Introduction to Business – Chapter 4 Test Bank | Ethics and Social Responsibility Questions & Answers

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Chapter 4 FORMS OF BUSINESS OWNERSHIP


TRUE-FALSE QUESTIONS

Title: ANSWER: F REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 RATIONALE:
With a sole proprietorship, the owner has unlimited liability.
1. If the sole proprietorship acquires a legal business name, the owner then has limited liability.
a. True
b. False

Title: ANSWER: T REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1
2. One of the disadvantages of the sole proprietorship is that the owner has unlimited liability.
a. True
b. False

Title: ANSWER: F REFERENCE: Going It Alone: Sole Proprietorship LEARNING OUTCOME: 1 RATIONALE: Sole
proprietorships are not legal entities.
3. The sole proprietorship is considered a legal entity; therefore, it is taxed separately from the owner.
a. True
b. False

Title: ANSWER: F REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 RATIONALE: A
partnership can be established either in writing or through an oral agreement.
4. For partnerships to be legal, they must be established in writing.
a. True
b. False

Title: ANSWER: F REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 RATIONALE: All
partners have unlimited liability.
5. In a limited partnership, all of the partners have limited liability.
a. True
b. False

Title: ANSWER: T REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2
6. A disadvantage of a partnership is that any partner may have to pay all of the debts of the company
regardless of who incurred the debts.
a. True
b. False

Title: ANSWER: F REFERENCE: Partnerships: Sharing the Load LEARNING OUTCOME: 2 RATIONALE: As a
rule partnerships are easier to form than to leave. Sole proprietorships are the easiest form of business to
dissolve.
7. Dissolving a partnership is easier than dissolving a sole proprietorship.
a. True
b. False

Title: ANSWER: F REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 RATIONALE: The
incorporation process differs from state to state.

,8. Registration procedures for incorporation are uniform from state to state across the U.S.
a. True
b. False

Title: ANSWER: F REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 RATIONALE:
This information is not included in the articles of confederation. See Exhibit 4.4.
9. Articles of incorporation usually specify the life of a corporation as a certain number of predetermined
years.
a. True
b. False

Title: ANSWER: T REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4
10. The corporation's board of directors elects the corporate officers.
a. True
b. False

Title: ANSWER: F REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4 RATIONALE:
Double taxation is a distinct disadvantage.
11. Double taxation is a distinct advantage that corporations have over other forms of ownership.
a. True
b. False

Title: ANSWER: T REFERENCE: Corporations: Limiting Your Liability LEARNING OUTCOME: 4
12. Corporations face many more government restrictions and regulations than sole proprietorships and
partnerships.
a. True
b. False

Title: ANSWER: F REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3
RATIONALE: Cooperatives are a distinctly different entity from a corporation.
13. Cooperatives are regulated with the same tax laws and rates as corporations.
a. True
b. False

Title: ANSWER: F REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3
RATIONALE: The two types of cooperatives are buyer and seller.
14. The two types of cooperatives are wholesale and retail.
a. True
b. False

Title: ANSWER: T REFERENCE: Specialized Forms of Business Organizations LEARNING OUTCOME: 3
15. When Ashland Plastics and Melamine Chemicals formed a joint venture to develop flame-resistant
plastic sheeting, the relationship most likely ended as soon as the project was completed.
a. True
b. False

Title: ANSWER: T REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5
16. When Addison Wilcox buys an H&R Block franchise, he becomes a franchisee.
a. True
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, b. False

Title: ANSWER: F REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5 RATIONALE: The
franchisee has to abide by the rules set by the franchisor or risk losing his or her investment.
17. A person who buys a franchise has the same level of control as an entrepreneur who opens his or her
own sole proprietorship.
a. True
b. False

Title: ANSWER: T REFERENCE: Franchising: A Popular Trend LEARNING OUTCOME: 5
18. Changing demographics drive the franchise industry growth.
a. True
b. False

Title: ANSWER: T REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6
19. In 2004, Albertson’s Inc. purchased Southern California’s premier fresh, gourmet, and specialty food
retailer, Bristol Farms. This was an example of an acquisition.
a. True
b. False

Title: ANSWER: F REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 RATIONALE: This is an
example of a vertical merger.
20. When Whole Foods Market, the world's largest natural foods supermarket, acquired Select Fish, a fish
processing company, it was an example of a conglomerate merger.
a. True
b. False

Title: ANSWER: T REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6
21. When companies in the same industry merge to achieve economies of scale and to expand their
product lines, it is called a horizontal merger.
a. True
b. False

Title: ANSWER: F REFERENCE: Mergers and Acquisitions LEARNING OUTCOME: 6 RATIONALE: When
companies in the same industry merge to achieve economies of scale and to expand their product lines, it
is called a horizontal merger.
22. When Wachovia Bank, acquired First Union Bank Dim S.A., it was an example of a conglomerate
merger.
a. True
b. False

Title: ANSWER: T REFERENCE: Trends in Business Ownership LEARNING OUTCOME: 7
23. Baby boomers are having a strong effect on the franchise industry.
a. True
b. False

Title: ANSWER: T REFERENCE: Trends in Business Ownership LEARNING OUTCOME: 7
24. Eighty-two percent of boomers indicated that they will not retire at or before age 65.
a. True
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