True or False
One of the benefits of being a sole proprietor is unlimited financial liability.( )
One of the disadvantages of being a sole proprietor is difficulty in selling or passing along the business.( )
In a master limited partnership, the partnership sells stock on a stock exchange, but pays a lesser rate than the corporate income tax.( )
Marilyn and her sister Sharon opened a business that sold homemade bath products in decorative baskets. After many successful years, Marilyn wanted to hand down her part of the business to her daughter, Louise. But Sharon did not want to partner with Louise. Sharon insisted that Marilyn sell her Marilyn's share of the business. This situation reflects one of the three basic drawbacks of being a partnership.( )
In order to establish a partnership, you must have a lawyer draw up a legal agreement in the form of articles of partnership.( )
Miguel and Ricardo have partnered in running a one-shop auto repair business for several years. Lately they have had to turn away many customers for lack of time, mechanics, and space to work on so many cars. They want to open another shop, and think it is time to incorporate. A limited liability company is the best choice for them.( )
A drawback of a cooperative (a co-op) is that members can squabble and take too long to make decisions.( )
A franchisee is the business owner that gives others the rights to sell its products or services.( )
Monica and Shelby want to buy the rights to sell Honda motorcycles at their car dealership, so they should look into purchasing a chain store type of franchise.( )
One of the main benefits of owning a franchise is the freedom to manage the business without outside interference.( )
Sam purchased a popular fast-food franchise but did not make a profit in his first quarter of operation. Still, Sam was probably required to pay royalties to his franchisor.( )
All franchises must be established as sole proprietorships.( )
One of the main drawbacks to owning a franchise is high initial startup costs.( )
The percentage of franchises in the United States owned by minorities has fallen since 2000.( )
Mergers and acquisitions are examples of internal expansion.( )
Bonnie's Bon Bons is a successful retail chain with franchises all over the country, but it has no presence on the Internet. Catherine's Confections is a successful mail-order business with no storefront presence. The two companies decided to merge, which immediately gave Bonnie's Bon Bons an Internet presence and opened the door to customers who wanted to buy Catherine's Confections at retail locations. This merger represents a shortcut to growth, in which companies acquire rather than develop a capability.( )
Sal sells Sal's Shoes online but has no retail store. Murray sells his shoes at Men's Footware stores in the northeast. The merger of Sal's Shoes and Men's Footware is an example of a vertical merger. ( )
In a conglomerate merger, two companies merge that are in different industries and each performs different activities( ).
Locust Industries makes Lo-Down, a highly profitable medicine to lower high blood pressure. The company is in danger of being acquired by its rival, Health Fits, which makes Slide, Lo-Down's major competitive product. Not wanting to be acquired, Locust Industries has paid to build and staff two new facilities to research and develop new medicines. Locust's actions are an example of the white knight way to resist a takeover.( )
In a proxy fight, an outsider seeking to take over a company directly contacts the company's shareholders and offers to buy their stock at a price that exceeds the present market value.( )
A leveraged buyout allows the purchaser to use the assets of the company being acquired as security for the loan being used to finance the purchase.( )
When a company launches a poison pill to resist being taken over, it typically invites a union to come in and organize the company's workers.( )