Oral Communication Skills for Managerial Ethics (BU103)
Business Organization / Forms of Business Ownership
DIRECTIONS: Use the notes you took in class to complete the
following questions. T/F, MC, and Fill-in-the-blank questions count
1 point; points for essay questions vary (see points in
the four forms of business ownership discussed and give
examples of each one. (6 pts)
2. T/F A law
firm or a doctor's office is a typical example of a single
of stockholders are _____________, _______________,
4. The most
distinguishing characteristic of corporations is that
5. T/F The
number of corporations in the US is greater than the number of
6. T/F A
sale is generated (made) by exchanging money for a good
8. T/F The
partnership has similar advantages and disadvantages as the single
Corporations dominate the dollar value of business.
10. T/F There
are so many single proprietorships in the US because there are many
with single proprietorships.
EXPLAIN why the single proprietorship has a tax advantage
(over the corporation).
12. T/F In a
single proprietorship, the profit that the business makes is
included in the owner’s personal income tax.
The risk of losing one's car or house in case a single
proprietorship goes bankrupt is called
14. T/F If a
business fails, the bank can seize the owner’s personal assets.
NAME the 2 reasons why it is difficult for sole proprietors
to raise money (funds) for expanding the business.
In a sole proprietorship, the ____________________ makes all
the decisions and has all the control.
18. T/F It is
easy and quick to sell a single proprietorship or partnership.
DEFINE bankrupt. (2 pts)
T/F Single proprietors can issue stock.
T/F In a stock issue, a company sells stock to shareholders,
and the shareholders pay money to the company for the stock.
22. If you
have invested $100 in a corporation by buying its stock, and the
company goes bankrupt, how much money can you lose?
If you want to buy stock in a corporation, you call a
The fact that we can buy and sell stock on the Internet or
over the phone in about 5 minutes shows the concept of
T/F An investor
in a corporation can lose his car and house if the corporation goes
The corporation is a legal entity and has
perpetual life. What do these 2 terms mean?
27. T/F A
corporation can sign contracts, borrow money, own property, sue, and
be sued in court.
28. T/F When one shareholder sells
all of his investment (stock) to another shareholder (investor), the
corporation will cease to exist (= die).
29. NAME the
2 reasons why corporations have easier access to capital
to grow their business.
Look at the corporation’s income statement. Write it here.
How can you calculate pre-tax income?
Money that the company pays out to its shareholders on a
regular basis is called ____________________.
T/F Dividends are income to the investor.
T/F All companies pay dividends to their
T/F Investors are taxed by the government on
Corporations have to pay income taxes to the
government. When corporations declare a dividend, the shareholders
have to pay income taxes on the dividend. This business principle
is called ________________________________ and is a major ADVANTAGE
/ DISADVANTAGE of the corporation.
T/F Corporations are more complex and costly to form
than sole proprietorships.
Publicly-held corporations are subject to disclosure
requirements. This means that they must provide the public
with information on __________________________________.
T/F Stockholders are always employees of an
T/F The Board of Directors is a
group of employees of a company.
LIST at least 3 rights and risks of the stockholders.
(Extra credit for more than 3)
42. T/F When
a company goes bankrupt, the stockholders are the first to receive
the money owed to them.
43. T/F The
Board of Directors is a group of representatives of all the
44. T/F The
Board of Directors is elected by the stockholders.
LIST at least 3 responsibilities of the Board of Directors. (Extra
credit for more than 3)
46. T/F The
CEO (Chief Executive Officer) manages the day-to-day operations of
47. T/F A Limited
Liability Corporation (LLC) provides limited liability for
its owners but is taxed only once, at the personal income level.
48. The owners' investment in a company is called
49. Return on Equity (ROE)
measures how much
50. When a business has a net income of $100,000 and
its investors have invested $1,000,000 in equity, it has a return on
equity of ________ %.
51. ROE is calculated by dividing
____________ into _______________.
52. When a business has an ROE of 10%, this
means that for every dollar the shareholders invested, they earned
b. 10 cents
53. When a larger company buys a smaller company, this is called
54. When a company divides its business into 2 or 3 new
businesses, this is called a _________________________.
55. When two companies set up a new company together, this is
called a _________________________.
56. List the four stakeholders in a business.
57. Each type of business impacts stakeholders
differently. For each of the four stakeholder groups, state
one positive and one negative impact.
Christine Bauer-Ramazani, Saint Michael's
College. Last updated:
September 7, 2017