Solutions to Week 1 Group Competition Quiz
1) Robert owns three restaurants in Atlanta. He pays taxes for the income from the
restaurants as his personal income. Robert's business is an example of a ________.
A) personal partnership
B) sole trader
C) joint venture
D) corporation
E) limited liability firm
Answer: B
Explanation: A sole trader is a business owned by one person. The restaurant is owned
by Robert alone although it has three branches.
2) Which of the following business structures is the most complicated and expensive?
A) unlimited partnership
B) corporation
C) general partnership
D) sole trader
E) limited partnership
Answer: B
Explanation: A) Corporations are more complicated and expensive to establish than
other structures.
3) A(n) ________ is an unincorporated company owned by two or more people.
A) limited liability corporation
B) partnership
C) corporation
D) S corporation
E) sole trader
Answer: B
Explanation: Partnership is an unincorporated company owned by two or more people.
The partnership structure is appropriate for firms that need more resources and
leadership talent than a sole proprietorship but that don't need the fundraising
capabilities or other advantages of a corporation.
4) A major advantage of partnerships is that they ________.
A) do not require owners to take personal responsibility for their actions
B) provide limited liability protection to partners
C) present opportunities to share costs
D) are less vulnerable to conflicts between investors
E) allow investors to handle issues such as succession and termination better
Answer: C
Explanation: An advantage of partnership is that they present opportunities to share
costs of the business between all partners.
5) 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
Answer: B
Explanation: 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.
6) 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
Answer: C
Explanation: The board of directors is 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.
7) In a(n) ________, two companies join to form a single entity either by pooling their
resources or by one company purchasing the assets of the other.
A) limited partnership
B) acquisition
C) merger
D) joint venture
E) strategic alliance
Answer: C
Explanation: In a merger, two companies join to form a single entity. Companies can
merge either by pooling their resources or by one company purchasing the assets of the
other.
8) In a general partnership, ________.
A) all partners have joint authority to make decisions
B) all partners have limited liability
C) the number of partners is limited to five
D) units of ownership are sold to the general public
E) risk is limited to the amount invested in a partnership
Answer: A
Explanation: A) In a general partnership, all partners have joint authority to make
decisions for the firm and joint liability for the firm's financial obligations.
9) Profits of sole proprietorships ________.
A) reach shareholders through intermediaries
B) flow directly to the owners
C) are considered fixed assets
D) are taxed at corporate rates
E) are subject to double taxation
Answer: B
Explanation: Profits and losses of sole proprietorships flow directly to the owners and
are taxed at individual rates.
10) 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
Answer: C
Explanation: 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.
