Question 1

A corporation primarily or wholly owned by another company is known as a(n)________.
A) domestic company
B) alien company
C) subsidiary
D) parent company
E) holding company

Accepted Answer

C) A corporation primarily or wholly owned by another company is known as a subsidiary.

Question 2

Corporate officers are the ________.
A) people who elect directors of a company
B) official representatives of shareholders
C) top executives who run a corporation
D) middle level managers of a corporation
E) lower level employees of an organization

Accepted Answer

C) Corporate officers are the top executives who run the company. Executives such as CEO and CFO are corporate officers.

Question 3

A(n)________ has most of the attributes of a regular corporation but adds the legal requirement that the company must also pursue a stated non-financial goal.
A) limited liability corporation
B) general partnership
C) S corporation
D) sole proprietorship
E) benefit corporation

Accepted Answer

E) A benefit corporation has most of the attributes of a regular corporation but adds the legal requirement that the company must also pursue a stated non-financial goal, such as hiring workers whose life histories make employment difficult to attain, or reducing the environmental impact of particular products.

Question 4

The board of directors are ________.
A) the highest-ranked managers of a corporation
B) elected by corporate officers
C) representatives of the shareholders
D) the top executives running a corporation
E) elected by the employees of an organization

Accepted Answer

C) The board of directors are a group of professionals elected by shareholders as their representatives, with responsibility for the overall direction of the company and the selection of top executives.

Question 5

A potentially significant disadvantage of a partnership is that ________.
A) it involves double taxation of the income generated
B) income tax is not straightforward and is complex
C) it has more chances for disagreement and conflict
D) it does not present opportunities to share costs
E) the amount of money generated in a partnership is low

Accepted Answer

C) Partners can disagree over business strategy, the division of profits (or the liability for losses), hiring and firing of employees, and other significant matters. This attracts more conflicts in the business.

Question 6

Pacific Electronics is a Swiss corporation doing business in the U.S.It was incorporated in Switzerland,in the year 1997.The company sells products such as electronic measuring devices,microprocessors,and microcontrollers.Pacific Electronics is called a(n)________.
A) alien corporation
B) foreign corporation
C) domestic corporation
D) external company
E) unlimited company

Accepted Answer

A) A corporation that operates in the United States but is incorporated in another country is called an alien corporation. Pacific Electronics is such a corporation.

Question 7

RK Associates is a firm incorporated in the state of Delaware.The company has operations in thirteen states.However,the company does not have any facilities in countries other than the United States.RK Associates is a(n)________.
A) international company
B) local corporation
C) domestic company
D) alien corporation
E) foreign corporation

Accepted Answer

E) A company that is incorporated in one state but that does business in several other states where it is registered is called a foreign corporation. RK Associates is such a firm.

Question 8

Robex Retail is a retail chain that has more than 390 stores in the United States.The directors of the company decide to launch operations in Italy to increase the company's market reach.Many of the shareholders think that this decision is not appropriate in light of the economic slowdown in Europe.A group of shareholders unite to pressurize the board of directors to change their decision.This is an example of ________.
A) shareholder protection
B) shareholder activism
C) hostile takeover
D) corporate governance
E) shareholder resolution

Accepted Answer

B) Shareholder activism refers to activities taken by shareholders (individually or in groups) to influence executive decision making in areas ranging from strategic planning to social responsibility.

Question 9

RSS Bank is registered as a corporation in Maryland.Apart from its financial objectives,the company has also formed a legal requirement to work for the welfare of the elderly citizens in the state.The bank is obligated to work for the cause even if there is a change in ownership.Based on this information,it can be concluded that RSS bank is a(n)________.
A) public corporation
B) benefit corporation
C) unlimited company
D) S corporation
E) not-for-profit company

Accepted Answer

B) A benefit corporation has most of the attributes of a regular corporation but adds the legal requirement that the company must also pursue a stated non-financial goal, such as hiring workers whose life histories make employment difficult to attain, or reducing the environmental impact of particular products. Using the given information, we can conclude that RSS bank is such a corporation.

Question 10

A company that is incorporated in one state (frequently the state of Delaware,where incorporation laws are more lenient)but that does business in several other states where it is registered is called a(n)________.
A) foreign corporation
B) domestic corporation
C) global corporation
D) alien corporation
E) international corporation

Accepted Answer

A) A company that is incorporated in one state (frequently the state of Delaware, where incorporation laws are more lenient) but that does business in several other states where it is registered is called a foreign corporation.

Question 11

Which of the following is a key advantage that corporations have over sole proprietorships and partnerships?
A) Management is less likely to lose control of operations in corporations than proprietorships and partnerships.
B) Reporting requirements of corporations are simpler than sole proprietorships and partnerships.
C) Forming corporations involves less cost over sole proprietorships and partnerships.
D) Investments in corporations have more liquidity than partnerships and sole proprietorships.
E) Corporations have a less complex structure compared to sole proprietorships and partnerships.

Accepted Answer

D) The stock of publicly-traded companies has a high degree of liquidity, which means that investors can easily and quickly convert their stock into cash by selling it on the open market. In contrast, liquidating (selling) the assets of a sole proprietorship or a partnership can be slow and difficult.

