BUS 121 – Test #4
Test due date: 17 November 2013
Chapter 20
1. Which of the following is the most popular form of business ownership in the U.S.?
Sole proprietorship
2. A franchise is a contractual relationship between the franchisor and the franchisee.
True
3. Members of the board of directors of a corporation are elected by shareholders.
True
4. Which of the following is a business that exists because of an arrangement between the owner of
a trade name or trademark and a person who sells goods or services under the trade name or
trademark?
Franchise
5. Which of the following is a group that comes together for the explicit purpose of financing a
specific large project?
A syndicate
6. For purposes of federal jurisdiction, a limited liability company is considered a citizen in ______.
Every state in which its members reside
7. In which of the following does the franchise operate under the franchisor's business name and act
subject to the franchisor's standards and methods of business operation?
Chain-style business operation
8. Investor-owners of a corporation are called which of the following?
Shareholders
9. Under Islamic law, a partnership and its partners are one unit.
True
10. Which of the following is a business organization governed by a group of trustees who operate
the trust for the beneficiaries?
A business trust
11. Which of the following would likely be formed by farmers who want to pool certain crops
together to ensure that they get a high market price for their crops?
A cooperative
12. In a limited partnership which of the following assume unlimited personal liability for the debts
of the partnership?
General partners
13. How is a limited liability company formed?
By filing Articles of Organization in the state in which the LLC is established.
14. Which of the following is true regarding corporations other than S corporations?
The corporation must pay taxes on profits, and shareholders must pay taxes on dividends they receive from
the corporation.
15. In a limited partnership which of the following have no part in the management of the business?
Limited partners
16. A sole proprietor is considered a separate legal entity.
False
17. Officers of a corporation are hired by the shareholders.
False
18. Which of the following governs partnerships in many states in the absence of an express
agreement?
The Uniform Partnership Act
19. Which of the following is true regarding S corporations?
They are formed under federal law
20. Under the Uniform Limited Liability Company Act, an LLC will dissolve after the passage of
______ consecutive days during which the company has no members.
90
Chapter 21
1. Which of the following dissolve a partnership by operation of law?
Death of a partner and the partnership's engagement in an activity that suddenly becomes illegal, but not a
partner's engagement in any other business activity.
2. Which of the following is true regarding silent partnerships in Germany?
They are legal, and the silent partner is not held personally liable for damages incurred in the course of
business.
3. Which of the following must a limited partner do or refrain from doing in order to retain limited
personal liability?
The limited partner must comply in good faith with the requirement that a certificate of limited partnership
be filed, the limited partner may not participate in the control of the business, and the limited partner's
surname may not be a part of the partnership name.
4. Which of the following is true regarding partnership agreements in Russia?
Russian law recognizes full partnerships and simple partnerships, and partnership agreements must be in
writing
5. Which of the following is true regarding a partner's actual authority to bind a partnership once a
partnership is dissolved?
A partner has no actual authority to bind the partnership after the partnership is dissolved.
6. Which of the following is false regarding the winding-up process?
During the winding-up process, the partners may not engage in any business that competes with the
partnership business.
7. Which of the following is true if a partner wrongfully dissolves a partnership?
The partner who wrongfully dissolved the partnership cannot require that the business be wound up, the
partner can be held liable for damages to the remaining partners, and the remaining partners can choose to
continue the business under the partnership name or to wind up the business.
8. Limited partnerships are also known as which of the following?
Special partnerships
9. When the articles of partnership do not address the matter, which of the following require
unanimous agreement among the partners?
A decision to change some element of the partnership agreement, a decision to admit a new partner, and a
decision to alter the nature of the firm's business.
10. Which of the following is true regarding the liability of a partner for a mistake?
A partner who makes an honest mistake in fulfilling his or her responsibilities to the partnership is not held
personally liable for the mistake.
11. The implied authority of partners is determined by the partnership agreement.
False
12. Under the Uniform Partnership Act, in regard to an agreement with a third party, which of the
following is true under the regarding personal liability of partners for obligations of the
partnership?
If the partnership is liable, each individual partner has unlimited personal liability.
13. Which of the following is defined as the change in the relation of the partners caused by any
partner's ceasing to be associated with the carrying on, as distinguished from the winding up, of
the business?
Dissolution
14. Title to property may not be put in the name of a partnership.
False
15. A partner who refuses to obey the articles of partnership may be held liable for any losses that the
partnership incurs based upon that failure.
