Pre-Requisite Competency (PRC) Stage Examination

60 minutes – 50 marks

Name: ____________________ Rise ID: ________________ Batch # _______

PRC 05- ITB (Teacher: Mr. Zia Ul Haq)
Test # 2 (Chapter 2)

1. How many basic Forms of business ownership are there?

a. sole proprietorship b. Partnership
c. corporation or Limited d. all of these company

2. Tick the correct option

a. Business organizations exist to make profit. c. Both of above
b. Public sector organizations exist to provide benefit to the public d. None of these

3. Tick the right options:

a. Charities rely on grants b Public sector obtains fund from govt.
c. Business organizations obtain funds from variety of sources. d. All of these

4. The directors of a company are accountable to

a. Customers b. stake holders
c. Shareholders d. All of these

5. Organizations Can be Classified in categories:

a. Business organizations b. Not-for-profit organizations
c. Both of these d. Neither of These

6. An individual who Owns his/her own business is called

a. Business partner b. Corporation
c. Company d. Sole proprietorship

7. Local restaurant and a barber shop are examples of

a. Company or corporation b. Partnership
c. sole proprietorship d. None of these

8. Mark The advantages of sole proprietorship

a. Ease and low cost of formation b. Secrecy
c. Lower taxes d. all of these.

9. Mark the disadvantages of sole proprietorship.

a. Unlimited liability b. Difficulty in raising funds
c. Taxation d. All of these

10. What is it called when ownership of a business is shared by at least two people?
a. sole proprietorship b. Partnership
c. Corporation d. All of these.
11. Mark the advantages of partnership
a. Ease of formation b. Higher availability of funds
c. Combined skill d. all of these

12. Disadvantages of Partnership must be marked

a. Less regulatory Control b. Flexibility of decision making
c. Difference of opinion d. All of These

13. Which of these are the key components of organizational Structure?

a. Stockholders b. directors
c. Management d. all of these

14. Who governs and handles the overall management of the Corporation?
a. Employees b. Customers
c. Suppliers d. Board of directors

15. mark the advantages of Companies.

a. Limited Liability b. Unlimited life
c. Tax deductions d. all of these

16. mark the disadvantages of companies.

a Double taxation of profits b. Increased govt restrictions
c. Ability to attract financing d. A and B

17. Which type of organization do not seek to make profit.

a. Business b. Partnership
c. Not for profit org d. all of these

18. Availability of clean drinking water is the responsibility of

a. Employees b. private sector
c. public sector org d. None of these

19. Club and societies are examples of

a. govt agencies b. Not For profit org
c. Both of These d. None of these.

20. Mark the Not - For – Profit org

a. Public sector org b. NGOs
c. club and societies d. all of these

21. A business organization is an entity formed for the purpose of carrying on required activities to achieve the
country's goals and objectives
a. True b. False

22. A business organization can be seen as the process of dividing up activities in an efficient and effective manner to
enable a system of co-operative activities of.
a. Two persons b. Two or more persons

c. Single person d. None of the above

23. Since people from different backgrounds come to work together, organizations are strongly influenced by that
form them.
a. Assets b. People

c. Promoters d. Sponsors

24. The personalities, attitude, perceptions, behaviors, and expectations of the people working together in an
organization significantly affect the organization of an
a. Ownership b. Functioning

c. Structure d. Profit

25.Companies are owned by shareholders whereas public sector organizations are owned by
a. Public b. Private sector

c. Government d. None of the above

26.In order for shareholders to hold accountable the director of the company for the financial performance, the
companies
a. Hold regular meeting b. Publish minutes of the meetings

c. Produce annual reports and accounts d. None of the above

27.Public sector organizations obtain their funds from the government which in turn raises through the
a. Public funding b. Government subsidy

c. Taxation d. None of the above

28. A sole proprietor runs his business himself and not willing to employ any individual for business management. Is it
absolutely correct?
a. Yes b. No

29. Many successful sole proprietors had previous work experience in the market in which they are competing,
perhaps competitor's firm. as employee in the
a. True b. False

