Chapter 8

Question 1

Sole proprietorship

Answer 1

A business that is established, owned, operated, and often financed by one person

Question 2

Partnership

Answer 2

An association of two or more individuals who agree to operate a business together for profit

Question 3

General partnership

Answer 3

A partnership in which all partners share in the management and profits. Each partner can act on behalf of the company and has unlimited liability for all its business obligations

Question 4

Limited partnership

Answer 4

A partnership with one or more general partners who have unlimited liability, and one or more limited partners whose liability is limited to the amount of their investment

Question 5

General partners

Answer 5

Partners who have unlimited liability for all of the company’s business obligations and who control its operations

Question 6

Limited partners

Answer 6

Partners whose liability for the company’s business obligations is limited to the amount of their investment. They help to finance the business but do not participate in the company’s operations.

Question 7

LLP

Answer 7

Limited Liability Partnership:
In a limited liability partnership, each individual partner is protected from responsibility for the acts of other partners, and each party’s liability is limited to harm resulting from that party’s own actions

Question 8

Corporation

Answer 8

A legal entity with its own rights and responsibilities separate from its shareholders, who therefore are not personally liable for the entity’s actions and liabilities

Question 9

Public corporation

Answer 9

A corporation whose shares are widely held and available to the general public

Question 10

Private corporation

Answer 10

A corporation whose number of shareholders is limited; there are normally restrictions on the transfer of shares to third parties, and its shares do not trade on a recognized stock exchange

Question 11

Shareholders

Answer 11

The owners of a corporation who hold shares of stock that provide certain rights; also known as stockholders

Question 12

Board of directors

Answer 12

A group of people elected by the shareholders to handle the overall management of a corporation, such as setting major corporate goals and policies, hiring corporate officers, and overseeing the company’s operations and finances

Question 13

One-person corporation

Answer 13

A corporation with only one person as the shareholder; common in professional practices (e.g., medical doctors, accountants, or lawyers) and in trades (e.g., plumbers and electricians)

Question 14

Crown corporations

Answer 14

Companies that only the provincial and federal governments can set up

Question 15

Cooperative

Answer 15

A legal entity typically formed by people with similar interests, such as suppliers or customers, to reduce costs and gain economic power. A cooperative has limited liability, an unlimited life span, an elected board of directors, and an administrative staff; all profits are distributed to the member-owners in proportion to their contributions

Question 16

Joint venture

Answer 16

Two or more companies that form an alliance to pursue a particular project for a specified time period

Question 17

Direct selling

Answer 17

Direct selling is a popular marketing structure that connects the sellers “directly” with the customers

Question 18

Merger

Answer 18

The combination of two or more companies to form a new company, which often takes on a new corporate identity

Question 19

Acquisition

Answer 19

The purchase of one company by another company or by an investor group; the identity of the acquired company might be lost

Question 20

Friendly takeover

Answer 20

A takeover that is supported by the management and board of directors of the targeted company

Question 21

Hostile takeover

Answer 21

A takeover that goes against the wishes of the target company’s management and board of directors

Question 22

Horizontal merger or acquisition

Answer 22

A merger or acquisition involving companies at the same stages of the supply chain in the same industry; done to reduce costs, expand product offerings, or reduce competition

Question 23

Conglomerate merger or acqusition

Answer 23

A merger or acquisition involving companies in unrelated businesses; done to reduce risk

Question 24

Vertical merger or acqusition

Answer 24

Mergers or acquisitions involving companies at different stages of the supply chain in the same industry; done to gain control over supplies of resources or to gain access to different markets

Question 25

LBO

Answer 25

Leveraged Buyout:
A corporate takeover financed by large amounts of borrowed money; can be done by outside investors or by a company’s own management

Question 26

Franchising

Answer 26

A form of business organization based on a business arrangement between a franchisor, which supplies the product concept, and the franchisee, which sells the goods or services of the franchisor in a certain geographic area

Question 27

Franchisor

Answer 27

In a franchising arrangement, the company that supplies the product concept to the franchisee

Question 28

Franchisee

Answer 28

In a franchising arrangement, the individual or company that sells the goods or services of the franchisor in a certain geographic area

Question 29

Franchise agreement

Answer 29

A contract setting out the terms of a franchising arrangement, including the rules for operating the franchise, the services provided by the franchisor, and the financial terms. Under the contract, the franchisee is allowed to use the franchisor’s business name, trademark, and logo