Quiz 2 chapter 5

Question 1

sole proprietorship

Answer 1

businesses owned and usually managed by a single individual

SPC

Question 2

Partnership

Answer 2

voluntary agreements where two or more people act as co-owners; there are several types
SPC

Question 3

corporations

Answer 3

legal entities, separate from their owners

SPC

Question 4

4 sole proprietorships: advantages

Answer 4

• retention of control
• pride of ownership
• retention of profits
• possible tax advantage

Question 5

5 sole proprietorships: disadvantages

Answer 5

• limited financial resources
• unlimited liability
• limited ability to attract and retain talented employees
• heavy workload and responsibilities
• lack of permanence

Question 6

General partnerships: advantages

Answer 6

• pooled financial resources
• shared responsibilities
• ease of formation
• tax advantages

Question 7

general partnerships: disadvantages

Answer 7

• unlimited liability
• disagreements
• difficulty in withdrawing from partnership
• lack of continuity

Question 8

general partnership

Answer 8

all partners have the right to participate in the management of the firm, and all share unlimited liability

Question 9

Limited partnership

Answer 9

includes at least one general partner and at least one limited partner (who has limited liability)

Question 10

limited liability partnership

Answer 10

all partners are actively involved but they have some form of liability, which varies by jurisdiction

Question 11

acquisitions

Answer 11

when one firm buys another

Question 12

mergers

Answer 12

two companies agree to become one

Question 13

corporations look for

Answer 13

growth opportunities, operational efficiencies, and competitive advantages

Question 14

divestitures

Answer 14

allow a firm to streamline operations and focus

Question 15

spin off

Answer 15

setting up the division or part of the business as a separate entity (sell shares to existing shareholders)

Question 16

carve out

Answer 16

setting up a separate business from an operation (sell shares to outside investors)

Question 17

Franchising

Answer 17

not a form of ownership but an operation option; the franchisee uses the brand name, trademark, and practices of the franchisor