Question 1

The form of business organisation most heavily regulated by the government is the
A) partnership.
B) corporation.
C) joint venture.
D) syndicate.
E) sole trading.

Accepted Answer

Corporations are heavily regulated by the government due to their larger size, public ownership, and potential impact on the economy. The government regulates aspects such as financial reporting, taxation, employee benefits, environmental impact, and consumer protection. Other forms of business organization may also be subject to regulations, but not to the extent that corporations are.

Question 2

What does double taxation mean?
A) Companies must pay taxes on their income, and then employees must pay taxes on their salaries and wages.
B) Companies have to pay both sales taxes and income taxes.
C) Companies must pay taxes on their earnings, and then stockholders pay taxes on their dividends.
D) Suppliers tax their customers, and in turn these businesses tax the ultimate consumer.
E) Companies must pay taxes on corporate income and then additional taxes on distributions to profit stockholders.

Accepted Answer

Double taxation refers to when a company has to pay taxes on their earnings and then stockholders pay taxes on their dividends. This means that the same income is being taxed twice, hence double taxation.

Question 3

Which of the following is not a disadvantage of the corporate form of ownership?
A) Difficulty of formation
B) Limited liability
C) Expense of incorporation and selling stock
D) Lack of secrecy
E) Double taxation

Accepted Answer

Limited liability is actually an advantage of the corporate form of ownership as it protects the shareholders from being personally liable for the company's debts or legal issues. The other options are all disadvantages associated with corporate ownership, such as the difficulty and expense of incorporation, lack of secrecy, and potential for double taxation.

Question 4

Which of the following is a disadvantage of the corporate form of organisation?
A) Both the corporation and its stockholders are taxed on profits retained and distributed.
B) Ownership of stock is easy to transfer.
C) More capital can be raised by the corporate form.
D) Corporations can hire better managers.
E) The organisation survives its owners.

Accepted Answer

One disadvantage of the corporate form of organization is double taxation. Both the corporation and its stockholders are taxed on the profits retained by the corporation and distributed as dividends. This can lead to a significant reduction in the net income available to stockholders. Choices B through E are advantages of the corporate form of organization.

Question 5

Wade serves on Foot Locker's board of directors.How did Wade get this position?
A) He volunteered for the assignment.
B) He was appointed by the chief executive officer.
C) He was assigned by the Federal Trade Commission.
D) Through default as the largest stockholder, Wade got the position.
E) He was elected by the company's stockholders.

Accepted Answer

Typically, members of a company's board of directors are elected by the company's stockholders.

Question 6

Shane is looking for ways to get more capital for his appliance sales and service business.He is very protective of his company's information and fears that it will get into the wrong hands.Shane would probably not want to
A) hire new employees.
B) incorporate his company.
C) get a loan from a bank.
D) take on a trustworthy friend as a partner.
E) use a computerised accounting system.

Accepted Answer

Incorporating a company involves making certain information public, which Shane fears could get into the wrong hands.

Question 7

Tiffany is about to finish her degree in business management and wants to find a job that will provide her with opportunities to advance within an organisation.What type of business organisation should Tiffany work for?
A) A sole trader
B) A small family-owned business that is incorporated
C) A partnership
D) A corporation
E) An unlimited partnership

Accepted Answer

A corporation is the best choice for Tiffany because it offers opportunities for advancement within the organization. Corporations are typically larger than sole traders and partnerships and have a more defined hierarchy, which provides more opportunities for career growth and promotion. Additionally, corporations often offer benefits such as retirement plans, health insurance, and other perks that can make them more attractive to job seekers.

Question 8

When Alyssa decides that she no longer wants her Radio Shack stock, she will discover that a related benefit of a corporation is
A) the ease of transfer of ownership.
B) its perpetual life.
C) limited liability.
D) specialised management.
E) avoiding double taxation.

Accepted Answer

The ease of transfer of ownership is a benefit of being a corporation because stocks and ownership can be easily bought and sold on the stock market. This allows owners, like Alyssa, to easily sell their shares if they no longer want them.