True
16. Joint and several liability means that partners must be sued jointly.
False
17. When a partnership is dissolved based upon the withdrawal of a partner, that partner no longer
has actual authority to bind the partnership.
True
18. Which of the following may be a "person" under the Uniform Partnership Act?
Partnerships, individuals, corporations, and other associations
19. What is a written agreement that creates a partnership called?
Articles of partnership
20. When the articles of partnership do not address the matter, which of the following is true
regarding a partner's right to sell a partnership interest to a creditor?
A partner can sell his or her interest in a partnership to a creditor.
Chapter 22
1. Federal securities law does not require that target corporations assist aggressors in any way.
False
2. Which of the following are outside directors who have business contacts with the corporation?
Affiliated directors
3. Directors and officers have a fiduciary duty of care.
True
4. In a hostile takeover situation, what does the term "going private" reference?
A leveraged buyout
5. Which of the following is needed in order for a business to qualify as an S corporation?
No more than 100 shareholders and only individuals, trusts, and in some circumstances corporations as
shareholders; but there is no requirement of at least $10,000 in capital.
6. Death of a corporation occurs in which of the following phases?
Dissolution and liquidation
7. ABC Corporation suffered damages when a supplier failed to deliver as agreed. The president of
ABC did not institute suit as Garrett, a major shareholder, believed was proper. Garrett
complained to the board of directors, but they refused to do anything. Which of the following is
an option to Garrett in regard to a lawsuit against the supplier?
A shareholder’s derivative suit
8. Which of the following are outside directors who do not have business contacts with the
corporation?
Unaffiliated directors
9. Which of the following is a term for stock issued to individuals below its fair market value?
Watered stock
10. A ________ corporation is a corporation created by the government to help administer law.
Public
11. When a corporation is incorporated, the secretary of state usually issues a[n] ________, a
document certifying that the corporation is incorporated in the state and is authorized to conduct
business.
Certificate of incorporation
12. In a merger situation, which of the following is a term for the corporation that does not continue
to exist?
The absorbed corporation
13. How is the number of corporate directors determined?
According to the corporate articles or bylaws in compliance with state law.
14. Reference - Machine Malfunction. Bruno, the president of a corporation operating work out
facilities, convinced the board of directors to approve a large purchase of a type of fitness
machine called "Perfect Body." Bruno had carefully investigated the machine and did a
presentation to the board on its purported benefits. Unfortunately, after the purchase, it was
announced that "Perfect Body" was actually a very dangerous machine that should not be used.
The manufacturer of "Perfect Body" went bankrupt, and the corporation lost $200,000 on the
purchase of the machines. The shareholders are furious and want to sue Bruno and the directors.
The board of directors agrees to allow Frances, the ringleader of the shareholders, to purchase
stock of the company at below its fair market value. She purchases a considerable amount of
stock on that basis, but says that the shareholders plan to continue with an action against Bruno
and the board members. Which of the following is true regarding liability of Frances, if any, for
purchasing the stock at below its fair market value?
She is liable for paying the difference between the price she paid for the shares and the stated corporate
value of the shares.
15. A corporation must be dissolved if over 50% of the shareholders die.
False
16. Courts have refused to find that corporations have rights under the U.S. Constitution.
False
17. How are directors chosen after incorporation?
By majority vote of the shareholders.
18. When directors or officers violate their duty of loyalty, they are self-dealing.
True
19. If the incorporator or promoters make an error or omission during the incorporation process,
courts may rule that the organization is not a corporation, in which case the organization is a[n]
________ corporation.
Defective
20. While ordinary decisions made by directors require a ________ vote, more important decisions
sometimes require a ________ vote.
Majority; two-thirds.
Chapter 23
1. Which of the following refer to state securities laws?
Blue-sky laws
2. Investment contracts are securities.
True
3. Under the Securities Exchange Act of 1934, corporate officers are not considered insiders.
False
4. Which of the following are examples of securities?
Debentures, warrants, and stocks
5. Which of the following is an example of an exempt transaction?
Limited offers, intrastate issues, and resales of securities
6. Which of the following references stock and bonds issued by corporations to raise capital for
corporate expansion?
Securities
7. Which of the following permit(s) the SEC to seek punishment of violators of foreign securities
laws?
The Securities Acts Amendments of 1990
8. How are the heads of the Securities and Exchange Act chosen?
They are appointed by the president.
