1.Paul and Megan are partners in an accounting firm. They have an argument, and Paul decides to leave the firm. All of the following are true of what would happen to the partnership EXCEPT
- Megan would continue the partnership without any changes.
- the firm’s liabilities would be paid off and the assets would be divided between Paul and Megan.
- Megan would have to find a new partner or reorganize the business as a sole proprietorship.
- Megan would be at a serious disadvantage in continuing the business.
- the business could be disrupted, financing could be reduced, and Paul’s management skills would be lost.
2.When Lisa and Steve decided to start their own house flipping business, their state required them to draw up an agreement listing how much money they contributed, their management roles or duties, how their profits and losses will be divided, how they may leave the partnership, and any other restrictions that might apply to their agreement. What type of agreement is this?
- articles of incorporation
- codes of conduct
- articles of partnership
- a corporate charter
- a partnership capital statement
3.When Russell turned 21-years-old, his father gave him a management position at the family’s hardware store. He explained to Russell that his family had owned and operated this store for five generations, and that someday, he would be able to pass it on to his children. He made Russell promise that he would never sell the company or any of its stock or hire managers from outside the family. This business is a
- private corporation.
- public corporation.
- sole proprietorship.
- limited partnership.
- cooperative.
4.Ken wants to buy stock in Chef Master, a large kitchen appliance corporation. He doesn’t have time to attend any meetings, and he doesn’t have any interest in having a say in how the company is run. However, he does want to receive dividend payments before anyone else. What type of stock should he buy?
- common stock
- limited stock
- independent stock
- preferred stock
- proxy stock
5.Jennifer, Liza, and Tami decided to start a freelance publishing business together. They have been working separately as independent consultants for several years, but they decided they would benefit greatly from joining forces and starting an S corporation. All of the following are benefits of starting this type of business EXCEPT
- the ease of formation and operation.
- the simple method of taxation.
- perpetual life.
- the limited liability of shareholders.
- the ability to shift income and appreciation to others.
6.Five dog breeders in Kentucky decided to work together to become more profitable and save money. Together, they can buy dog food, treats, toys, beds, leashes, and collars in bulk at a lower price. They also have a deal with a local veterinarian to charge them lower prices for check-ups and routine treatments. These dog breeders have formed a
- sole proprietorship.
- joint venture.
- corporation.
- cooperative.
- general partnership.
7.When Hardware Headquarters and National Hardware joined forces, it reduced the number of corporations competing in the hardware industry. As a result, federal regulators carefully reviewed the merger before it was allowed to proceed. What type of merger is this?
- a vertical merger
- an equity carve-out
- a conglomerate merger
- a divestment
- a horizontal merger
