ETH 321
Week 2 Apply Assignment
1. Abigail is a manager at her company. The company just launched an initiative to improve its corporate citizenship practices. Abilgail is responsible for all but which of the following areas?
o Safeguarding shareholders’ interests
o Disclosure and transparency
o Vigilance of the board of directors
o Integrity and ethical behavior
2. Which of the following roles best fits the situation?
Apol wants to start or join a business but is not sure which business organization would be best. She has a large amount of capital but does not yet have any partners who can invest or effectively manage the business.
o Neither a limited or general partner would be a good choice.
o Limited partner in a limited partnership.
o General partner in a limited partnership.
3. What is the appropriate description for a distributorship?
o A franchisee sells a franchisor’s product in a specific geographic area.
o A franchisee produces and sells a franchisor’s product using the franchisor’s name.
o A franchisee makes or sells a franchisor’s product.
4. What is the appropriate description for a plant-processing franchise?
o A franchisee produces and sells a franchisor’s product using the franchisor’s name.
o A franchisee sells a franchisor’s product in a specific geographic area.
o A franchisee makes or sells a franchisor’s product.
5. What is the appropriate description for a chain-style franchise?
o A franchisee sells a franchisor’s product in a specific geographic area.
o A franchisee produces and sells a franchisor’s product using the franchisor’s name.
o A franchisee makes or sells a franchisor’s product.
6. J-Chron’s board of directors periodically meets with the CFO of the company. The CFO reports on the financial status of a company project, after which the board inquires about the project’s compliance with legally-required accountings principles. It asks no other questions about the project. Which of the following is true?
o The board is not meeting any basic vigilance requirements.
o The board is meeting legally-required vigilance standards, but not necessarily those which would protect shareholders’ interest.
o The board is meeting all of its vigilance requirements.
o The board is not legally required to meet vigilance requirements.
7. Lily wants to build a business. She has very little capital. She does, however, have a partner with which she could run a business. Lily wants to be able to avoid being held personally liable for any problems the business has. Which of the following would lead Lily to choose a sole proprietorship organization for her business?
o Avoidance of personal liability
o Little capital
o Possession of a partner
o None of the above
8. Which description that properly completes this prompt?
Zoey is the CEO of a corporation she organized herself with 15 shareholders. The company operates in several states, as well as outside of the U.S. Her business consists mostly of training services for in-home medical care personnel. Her company would be a __________ corporation.
o Closely-held
o Alien
o Domestic
o Subchapter S
o Professional
9. Which description that properly completes this prompt?
Tucker works for a retail distribution company that was recently started. Tucker has invested a lot of his earnings into shares of the company. When quarterly earnings are posted, Tucker receives a check for 8% of the quarterly profit of the company. Tucker belongs to a __________ corporation.
o Professional
o Closely-held
o Subchapter S
o Alien
o Domestic
10. Which description that properly completes this prompt?
Lenny organized his business in Delaware. He has customers in Delaware, other states in the U.S., and in foreign countries. Lenny’s business is __________ in Delaware.
o Domestic
o Subchapter S
o Professional
o Closely-held
o Alien
11. Juan wants to be involved in business. He has plenty of capital to invest, but he does not want to be involved in management. He also does not want to worry about fluctuations in the market prices of debt and equity instruments. Which form of business would be best for Juan?
o Corporation
o Sole proprietorship
o General partnership
o LLC
12. Noodleoo, a struggling restaurant chain, wants to enact a franchise agreement with Stephen to sell its product through a chain-style franchise. Stephen agrees and opens the store, and 6 months later Noodleoo goes bankrupt. Which is most likely true of this situation?
o If Noodleoo was not transparent with its financial data, Stephen has no recourse.
o More than one response is correct.
o If Noodleoo was transparent with its financial data, it owes no recompense to Stephen.
o If Noodleoo was not transparent with its financial data, it has broken the franchise rule.
13. Sandy works for RigorMart. She supervises regional managers and directs them based on orders from the board of directors. Sandy’s position also entitles her to stock ownership in the company. What is Sandy’s position in the company?
o Executive and shareholder
o Executive, shareholder, and director
o Shareholder
o Executive
14. Which of the following roles best fits the situation?
Kevin wants to create a business but is not sure what role is best for him. He has capital to invest. He has several partners with which he can begin a business. He has the most management experience of all his potential partners.
o General partner in a limited partnership.
o Neither a limited or general partner would be a good choice.
o Limited partner in a limited partnership.
15. Rita wants to be involved in business. She has a fair amount of money to invest, but she does not want to be involved in management. She wants to form a business in the quickest way possible under her circumstances. Which form of business would be best for Rita?
o Limited partnership
o Sole proprietorship
o Corporation
o LLC
16. Cadence works for WilderCorp. She meets with a team to make all-encompassing decisions concerning the direction of the business. She also personally supervises managers and conducts training for supervisors and plant managers. Cadence also buys stock in WilderCorp. What is Cadence’s position in the company?
o Executive
o Director
o More than one option
o Shareholder
17. Kara wants to build a business. She has plenty of capital and potential investors and partners. She wants to avoid the burden of sole liability for her business and wants to be able to close the business when she is no longer interested in it. Which of the following would lead Kara to choose a sole proprietorship organization for her business?
o Many potential investors/partners
o Ability to close the business easily
o Plenty of capital
o Avoidance of sole liability
18. What role best fits the following situation?
Manny wants to be involved in a business but is not sure which type of business to join or create. He has capital to invest. He has a good network of potential investors and partners. He has no experience in management.
o General partner in a limited partnership.
o Limited partner in a limited partnership.
o Neither a limited or general partner would be a good choice.
19. Koffman Corporation is trying to raise capital. What method would be the least risky to raise capital if it has a less-than-favorable credit rating?
o Bond issuance, since additional debt can provide the company with more leverage.
o Stock issuance, since a credit rating won’t negatively affect Koffman’s ability to sell stock.
o Bond issuance, since nobody wants to buy shares of a company with a less-than-perfect credit rating.
o Stock issuance, since stocks are more valuable as finance instruments.
20. Which description that properly completes this prompt?
Hal organized his business in Canada. Most of his customers are in Montana. In Montana, Hal’s business would be considered a(n) __________ corporation.
o Professional
o Alien
o Domestic
o Closely-held
o Subchapter S
21. Which description that properly completes this prompt?
Piper is a manager in a corporation that was organized in Canada by one of his former coworkers. The company provides consulting services and training for architects employed by construction companies. The company recently went public, with shares being sold to about 500 investors. Piper’s company would be a __________ corporation.
· Alien
· Closely-held
· Subchapter S
· Professional
· Domestic
22. Loptech, a technology firm, wants to issue bonds for investment purposes. Loptech has one of the best credit ratings in the industry. Market rates for debt instruments average at .5% interest. Based on its credit rating, Loptech would likely sell bonds that pay _____.
· Indeterminable with current information
· 0.5%
· 0.25%
· 0.75%
23.What is the order in which the formation of a corporation occurs?
· Business selects a state of incorporation; Incorporators select a name for the corporation; Articles of incorporation are filed; Novations are executed
· Business selects a state of incorporation; Novations are executed; Incorporators select a name for the corporation; