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1. Amy wants to go into the business of construction contracting. Among the reasons that would probably convince her to set up her business as a sole proprietorship would be its
a. greater organizational flexibility.
2. Tom owns the ABC enterprise a sole proprietorship. In a sole proprietorship, the liability of the owner is
3. Adam is the owner of Adam's Apples a sole proprietorship. He wishes to increase his business capital while maintaining control. This can best be accomplished by
a. borrowing funds.
4. Great Games is a firm that specialized in r and d of computer games and operated as a partnership. Much of the law that governs the operation of a partnership is based on the
. principles of agency law.
5. Earl runs a livestock breeding business and owes Cattle Ranch$1000. Earl agrees to pay Cattle Ranch a percentage of his profits each month until debt is paid. Because of this agreement, the Cattle Ranch is
a. Earl's creditor only.
6. Bill and Carol are the only partners in an accounting firm. The partnership may be treated as an
entity for bankruptcy.
7. The Bayside restaurant is a partnership. For tax purposes, the Bayside Restaurant is required to file an information return, but is not
a. a tax paying entity.
8. Owen and Paula agree to operate a coffee stand. They purchase supplies and split costs equally and agree to share profits equally and decide that each of them will have an equal say in how the stand will operate. Nothing was put down in writing, but
a. Owen and Paula have formed a partnership.
9. The American Goods Inc. is a corporation. Responsibility for overall management is entrusted to
the board of directors
10. The Statewide Distributors Inc. is a corporation. Owen is an officer of SDI. Of the following list, the one that possesses a Fifth Amendment right in a criminal case would be
a. Owen only.
11. FHP is an incorporation, the implied powers are powers necessary to perform all acts reasonably appropriate and necessary to accomplish all acts
a. reasonably appropriate and necessary to accomplish its corporate purposes.
12. Fred and Diane marketing new comp game. Wish to have an incorporation that avoids income taxes at incorporation level.
a. Known as a S corp
13. Jay and Kyle are accountants at J and Kyle PC. As a member,
a. Jay may be personally liable for malpractice committed by employee under his supervision
14. Adam and Betty holders of preferred stock in mega corp. So Adam and Betty have priority
. over common stock holders, as to payment of any dividends and on dissolution
15. Ron and Nancy form the eagle equipment corp. Has board of directors, CEO, COO, and 52 shareholders. Eagle is governed by its
a. board of directors
16. Bob and Jenny act as the incorporators for the National Sales Limited. After the first board meeting, subsequent directors are selected by a
a. majority vote of national shareholders
17. Ray is the chairman of the board of a drug company. The corporation and ray individually have been sued by customer who got ill from product. The corporation may
a. pay Ray's legal fees regardless of the outcome of the lawsuit.
18. William is the director of Harrison lumber inc. Under the standard of due care that is owed by directors of a corp. William must carry out his responsibility in an
a. informed businesslike manner.
19. Betty owns 100 shares of mega corp. Mega corporation makes a new issue of 10000 shares. According to her stock certificate, Betty is entitled to buy another 100 shares at the time of new issue. This is an example of
a. preemptive rights
20. Joe is the shareholder of American computers inc. Joe will be deemed to have a fiduciary due to American and to the minority shareholders if
a. Joe has a sufficient number of shares to exercise de facto control of the corporation
21. Café Corp. plans to merge with Cream and Sugar Inc. So before the merger, café brought lawsuit against rival firm. After the merger
a. cream and sugar may continue the suit.
23. The best goods incorporated and consumer products corp. plans to merge. This must be approved by
a. their boards and their shareholders.
24. Highway trucking company and inter state plan to consolidate.
a. A certificate of consolidation must be issued by the state only.
25. Nora is a descending shareholder of the omega company whose management is considering a tender offer to buy power products incorp. Nora and omega company can not agree on FMV of stock, so the value
a. will be determined by a court
26. If the conduct of international software corp is perceived as unethical, it is likely to suffer
a. lost profits and negative publicity.
27. In studying business law professor smith's students also study ethics. Ethics is the study in
a. what constitutes right or wrong behavior.
28. Commercial Products Company markets its products nationwide. When making a decision CPC must take into account the needs of
a. 1) consumers and employees 2) owners and shareholders 3) society and the community.
29. Jill is a lawyer on the staff of international marketing group. They apply the utilitarian theory of ethics in the business context. Utilitarianism focuses on
a. consequences of an action
30. National distribution corp can demonstrate a commitment to ethical behavior by complying
a. to the law, establishing ethics codes, and making money
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