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Exam 5: How to Form a Business

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Question 121

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It is correct to say that if a franchisor expects an 8% royalty fee on revenue, the franchisor earns 8 cents on each dollar of revenue the franchisee generates.

A) True
B) False

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Question 122

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The stockholders of large, publicly traded corporations have a daily pulse on the operation of the business.

A) True
B) False

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Question 123

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A conventional corporation is a state-chartered legal entity, with authority to act and have liability separate from its owners.

Franchisees must follow more rules, regulations, and procedures than if they operated independently owned businesses.

The Sandwich Emporium, Inc. sells the rights to use its name and sell its signature sandwiches in a given market area to those willing to pay agreed-upon fees and meet specific contractual terms. The Sandwich Emporium is

The strategy of investors who are attempting a leveraged buyout is to

States may levy special taxes on corporations that are not imposed on other businesses.

It is usually easy to start and end a sole proprietorship.

In a general partnership, all partners share in management of the business and in the liability for the firm's debts.

Few people today start their own business.

Maria is already a successful franchisee with Nite Lite, a chain of "no frills" motels that provide clean rooms and good service at affordable rates. The motel she currently operates is located in Texas, but she is considering an opportunity to open another Nite Lite motel in Canada. Although her costs of operating in a foreign nation may be higher, she has the benefit of an expanding market and less competition.

Franchisees are not always pleased with management regulations handed down from the franchisor. In some cases, franchisees have been known to band together to express concern over marketing and management direction.

Because of the growth of minority-owned businesses in the U.S., franchisors are becoming more focused on recruiting minority franchisees.

A corporation can raise financial capital by selling shares of stock to interested investors.

The Uniform Partnership Act is law in most states, except California, Oregon, and Colorado.

Tadashi's uncle passed away and left him a Realty Experts franchise. Tadashi is not a licensed agent or broker, nor does he know the first thing about the real estate business. He plans to sell his Realty Experts franchise to his friend Devonte, who recently got his real estate license. One of the advantages of owning a franchise is that you can decide to sell out to anyone you think is suitable for the business.

The stockholders in a corporation elect a board of directors to oversee the company's major policy issues.

The fairest way to handle profits in any partnership arrangement is to divide things evenly. If there are two owners in the business, each gets 50%. If there are three owners (even if one is a limited partner), each gets 33.333% of any accumulated profits.

One way to eliminate some of the risk of your partners making costly mistakes that could jeopardize your personal assets is to set up a

Due to several years of poor performance, Stanley's Metal Manufacturers, Inc., is closing. Through the use of debt financing, Stanley's workers plan to purchase the company's stock from current shareholders in order to buy the company, improve performance, and save jobs.