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Exam 6: Forms of Business Ownership

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Question 31

True/False

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Two of Rolanda's friends have approached her to see if she would like to join them in starting a new business.Rolanda is willing to invest money in the business and share in its profits,but she has no desire to be involved in the day-to-day management of the company.She is also very nervous about the risk of losing her personal assets.Rolanda's preferences suggest that she would like to see the business operated as a general partnership.

A) True
B) False

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Question 32

Multiple Choice

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Homer and Marge have decided to open a floral design shop,which they intend to run as co-owners.Both intend to take an active role in the management of their new business,and each will accept unlimited liability.Homer and Marge are planning to operate a:

A) general partnership.
B) limited partnership.
C) co-operative.
D) joint venture.

E) A) and B)
F) A) and C)

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Question 33

Multiple Choice

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Co-operatives differ from other businesses in several ways except:

Co-ops distribute their profits to members as a reduction in members' costs.These profits are non-taxable.

Marie recently purchased 100 shares of stock in the McBun Development Corporation.Marie has become a(n) __________of McBun Development.

The stockholders in a corporation elect a board of directors to oversee the company's major policy issues.

A recent study showed that partnerships are more likely to fail than sole proprietorships.

A partner who invests money in a business,but does not take an active role in management or assume unlimited liability for the firm's losses is known as a(n) :

Ram is a stockholder in Endrun Investments,which is organized as a corporation.Endrun recently lost a major court decision and will probably be forced into bankruptcy.In fact,the damages awarded are so great that,even if all of its assets are sold and the proceeds are used to pay its debts,Endrun is likely to still owe money to its creditors.If Endrun does go bankrupt,Ram and the other stockholders will:

There are advantages and disadvantages to all forms of business ownership.

Corporations are subject to double taxation.

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

In a general partnership,all owners share in both management of the business and in the assumption of liability for the firm's debts.

Connie is a general partner in a retail cookie store.Her personal assets are protected from the debts of the business.

One reason franchises have become so popular is that this arrangement provides the franchisee with:

Martyn is a limited partner in Gettout & Associates.Mary Gettout,one of the senior general partners in the company,must temporarily leave the company to attend to some personal matters.Mary has asked Martyn to temporarily perform her managerial duties while she is gone.As a limited partner,Martyn:

Mary is interested in becoming a franchisee in Katie's Grill,a very successful fast food chain from the Canadian West.Which of the following problems is Mary most likely to encounter if she agrees to become a franchisee?

List some of the economic sectors where you find co-operatives in Canada.

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

The process and policies that determine how an organization interacts with its shareholders is known as corporate governance.