Question 9

Unless specified in the charter, a corporation has a
A) legal life of one decade.
B) life of seventeen years, which is renewable.
C) life of fifty years.
D) perpetual life.
E) legally recognised life, which varies from state to state.

Accepted Answer

Unless specified in the charter, a corporation has perpetual life, meaning it continues to exist until it is dissolved or merges with another company.

Question 10

Corporate officers are
A) listed in the corporate charter.
B) elected by stockholders.
C) appointed by the board of directors.
D) appointed by management.
E) elected by incorporators.

Accepted Answer

Corporate officers are typically appointed by the board of directors, not elected by stockholders or incorporators. While they may be listed in the corporate charter, this is not a requirement and does not necessarily determine the appointment process. Management may have input in the selection of officers, but they are ultimately appointed by the board.

Question 11

Mark owns stock in Walgreens.He has the right to vote on company issues and examine corporate records, and he receives dividends from Walgreens' profits.What type of stock does Mark own?
A) Common
B) "A" class
C) Proxy
D) Dividend
E) Preferred

Accepted Answer

Common stock provides shareholders with voting rights, ownership in the company, and the right to receive dividends from profits.

Question 12

How can the following quotation best be explained: "Stockholders control the activities of a corporation"?
A) All stockholders vote on all the major issues and problems that a company faces on a monthly basis.
B) Stockholders are intricately involved in the daily operations of a corporation.
C) Stockholders elect the board of directors, and this board is responsible for appointing corporate officers who manage the daily business of the corporation.
D) Stockholders vote for the members of the board of directors, and this board makes all the daily business decisions for the corporation.
E) Stockholders usually call company management and tell executives better ways to run the organisation.

Accepted Answer

Stockholders elect the board of directors, and this board is responsible for appointing corporate officers who manage the daily business of the corporation. The board of directors is accountable to the stockholders and makes decisions on behalf of the company, but stockholders do not typically make daily business decisions or tell executives how to run the organization.

Question 13

The order of difficulty and expense, from most to least, when forming a business organisation is as follows:
A) corporation, sole traders, partnership.
B) corporation, partnership, sole traders.
C) partnership, corporation, sole trader.
D) partnership, sole trader, partnership.
E) sole trader, partnership, corporation.

Accepted Answer

Forming a corporation is the most difficult and expensive due to legal and regulatory requirements, including formal registration and ongoing compliance requirements. A partnership typically requires a written agreement, but is generally easier and less expensive to set up than a corporation. Sole proprietorships (sole traders) are the easiest and least expensive to establish, as they have no formal structure or registration requirements, although there may be local business license or permit requirements to comply with. Therefore, the correct order of difficulty and expense is corporation, partnership, sole traders.

Question 14

The most effective form of business organisation for raising capital is the
A) joint venture.
B) syndicate.
C) sole trader.
D) partnership.
E) corporation.

Accepted Answer

A corporation is the most effective form of business organisation for raising capital because it can issue stocks and shares to investors who are interested in investing in the company. This provides a way for the company to raise large amounts of capital, which can be used to fund growth and expansion or to take advantage of new business opportunities. Additionally, corporations tend to have a more established reputation than other forms of business organisation, which can make them more attractive to investors looking for a stable and profitable investment.

Question 15

The top governing body of a corporation is known as the
A) incorporators.
B) stockholders.
C) management.
D) officers.
E) board of directors.

Accepted Answer

The top governing body of a corporation is the board of directors who make decisions and set policies for the corporation. The incorporators are the individuals who file the necessary paperwork to create a corporation. Stockholders own shares in the corporation but do not necessarily make governing decisions. Management and officers are responsible for the day-to-day operations of the corporation but are not the top governing body.

Question 16

All of the following are disadvantages of corporations except
A) perpetual life.
B) double taxation.
C) lack of secrecy.
D) expensive formation.
E) heavy government regulation.

Accepted Answer

Perpetual life is actually an advantage of corporations as they can continue to exist even after the death or change of ownership of a shareholder. Therefore all the other options B) double taxation, C) lack of secrecy, D) expensive formation, and E) heavy government regulation are disadvantages of corporations.

