CHAPTER 5

Question 1

Sole Propietorship

Answer 1

A business owned by a single person.

Question 2

Unlimited Liability

Answer 2

A legal condition under which any damages or debts incurred by a business are the owner’s personal responsibility.

Question 3

Partnership

Answer 3

An unincorporated company owned by two or more people.

Question 4

General Partnership

Answer 4

A partnership in which all partners have joint authority to make decisions for the firm and joint liability for the firm’s financial obligations.

Question 5

Limited Partnership

Answer 5

A partnership in which one
or more persons act as general partners who run the business and have the same unlimited liability as sole proprietors.

Question 6

Limited Liability

Answer 6

A legal condition in which the maximum amount each owner is liable for is equal to whatever amount each invested in the business.

Question 7

Corporation

Answer 7

A legal entity, distinct from any individual persons, that has the power to own property and conduct business.

Question 8

Shareholders

Answer 8

Investors who purchase shares of stock in a corporation.

Question 9

Public Corporation

Answer 9

A corporation in which stock is sold to anyone who has the means to buy it.

Question 10

Private Corporation

Answer 10

A corporation in which all the stock is owned by only a few individuals or companies and is not made available for purchase by the public.

Question 11

Liquidity

Answer 11

A measure of how easily
and quickly an asset such as corporate stock can be converted into cash by selling it.

Question 12

S corporation

Answer 12

A type of corporation that combines the capital-raising options and limited liability of a corporation with the federal taxation advantages of a partnership.

Question 13

Limited Liability Company (LLC)

Answer 13

A structure that combines limited liability with the pass-through taxation benefits of a partnership; the number of shareholders is not restricted, nor is members’ participation in management.

Question 14

Benefit Corporation

Answer 14

A profit-seeking corporation whose charter specifies a social or environmental goal that
the company must pursue in addition to profit.

Question 15

Board of Directors

Answer 15

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.

Question 16

Corporate Governance

Answer 16

In a broad sense, all the policies, procedures, relationships, and systems in place to oversee the successful and legal operation of the enterprise; in a narrow sense, the responsibilities and performance of the board of directors specifically.

Question 17

Proxy

Answer 17

A document that authorizes another person to vote on behalf of a shareholder in a corporation.

Question 18

Shareholders Activism

Answer 18

Activities undertaken by shareholders (individually or in groups) to influence executive decision-making in areas ranging from strategic planning to social responsibility.

Question 19

Corporate Officers

Answer 19

The top executives who run a corporation.

Question 20

Chief Executive Officer (CEO)

Answer 20

The highest-ranking officer of a corporation.

Question 21

Merger

Answer 21

An action taken by two companies to combine as a single entity.

Question 22

Acquisition

Answer 22

An action taken by one company to buy a controlling interest in the voting stock of another company.

Question 23

Hostile Takeover

Answer 23

Acquisition of another company against the wishes of management.

Question 24

Leveraged Buyout (LBO)

Answer 24

Acquisition of a company’s publicly traded stock, using funds that are primarily borrowed, usually with the intent of using some of the acquired assets to pay back the loans used to acquire the company.

Question 25

Strategic Alliance

Answer 25

A long-term partnership between companies to jointly develop, produce, or sell products.

Question 26

Joint Venture

Answer 26

A separate legal entity established by two or more companies to pursue shared business objectives.

Question 27

Big Data

Answer 27

The massive data sets that companies collect and analyze to find important trends and insights.

Question 28

Analytics

Answer 28

Computing tools and techniques used to analyze big data; major types include data mining, text mining, and predictive analytics.