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Exam 6: Forms of Business Ownership

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Question 71

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A co-operative is simply another name for a corporation.

A) True
B) False

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Question 72

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Which of the following statements about buying a franchise is most accurate?

A) One of the advantages of buying a franchise is that franchisors are so closely regulated that there is virtually no chance for scams to succeed.
B) Before purchasing a franchise,the buyer should carefully evaluate the franchise,the franchisor,his or her own situation,and the nature of the market.
C) Franchise agreements are simple to evaluate,since federal law requires that all such agreements must be written in plain English with all fees and terms clearly explained.
D) Buying a franchise is the simplest and least expensive way to set up a business,since the franchisor has already worked out all of the details for setting up and running the business.

E) C) and D)
F) A) and D)

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Question 73

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Dr.Wright is interested in incorporating as an individual.While this is legally possible,there are really no advantages to doing so.

Few brick-and-mortar franchisees are expanding online.

Rhonda has agreed to invest $16,000 in a partnership with her sister and brother-in-law.Rhonda does not plan to work in the partnership,nor does she wish to risk any of her own wealth other than the $16,000 she invests,but she does intend to share in any profits earned by the partnership.Evidently,Rhonda will be a:

An evaluation of franchising would conclude that this type of arrangement:

Franchising in global markets has demonstrated that convenience and predictable levels of service are important worldwide.

A limited partner is an owner who takes no management responsibility and has no liability for losses beyond the amount invested.

A difference between partnerships and sole proprietorships is that partnerships:

One advantage of corporations is that the initial cost of setting them up is usually lower than for other forms of ownership.

Trans Globe Airlines has recently looked into a merger with Royal Blue Airlines,a financially troubled rival.The firms believe the merger will create a stronger company that can offer travelers more flights to a wider variety of destinations.This proposed merger is an example of a:

Once a business is established,it's almost impossible to change from one form of business ownership to another.

The most popular global market for U.S.franchisors has been Canada.

A drawback of sole proprietorships is that they usually have limited access to additional financial resources.

Mel is a major stockholder in Precision Transmission Services (PTS) ,a nationwide network of transmission repair shops founded by his father.Currently,PTS stock is sold on the open market,but Mel has talked to several relatives about his desire to get all of the PTS stock back in his family's hands.Mel is interested in:

Sharon,Lois and Sam have just formed a business partnership.Under their arrangement,Sharon will actively manage the company and assume unlimited liability for the firm's debts.Sam and Lois will invest several thousand dollars of their money and will share in the profits,but will not actively manage the firm and will not have liability for losses beyond their initial investment.This describes a limited partnership.

Which of the following people would be most interested in participating in a business organized as a co-operative?

Any debts or damages incurred by a firm organized as a sole proprietorship are:

A general partner has unlimited liability for the debts of the partnership only if he or she personally approved the decisions that resulted in those debts.

Many mergers in recent years were motivated by a desire of firms to: