Question 1

The is the most common form of business ownership.
A)partnership
B)sole proprietorship
C)corporation
D)joint venture

Accepted Answer

Sole proprietorship is the most common form of business ownership, representing over 70% of small businesses in the United States. It is a simple and flexible structure where the business is owned and operated by one individual who assumes all risks and responsibilities. Partnerships and corporations are also common forms of ownership, but they are more complex and require greater legal and financial formalities. Joint ventures are typically temporary partnerships established for a specific project or venture.

Question 2

The group farthest removed from the daily operations of a corporation are:
A)managers
B)officers
C)directors
D)owners

Accepted Answer

Owners are usually the farthest removed from the daily operations of a corporation as they do not typically participate in day-to-day decision-making or management tasks. They may only receive regular updates on the company's performance and attend annual shareholder meetings.

Question 3

Global franchising offers:
A)few opportunities for Canadian investors.
B)American firms the opportunity to market goods overseas without any need to adjust for cultural differences.
C)opportunities for both large and small franchises.
D)opportunities for the largest franchise systems,but not small ones.

Accepted Answer

Global franchising offers opportunities for both large and small franchises. Franchising can be a successful way to expand business internationally, and there are options for different types of franchises to enter new markets.

Question 4

Jamie and Maria invested all their savings in a small pizzeria they opened outside the University of Western Ontario.They operated the business as a general partnership.After 11 months the business went broke and Jamie and Maria were left with outstanding bills of $37,500,which is more than their investment in the company.Jamie and Maria can:
A)lose only the funds they originally invested in their company.
B)lose their personal assets as the result of their company's financial problems.
C)lose only the total value of the assets actually used to operate the business.
D)avoid any liability for these debts since a partnership is considered to be a business entity that is separate and distinct from the partners who own it.

Accepted Answer

In a general partnership, the partners have unlimited liability for the debts and obligations of the business, meaning that their personal assets are at risk if the business fails to pay its debts. Therefore, Jamie and Maria may be forced to sell their personal assets to cover the outstanding bills of $37,500, which is more than their investment in the company. Option A and C are incorrect because the partners' liability is not limited to their initial investment or the assets used to operate the business. Option D is incorrect because partnerships are not considered separate legal entities from their owners.

Question 5

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:
A)can make managerial decisions as long as they do not involve the payment of money.
B)can fill in as a manager whenever necessary,as long as it is for only a limited time.
C)can manage the firm as long as he gets approval from the company's other general partners.
D)cannot participate in the management of the partnership.

Accepted Answer

As a limited partner, Martyn cannot participate in the management of the partnership. This is because limited partners have no control over the day-to-day operations of the partnership and are generally only invested for the purpose of receiving a share of the profits. Any management decisions or actions taken by a limited partner can potentially put their limited liability status at risk. Therefore, Martyn should decline Mary's request to temporarily perform her managerial duties.

Question 6

One disadvantage of________is the initial cost of starting this form of business organization.
A)limited partnerships
B)general partnerships
C)corporations
D)sole proprietorships

Accepted Answer

Corporations typically have higher initial costs due to legal fees and various filings required to set up the business entity. Limited partnerships and general partnerships may also have some initial costs but they are generally lower than corporations. Sole proprietorships have the lowest initial cost as they are the simplest business structure and do not require any formal registration.

Question 7

Ted and Mark have been partners in a dry cleaning business for the past three years.They would like their brother Todd to join them.Unfortunately,partnership law states that only two partners can participate in a partnership.

Accepted Answer

This statement is false. Partnership law allows for more than two partners to participate in a partnership. However, Ted and Mark may have chosen to limit their partnership agreement to only two partners.

Question 8

Ellen has just been granted a franchise from Tim Horton's.The new business will be set up as a:
A)sole proprietorship
B)corporation
C)partnership
D)any form of business she chooses

Accepted Answer

A franchise can be set up in any form of business structure, including sole proprietorship, corporation, or partnership, depending on the franchise agreement and Ellen's preference.

Question 9

Which of the following operations is not an example of a franchise?
A)Quiznos Sub
B)Swiss Chalet
C)Home Hardware
D)Loblaws

Accepted Answer

Loblaws is a grocery store chain owned by Loblaw Companies Limited, which operates independently as a corporation, and is not a franchise.

Question 10

In a co-operative,members/customers:
A)each have unlimited liability for the debts of the firm.
B)take turns serving on the board that manages the company.
C)democratically control their businesses using the one member/one vote system.
D)are known as limited partners.

Accepted Answer

Co-operatives are democratically controlled by their members/customers using the one member/one vote system. They are not personally liable for the debts of the firm and do not take turns serving on a board. Limited partners are a type of partner in a limited partnership, which is a different type of business structure.

Question 11

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:
A)be entitled to full reimbursement of any investment losses.
B)be personally responsible for all remaining debts.
C)automatically qualify for federal reimbursement for any losses suffered by the firm.
D)lose their investment but nothing else.

