chapter 8

Question 1

the ownership structure of a company or firm

Answer 1

business organization

Question 2

authorization to operate a business issued by a local government

Answer 2

business license

Question 3

laws in a ciity or town that designate certain areas, or zones, for residential and business use

Answer 3

zoning laws

Question 4

the legal obligation to pay debts

Answer 4

liability

Question 5

a business organization owned by two or more persons who agree on a specific division of responsibilities and profits

Answer 5

partnership

Question 6

general partnership

Answer 6

a type of partnership in which all partners share equally in both responsibility and liability

Question 7

limited partnership

Answer 7

a type of partnership in which only one partner id required to be a general partner

Question 8

limited liability partnership

Answer 8

a type of partnership in which all partners are limited partners

Question 9

a partnership agreement that spells out each partners rights and responsibilities

Answer 9

articles of partnership

Question 10

the money and other valuables belonging to an individual or business

Answer 10

assets

Question 11

a semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a giving area

Answer 11

business franchise

Question 12

the share of earnings given by a franchise as payment to the franchiser

Answer 12

royalties

Question 13

corporation

Answer 13

a legal entity, or being, owned by individual stockholders, each of whom has limited liability for the firms debts

Question 14

stock

Answer 14

a certificate of ownership in the corperation

Question 15

a type of corporation that issues stock to only a few people, who are often family members

Answer 15

closely held corporation

Question 16

a type of corporation that sells stock on the open market

Answer 16

publicly held corporation

Question 17

a formal contract issued by a corporation or other entity that includes a promise to repay borrowed money with interest at fixed intervals

Answer 17

bond

Question 18

a license to form a corporation issued by a state government

Answer 18

certificate of incorporation

Question 19

the portion of corporate profits and out to stockholders

Answer 19

dividend

Question 20

a type of business with limited liability for the owners, with the advantage of not paying corporate income tax

Answer 20

limited liability corporation

Question 21

horizontal merger

Answer 21

the combination of two or more firms competing in the same market with the same good or service

Question 22

vertical merger

Answer 22

two or more firms involved in different stages of producing the same good or service

Question 23

conglomerate

Answer 23

a business combination merging more than three businesses that produce unrelated products or services

Question 24

a large corporation that produces and sells its goods and services in more than one country

Answer 24

multinational corporation

Question 25

What are four elements common to all businesses?

Answer 25

expenses advertising receipts and record keeping risk

Question 26

what two steps must entrepreneurs take before starting a business?

Answer 26

they must gather the factors of production | decide on the form of business organization that best suits their purpose

Question 27

List and briefly explain the four advantages of sole proprietorships

Answer 27

- easy to start - with just a small amount of paper work and legal exspense, just about anyone can start such a business - relatively few regulations - least regulated form of business organization - sole receiver profit - owner keeps profits - full control - all the shots called by one owner

Question 28

list and briefly explain the three disadvantages of sole proprietorships?

Answer 28

unlimited personal liability - personally responsible for all business debts limited access to resources - pay for things out of pocket lack of permanence - when an owner of a business dies and no one buys or takes over and keeping employees

Question 29

list and briefly explain the advantages of partnerships

Answer 29

ease to start up - no written partnership law financial impact - one or more person contributes shared decision making - joining strengths and weaknesses

Question 30

list and briefly explain the three disadvantages of partnerships

Answer 30

unlimited liability - could louse everything potential for conflict - disagreements between partners lack of permanence - if one partner dies then the other could receive sole ownership

Question 31

list the two advantages of corporations to stockholders

Answer 31

- gain benefit of limited liability | - provide flexibility

Question 32

list the three advantages of corporations to the corporation

Answer 32

- more potential growth - raise large amounts of capital - long life

Question 33

list the four disadvantages of corporations

Answer 33

- more regulation - difficulty and expense of start up - double taxation - loss of control

Question 34

a business owned and managed by a single individual

Answer 34

sole proprietorship