9. Which of the following was the result on appeal in Securities and Exchange Commission v. Texas
Gulf Sulphur Co, the case in the text in which it was alleged that corporate employees possessed
inside information involving the likelihood of a major mineral find precluding them from trading
in their company's stock?
That the defendants could be held liable because they failed to reveal material information to the public.
10. Which of the following would be considered an accredited investor?
All of these.
11. The Securities and Exchange Commission is headed by how many individuals?
5
12. Once an issuer files a registration statement and prospectus, the ______ period begins.
Waiting
13. Which of the following references a brief ad that may be issued by an issuer during the waiting
period?
A tombstone advertisement
14. Which of the following is an example of a material omission or misrepresentation during a
securities transaction under Section 10(b) and Rule 10(b)(5)?
A change in the status of litigation against the company; a change in dividends; and a new product, process,
or discovery.
15. Which of the following created the Public Company Accounting Oversight Board to regulate
public accounting firms?
The Sarbanes-Oxley Act of 2002
16. Which of the following begins when the SEC declares the registration statement effective, and
ends when the issuer sells all securities offered or withdraws them from sale?
The post effective period
17. Securities may be sold during the prefiling period.
False
18. Under the 1933 Act, any security offered or sold to a permanent resident of the single state where
the issuer of the security resides and does business is exempt.
True
19. A person who violates the 1933 Securities Act can be fined but not sent to jail.
False
20. Which of the following limits shareholders' ability to bring class action suits against nationally
traded companies?
The Securities Litigation Uniform Standards Act of 1998.
Chapter 24
1. Which of the following enables employees who lose their jobs or have their hours reduced to a
level at which they are no longer eligible to receive medical, dental or optical benefits to pay to
continue receiving benefits for themselves and their dependants under the employer's policy?
The Consolidated Omnibus Budget Reconciliation Act
2. Which of the following primarily governs the internal operations of labor unions?
The Landrum-Griffin Act
3. The National Labor Relations Board is the administrative agency that interprets and enforces the
National Labor Relations Act.
True
4. The issue of whether a hostile work environment exists is only considered by the courts in the
area of harassment based upon gender.
False
5. Which of the following is the term for the concept that an employee may be fired for no reason at
all?
Employment-at-will
6. Which of the following is a federal law that sets minimum standards for most voluntarily
established pension and health plans in private industry to provide protection for individuals in
those plans?
The Employee Retirement Income Security Act
7. Title VII applies to employers who have _______ or more employees for _______ consecutive
weeks within one year and who are engaged in a business that affects commerce.
15; 20
8. Which of the following is true regarding whether an employer may be held liable under Title VII
for harassment of an employee by a nonemployee?
An employer may be held liable in such cases if the employer knows that a customer repeatedly harasses an
employee, yet the employer does nothing to remedy the situation.
9. It is usually more difficult to prove disparate-impact discrimination in employment under Title
VII than disparate-treatment.
True
10. Which of the following is false under federal law regarding employer monitoring of employee
telephone calls?
Employers must give employees access to a telephone and the ability to make personal phone calls at some
point during the work day, and these personal calls may not be monitored.
11. The Family and Medical Leave Act guarantees all eligible employees up to ________ weeks of
leave during any ________ month period.
12; 12
12. Which of the following are employers required to provide to employees under ERISA containing
information as to how their benefit plan operates, the benefits under the plan, how to apply for
such benefits, and other information?
A summary plan description
13. Which of the following is true regarding caps on punitive damages in Title VII cases based on
discrimination other than race?
Punitive damages are capped at $300,000 for employers of more than 500 employees.
14. Currently only one state prohibits discrimination on the basis of sexual orientation.
False
15. Which of the following consists of negotiations between an employer and a group of employees
so as to determine the conditions of employment?
Collective bargaining
16. Which title of the Civil Rights Act of 1964 deals with discrimination in employment?
Title VII
17. Workers' compensation laws are primarily federal laws.
False
18. Under Title VII of the Civil Rights Act, which of the following occurs when a plaintiff
establishes a prima facie case in an action alleging disparate-treatment discrimination in
employment in the form of an illegal discharge?
The burden shifts to the defendant to articulate a legitimate, nondiscriminatory reason for the discharge.
19. The Age Discrimination in Employment Act applies to private employers having _______ or
more employees.
20
20. What is the federal minimum wage?
$7.25