30. A sole proprietor does not have discuss his plans with other individuals, hence, has an advantage of secrecy. it
correct?
a. Yes b. No

31. X and Y are brothers. Y manages X's business and is not entitled to any share of business profit. This is the
example of what kind of organization.
a. Partnership b. Limited partnership

c. Sole proprietorship d. None of the above

32. Why is there greater flexibility in sole proprietorships?

a. Because sole proprietor is free to make decisions himself b. Because sole business proprietor easily transfers his

c. Because the degree of expansion of business is high d. None of the above

33.It is confirmed that SECP laws and regulations only apply to corporations that issue stock. But in case of sole
proprietor the laws according to their nature of business also apply to the business.
a. True b. False
34.Despite ease of dissolution in sole proprietorship which of the following factor is constraint in dissolution of
business.
a. Financial obligation b. Loss of the assets

c. Higher taxation d. None of the above

35.As sole proprietorship there is unlimited liability, hence in case of nonpayment of debts sole proprietor has to pay
liability from his
a. General reserve b. Personal assets

c. Bank balance d. None of the above

36.In case the sole proprietor becomes mentally ill or dies, the business may come to an end. This means there is
a. Lack of continuity b. Lack of liquidity

c. Lack of life d. None of the above

37.In limited partnership, usually the general partner receives a larger share of the profits after the limited partners
have received their initial investment back.
a. True b. False

38.In partnership the funds can be raised easily inspite unlimited liability because partner's combined financial
strength also increase the firm's ability to raise funds
a. True b. False

39.The sole proprietor liability is unlimited and debt is paid from his personal assets due to this it is considered that
there can be greater risk of default. Thus before borrowing he has to his personal assets
a. Sale b. Pledge

c. conceal d. All of the above

40. In partnership, dissolution is not easy because if a partner who owns more than___ % of share of the entity
withdraws, dies, or becomes disabled the partnership must reorganize or end.
a. 75 b. 50

c. 25 d. none of the above

41. Clubs and societies are non profit making organizations and they exist because their members are drawn together
a. For making profit b. By common professions

c. By common class d. By common interest

42. Social and sports clubs are examples of non-profit making organizations referred to as "clubs and societies", the
main source of their income of which is
A. Subscription b. Government fund

c. Public fund d. All above

43. Instead of profit and loss account, clubs and societies produce to show surplus/deficit of income over expenditure
a. Income statement b. Income expenditure accounts

c. Balance sheet d. All of the above

44. Laws and regulations vary between different country, but in certain areas of commercial activities such as banking
is accepted
a. International regulation b. Management regulation

c. Trade regulation d. None of the above

45. To be successful a sole trader must do which of the following?
a. He must register his business with the government

b. He must exhibit strong leadership skills, be well organized, and communicate well with employees

c. He must share his profits with the individual if any who manages his business

d. All of the above

46. Which of the following is not the benefit of sole proprietorship?

a. No legal formalities needed to set up as a sole proprietor.

b. Any profit made after tax belongs to the owner.

c. The owner is in complete control and is free to make decisions.

d. None of the above

47. Responsibility of sole proprietorship forces the sole proprietor to do which of the following?
a. Sole proprietors must be willing to accept full responsibility for the business's performance.

b. Sole proprietors must also be willing to work flexible hours.

c. They are on call at all times and may even have to substitute for a sick employee.

d. All of the above

48. Sole proprietorships may have to pay. on funds borrowed from banks than do large corporations because they are
considered greater risk of default.
a. Lower interest rate b. Higher interest rate

c. 10% d. None of the above

49. A _________ has at least one general partner, who assumes (unlimited liability, and at least one limited partner,
whose liability is limited to his or her investment in the business.
a. General partnership. b. Limited partnership

c. Limited liability partnership d. None of the above.

50. A does not have to file public financial statements with government agencies or send out quarterly financial
statements to several thousand owners, as the corporations do.
a. Companies b. Partnership

c. Both a and b d. None of the above