Question 17

The retail card and gift shop chain that Heidi started has since been incorporated.Which of the following best describes the limited liability that Heidi has as the primary stockholder in this corporation?
A) Heidi has no responsibility if the business fails and will still be able to get her initial investment back.
B) Heidi may have to give up her car and house if the corporation fails in order to cover the debts of the corporation.
C) The other stockholders will be able to seize Heidi's personal money but not her primary residence in the event that the business fails.
D) Heidi's personal assets will be protected in the event that the corporation fails, although she could lose her entire investment.
E) Heidi will only be liable for losses that develop from decisions she made about the daily business operations.

Accepted Answer

As the primary stockholder in the corporation, Heidi's personal assets will be protected in the event that the corporation fails. However, she may lose her entire investment in the corporation. This is known as limited liability, which is a benefit of incorporating a business.

Question 18

Your friend Steve owns a considerable amount of ordinary share in Intel, the large microchip manufacturer.He wants to cast his votes on various issues at the annual stockholders' meeting, but he does not have the time to travel a great distance to the meeting.Instead of attending the meeting, Steve decides to register his votes by
A) registered mail.
B) pre-emptive right.
C) proxy.
D) power of attorney.
E) preferred stock.

Accepted Answer

A proxy allows Steve to appoint someone to attend the meeting and vote on his behalf. This is the best choice for Steve since he does not have the time to attend the meeting in person. Registered mail, pre-emptive right, power of attorney, and preferred stock are not relevant to casting votes at a stockholders' meeting.

Question 19

Which of the following is an advantage of the corporate form of organisation?
A) Ownership of stock is easy to transfer.
B) Forming a corporation is a complex and costly process.
C) The corporation and its stockholders pay taxes on profits.
D) A corporation must submit detailed information to government agencies.
E) It is difficult to keep operations confidential because of required reports.

Accepted Answer

Ownership of stock in a corporation is easy to transfer, which means it is easier for investors to buy and sell shares in the company. This liquidity makes it a more attractive option for investors, as they can easily exit their investment if they need or want to.

Question 20

The form of business organisation that experiences double taxation is the
A) partnership.
B) corporation.
C) venture company.
D) syndicated partnership.
E) sole trader.

Accepted Answer

Corporations are subject to double taxation, meaning the corporation pays taxes on its profits and then shareholders also pay taxes when they receive dividends or sell their shares. Other forms of business organization, such as partnerships and sole traders, are not subject to double taxation.

Quiz 4: Types of Business Ownership

The form of business organisation most heavily regulated by the government is the

What does double taxation mean?

Which of the following is not a disadvantage of the corporate form of ownership?

Which of the following is a disadvantage of the corporate form of organisation?

Wade serves on Foot Locker's board of directors.How did Wade get this position?

Shane is looking for ways to get more capital for his appliance sales and service business.He is very protective of his company's information and fears that it will get into the wrong hands.Shane would probably not want to

Tiffany is about to finish her degree in business management and wants to find a job that will provide her with opportunities to advance within an organisation.What type of business organisation should Tiffany work for?

When Alyssa decides that she no longer wants her Radio Shack stock, she will discover that a related benefit of a corporation is

Unless specified in the charter, a corporation has a

Corporate officers are

Mark owns stock in Walgreens.He has the right to vote on company issues and examine corporate records, and he receives dividends from Walgreens' profits.What type of stock does Mark own?

How can the following quotation best be explained: "Stockholders control the activities of a corporation"?

The order of difficulty and expense, from most to least, when forming a business organisation is as follows:

The most effective form of business organisation for raising capital is the

The top governing body of a corporation is known as the

All of the following are disadvantages of corporations except

The retail card and gift shop chain that Heidi started has since been incorporated.Which of the following best describes the limited liability that Heidi has as the primary stockholder in this corporation?

Which of the following is an advantage of the corporate form of organisation?

The form of business organisation that experiences double taxation is the