Lim. Resources
5. Uneven distribution of work and pay
Corporations - ANSWER Legal entity owned by shareholders
Dividends - ANSWER Pay given to each shareholder bases of corporate profit and
revenues
Public corporations - ANSWER Corps. That sell stock to the public
Private corporations - ANSWER Corps. That does not sell stock to the public
, Mergers - ANSWER When 2+ firms come together and combine
Horizontal Merger - ANSWER 2+ companies that PRODUCE THE SAME GOOD come
together
Vertical Merger - ANSWER 2+ companies at DIFFERENT LEVELS OF PRODUCT
combine
Conglomerate Merger - ANSWER 2+ UNRELATED companies merge
Leveraged buyout (LBO) - ANSWER when stockholders buy enough into the company
in order to gain control
Entrepreneurs - ANSWER People who create and manage their own businesses; risk
takers
Small business - ANSWER An independently owned and operated business; less than
500 employees
Small Business Administration (SBA) - ANSWER Government agency that offers
assistance, advice and financial management
Role of small businesses - ANSWER Economy growth; job creations
Small business industries - ANSWER 1. Retail
2. Services
3. Manufacturing
4. High tech
Advantages of small businesses - ANSWER 1. Independence
2. Flexibility
3. Focus
4. Reputation
Disadvantages of small businesses - ANSWER 1. High fail rates
2. High stress level
3. Under capitalization
4. Inexperience
Collateral - ANSWER Something you own of value that banks/government will look at
before you receive a loan
Starting a small business - ANSWER 1. A business plan
2. Financial resources
ANSWERS
Sole proprietorship - ANSWER One person starting a business
Advantages of starting a sole proprietorship - ANSWER 1. Flexibility
2. Simplicity
3. Individual Tax
4. Secrecy
5. Dissolved easily
Disadvantages of a sole proprietorship - ANSWER 1. Unlim. liability
2. Lack of funds
3. Lim. Skills
4. Hard to cont
Partnership - ANSWER Two or more people sharing a business
Types of partnerships - ANSWER 1. General
2. Limited
General partnership - ANSWER Shared responsibility ("50/50")
Limited partnership - ANSWER Unequal responsibility; one has less investment in the
company
Advantages of partnerships - ANSWER 1. Combined knowledge
2. Easy to form
3. Easy to raise funding
Disadvantages of partnerships - ANSWER 1. Unlim. Liability
2. Disagreements
3. Life span
4. Lim. Resources
5. Uneven distribution of work and pay
Corporations - ANSWER Legal entity owned by shareholders
Dividends - ANSWER Pay given to each shareholder bases of corporate profit and
revenues
Public corporations - ANSWER Corps. That sell stock to the public
Private corporations - ANSWER Corps. That does not sell stock to the public
, Mergers - ANSWER When 2+ firms come together and combine
Horizontal Merger - ANSWER 2+ companies that PRODUCE THE SAME GOOD come
together
Vertical Merger - ANSWER 2+ companies at DIFFERENT LEVELS OF PRODUCT
combine
Conglomerate Merger - ANSWER 2+ UNRELATED companies merge
Leveraged buyout (LBO) - ANSWER when stockholders buy enough into the company
in order to gain control
Entrepreneurs - ANSWER People who create and manage their own businesses; risk
takers
Small business - ANSWER An independently owned and operated business; less than
500 employees
Small Business Administration (SBA) - ANSWER Government agency that offers
assistance, advice and financial management
Role of small businesses - ANSWER Economy growth; job creations
Small business industries - ANSWER 1. Retail
2. Services
3. Manufacturing
4. High tech
Advantages of small businesses - ANSWER 1. Independence
2. Flexibility
3. Focus
4. Reputation
Disadvantages of small businesses - ANSWER 1. High fail rates
2. High stress level
3. Under capitalization
4. Inexperience
Collateral - ANSWER Something you own of value that banks/government will look at
before you receive a loan
Starting a small business - ANSWER 1. A business plan
2. Financial resources
