Chapter 4

Question 1

Acquisition

Answer 1

The purchase of one company by another, usually by buying its stock

Question 2

Articles of partnership

Answer 2

Legal documents that set forth the basic agreement between partners

Question 3

Board of Directors

Answer 3

A group of individuals, elected by the stockholders to oversee the general operation of the corporation, who set the corporation’s long-range objectives

Question 4

Common Stock

Answer 4

Stock whose owners have voting rights in the corporation, yet do not receive preferential treatment regarding dividends

Question 5

Cooperative (Co-op)

Answer 5

An organization composed of individuals or small businesses that have banded together to reap the benefits of belonging to a larger organization

Question 6

Corporation

Answer 6

A legal entity, created by the state, whose asset and liabilities are separate from its owners

Question 7

Dividends

Answer 7

Profits of a corporation that are distributed in the form of cash payments to stockholders

Question 8

Corporate charter

Answer 8

A legal document that the state issues to a company based on information the company provides in the articles of incorporation

Question 9

General Partnership

Answer 9

A partnership that involves a complete sharing in both the management and the liability of a business

Question 10

Initial Public Offering (IPO)

Answer 10

Selling a corporation’s stock on public markets for the first time

Question 11

Joint venture

Answer 11

A partnership established for a specific project or for a limited time

Question 12

Leveraged buyout (LBO)

Answer 12

A purchase in which a group of investors borrows money from banks and other institutions to acquire a company (or division of one), using the assets of the purchased company to guarantee repayment of the loan

Question 13

Limited Liability Company

Answer 13

Form of ownership that provides limited liability and taxation like a partnership but places fewer restrictions on members

Question 14

Limited Partnership

Answer 14

A business organization that has at least one general partner, who assumes unlimited liability, and at least one limited partner, whose liability is limited to the individual’s investment in the business

Question 15

Merger

Answer 15

The combination of two companies (usually corporations) to form a new company

Question 16

Nonprofit Corporations

Answer 16

Corporations that focus on providing a service rather than earning a profit but are not owned by a government entity

Question 17

Partnership

Answer 17

A form of business organization defined by the Uniform Partnership Act as “an association of two or more persons who carry on as co-owners of a business for profit”

Question 18

Preferred Stock

Answer 18

A special type of stock whose owners, though not generally having a say in running the company, have a claim to profits before other stockholders do

Question 19

Private Corporation

Answer 19

A corporation owned by just one or a few people who are closely involved in managing the business

Question 20

Public Corporation

Answer 20

A corporation whose stock anyone may buy, sell, or trade

Question 21

Quasi-public corporations

Answer 21

Corporations owned and operated by the federal, state, or local government

Question 22

S corporation

Answer 22

Corporation taxed as though it were a partnership with restrictions on shareholders

Question 23

Sole proprietorships

Answer 23

Businesses owned and operated by one individual; the most common form of business organization in the United States

Question 24

Stock

Answer 24

Shares of a corporation that may be bought or sold