Accepted Answer

As a stockholder in Endrun Investments, Ram only owns a portion of the corporation, not the corporation itself. Therefore, in the event of bankruptcy, Ram would only lose his investment in the corporation and would not be personally responsible for any remaining debts.

Question 12

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

Accepted Answer

While changing from one form of ownership to another can sometimes be a complicated and expensive process, it is not impossible. Businesses can convert from sole proprietorships to partnerships or LLCs, or from partnerships to corporations, for example. It may require legal and accounting assistance, as well as filing paperwork with the appropriate state and federal agencies, but it can be done.

Question 13

One reason franchises have become so popular is that this arrangement provides the franchisee with:
A)limited liability.
B)the right to retain all profits earned by their franchise.
C)a low cost way to start a business.
D)a nationally recognized name and product.

Accepted Answer

Franchises offer the advantage of having a nationally recognized name and product, which can give the franchisee a competitive edge in the market. This can lead to increased sales and profitability. While franchises may also provide limited liability and a lower cost of entry, these are not the primary reasons for their popularity.

Question 14

An evaluation of franchising would conclude that this type of arrangement:
A)has little chance of success outside the United States because many foreign countries do not allow such arrangements.
B)has become the dominant form of business organization in Canada because it has many advantages and almost no disadvantages.
C)appeals to people who want to own a business,but are not comfortable starting a company from scratch.
D)has a much higher risk of failure than independent companies.

Accepted Answer

Franchising appeals to people who want to own a business but are not comfortable starting a company from scratch. Franchising provides the advantage of having an established brand, proven business model, and support from the franchisor while still allowing some degree of independence as a business owner. The success rate for franchise businesses is generally higher compared to independent businesses because of the support and resources provided by the franchisor. However, the success rate still depends on various factors such as the location, market demand, and the individual's ability to run the business effectively.

Question 15

In a typical franchise agreement,the franchisor pays the franchisee a fee to manage its company,and the two of them split the profits based on the percentages established in the agreement.

Accepted Answer

In a typical franchise agreement, the franchisee pays the franchisor a fee (franchise fee) to use the franchisor's brand and operating system, and the franchisee keeps the profits (but must also pay ongoing royalties and adhere to certain operational and quality standards mandated by the franchisor).

Question 16

Home-based franchisees feel less isolated than who?
A)home-based entrepreneurs
B)managers
C)owners
D)customers

Accepted Answer

Home-based franchisees have the advantage of being part of a larger network, with access to support and guidance from the franchisor and other franchisees. Home-based entrepreneurs, on the other hand, may feel more isolated and lacking in resources, as they are typically working solo without the backing of a franchise system.

Question 17

The most popular international target for Canadian-based franchises is:
A)The United States
B)China
C)India
D)The European Common Market

Accepted Answer

The United States is the most popular international target for Canadian-based franchises due to its large population, similar business culture, and proximity to Canada. It also has a high demand for Canadian products and services, making it a logical choice for expansion.

Question 18

Which of the following is an advantage of a sole proprietorship?
A)longer survival
B)no special taxes
C)limited growth
D)unlimited liability

Accepted Answer

One advantage of a sole proprietorship is that there are no special taxes. The sole proprietorship's income is included in the owner's personal income tax return.

Question 19

Co-operatives differ from other businesses in several ways except:
A)allocation of profits
B)purpose
C)control structure
D)having a long history and proven track record

Accepted Answer

The statement that co-operatives have a long history and proven track record is not a way in which they differ from other businesses, as some traditional businesses may also have a long history and proven track record. The other options (allocation of profits, purpose, and control structure) are ways in which co-operatives typically differ from other businesses.

Question 20

Which of the following statements about co-operatives is most accurate?
A)has become a major force in Canadian agriculture and housing.
B)there are about 500 co-operatives in Canada.
C)are found in few sectors of the economy.
D)provide products and services to about 1 million Canadians.

Accepted Answer

Co-operatives have indeed become a major force in Canadian agriculture and housing, with over 9,000 co-operatives and credit unions providing products and services to about 18 million members or about half the Canadian population. Options B, C, and D are incorrect as they either underestimate the number of co-operatives in Canada or the sectors they operate in and the number of Canadians they serve.

Quiz 6: Forms of Business Ownership

The is the most common form of business ownership.

The group farthest removed from the daily operations of a corporation are:

Global franchising offers:

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:

One disadvantage of________is the initial cost of starting this form of business organization.

Ted and Mark have been partners in a dry cleaning business for the past three years.They would like their brother Todd to join them.Unfortunately,partnership law states that only two partners can participate in a partnership.

Ellen has just been granted a franchise from Tim Horton's.The new business will be set up as a:

Which of the following operations is not an example of a franchise?

In a co-operative,members/customers:

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

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

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

In a typical franchise agreement,the franchisor pays the franchisee a fee to manage its company,and the two of them split the profits based on the percentages established in the agreement.

Home-based franchisees feel less isolated than who?

The most popular international target for Canadian-based franchises is:

Which of the following is an advantage of a sole proprietorship?

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

Which of the following statements about co-operatives is most accurate?