RSM100 Study Guide | Questions with 100%
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Terms in this set (70)
How is wealth created? 1. Trade
2. Develop a good that generates profit
Forms of Private Business Ownership Sole proprietorship, Partnerships, Corporations,
Not-For Profits
Sole proprietorship Definition + Individual is not legally separate from their status
Advantages and Disadvantages as a business owner
+ Less taxes
+ Easier to start
+ More flexible
- Can take assets away from the owner as they are
connected (higher liability)
- Harder to secure financing
- Difficult to raise capital
,Partnership Definition + Advantages Two or more persons who operate a business as
and Disadvantages co-owners by legal agreement
+ Less taxes
+ Extra set of hands
+ Combined knowledge
+ Less financial burdens
- Higher liability
- No sole decisions
- Disagreements
- Business is not separate entity
Corporations Definition + Legal organization with assets and liabilities
Advantages and Disadvantages separate from those of it's owners
+ Business is separate from owners
+ Doesn't cease to exist following owner's
departure
+ Easier to raise funds
- Higher taxes
- More paperwork
- Hard to maintain
- More conflict
Not-for-profit corporations A corporation that does not aim to generate profit
Definition + Advantages and
Disadvantages + Business is separate entity
+ Exempt from taxes
- No cash flow
- Limited funding
- Societal pressure
, Two types of shares common and preferred
What are Common shares Common shares are stocks that give their owners
the right to vote on the board of directors and may
or may not pay dividends
What are preferred shares Stocks that do not grant voting rights and typically
include dividends, have higher claim on assets
(compared to common shares) in case of
insolvency
Characteristics of preferred shares - Convertible
(explain each characteristic) - Redeemable: shareholder can refund
- Participating: Can share leftovers with common
shareholders
- Cumulative: Have to make up for years they didn't
declare dividends
- Callable: Option of the company to refund
- Lose the most gain the most
What is the board of directors Elected by shareholders to represent their
interests; its auditing committee is responsible for
maintaining the integrity of the company's financial
reports
What are corporate officers and Make major corporate decisions and handle
managers operations
What is franchising Individuals buy the rights to run the company with
the name
Correct Answers | Verified | Latest Update 2026
Save
Terms in this set (70)
How is wealth created? 1. Trade
2. Develop a good that generates profit
Forms of Private Business Ownership Sole proprietorship, Partnerships, Corporations,
Not-For Profits
Sole proprietorship Definition + Individual is not legally separate from their status
Advantages and Disadvantages as a business owner
+ Less taxes
+ Easier to start
+ More flexible
- Can take assets away from the owner as they are
connected (higher liability)
- Harder to secure financing
- Difficult to raise capital
,Partnership Definition + Advantages Two or more persons who operate a business as
and Disadvantages co-owners by legal agreement
+ Less taxes
+ Extra set of hands
+ Combined knowledge
+ Less financial burdens
- Higher liability
- No sole decisions
- Disagreements
- Business is not separate entity
Corporations Definition + Legal organization with assets and liabilities
Advantages and Disadvantages separate from those of it's owners
+ Business is separate from owners
+ Doesn't cease to exist following owner's
departure
+ Easier to raise funds
- Higher taxes
- More paperwork
- Hard to maintain
- More conflict
Not-for-profit corporations A corporation that does not aim to generate profit
Definition + Advantages and
Disadvantages + Business is separate entity
+ Exempt from taxes
- No cash flow
- Limited funding
- Societal pressure
, Two types of shares common and preferred
What are Common shares Common shares are stocks that give their owners
the right to vote on the board of directors and may
or may not pay dividends
What are preferred shares Stocks that do not grant voting rights and typically
include dividends, have higher claim on assets
(compared to common shares) in case of
insolvency
Characteristics of preferred shares - Convertible
(explain each characteristic) - Redeemable: shareholder can refund
- Participating: Can share leftovers with common
shareholders
- Cumulative: Have to make up for years they didn't
declare dividends
- Callable: Option of the company to refund
- Lose the most gain the most
What is the board of directors Elected by shareholders to represent their
interests; its auditing committee is responsible for
maintaining the integrity of the company's financial
reports
What are corporate officers and Make major corporate decisions and handle
managers operations
What is franchising Individuals buy the rights to run the company with
the name