Question 12

A group of college graduates starts a business.They want to give their business a structure such that their risk is limited to the amount they have invested in the business.They also want to avoid double taxation of the income that they generate from the business.Which of the following structures is most suitable to satisfy these wants?
A) sole proprietorship
B) corporation
C) direct partnership
D) S corporation
E) general partnership

Accepted Answer

D) S corporation is a type of corporation that combines the capital-raising options and limited liability of a corporation with the federal taxation advantages of a partnership. The owners can incorporate their business as an S corporation in order to satisfy their requirements.

Question 13

Which of the following is a valid observation of corporations?
A) A corporation cannot own property of its own.
B) All corporations should sell its stock to the public.
C) The owners of a corporation are called directors.
D) A corporation is distinct from the people running it.
E) A corporation must be owned by less than fifty people.

Accepted Answer

D) A corporation is a legal entity, distinct from any individual persons, that has the power to own property and conduct business.

Question 14

A disadvantage of the corporate structure is that it ________.
A) limits the business's ability to raise capital
B) limits the liquidity that businesses have
C) increases the risk of conducting business
D) involves strict reporting requirements
E) imposes unlimited liability on the owners

Accepted Answer

D) To help investors make informed decisions about stocks, government agencies require publicly-traded companies to publish extensive and detailed financial reports. These reports can eat up a lot of staff and management time, and they can expose strategic information that might benefit competitors or discourage investors unwilling to wait for long-term results.

Question 15

In the United States,a corporation is called a domestic corporation if it ________.
A) does business only in the state where it is chartered
B) files income taxes with the U.S. government
C) does business only within the United States
D) has more than 5 subsidiaries in the United States
E) has incorporated its business in any of the U.S. states

Accepted Answer

A) A domestic corporation is a corporation that does business only in the state where it is chartered or incorporated.

Question 16

S corporation is a type of corporation that ________.
A) combines limited liability of a corporation with the federal taxation advantages of a partnership
B) does not have such advantages as limited liability of investments
C) does not split the ownership into smaller units
D) files income tax returns in a country other than the country of operation
E) combines limited ownership of a proprietorship with the capital-raising options of a corporation

Accepted Answer

A) S corporation is a type of corporation that combines the capital-raising options and limited liability of a corporation with the federal taxation advantages of a partnership.

Question 17

A public corporation refers to a corporation ________.
A) that is allowed to sell stock only to a limited number of investors
B) whose stock is sold to general people
C) that is owned solely by the federal government
D) that is owned solely by state/federal government
E) whose stock is not traded in stock exchanges or other markets

Accepted Answer

B) A public corporation refers to a corporation whose stock is sold to the general public. It is also known as publicly held or publicly traded corporation.

Question 18

Which of the following is a key difference between private corporations and public corporations?
A) Private corporations are legally a group of people, whereas public corporations are distinct from any individual persons.
B) Private corporations cannot own property, whereas public corporations can own property.
C) Public corporations cannot own property, whereas private corporations can own property.
D) Private corporations do not have the power to run business of its own, whereas public corporations can run a business of its own.
E) Private corporations are owned by a few people, whereas public corporations can be owned by anyone who has the means to buy stake.

Accepted Answer

E) The stock of a private corporation is owned by only a few individuals or companies, whereas the stock of a public corporation is sold to anyone who has the means to buy it.

Question 19

Who is the highest-ranked officer of a corporation?
A) chief information officer
B) chief financial officer
C) chief operating officer
D) chief executive officer
E) chief technology officer

Accepted Answer

D) The highest-ranking officer is the chief executive officer (CEO), and that person is aided by a team of other "C-level" executives, such as the chief financial officer (CFO), chief information officer (CIO), chief technology officer (CTO), and chief operating officer (COO).

Question 20

Which of the following is a document that authorizes another person to vote on behalf of a shareholder in a corporation?
A) agency agreement
B) proxy
C) draft
D) affidavit
E) share certificate

Accepted Answer

B) A proxy is a document that authorizes another person to vote on behalf of a shareholder in a corporation.

Quiz 5: Forms of Ownership

A corporation primarily or wholly owned by another company is known as a(n) ________.

Corporate officers are the ________.

A(n) ________ has most of the attributes of a regular corporation but adds the legal requirement that the company must also pursue a stated non-financial goal.

The board of directors are ________.

A potentially significant disadvantage of a partnership is that ________.

Pacific Electronics is a Swiss corporation doing business in the U.S.It was incorporated in Switzerland,in the year 1997.The company sells products such as electronic measuring devices,microprocessors,and microcontrollers.Pacific Electronics is called a(n) ________.

RK Associates is a firm incorporated in the state of Delaware.The company has operations in thirteen states.However,the company does not have any facilities in countries other than the United States.RK Associates is a(n) ________.

A company that is incorporated in one state (frequently the state of Delaware,where incorporation laws are more lenient) but that does business in several other states where it is registered is called a(n) ________.

Which of the following is a key advantage that corporations have over sole proprietorships and partnerships?

Which of the following is a valid observation of corporations?

A disadvantage of the corporate structure is that it ________.

In the United States,a corporation is called a domestic corporation if it ________.

S corporation is a type of corporation that ________.

A public corporation refers to a corporation ________.

Which of the following is a key difference between private corporations and public corporations?

Who is the highest-ranked officer of a corporation?

Which of the following is a document that authorizes another person to vote on behalf of a shareholder in a corporation?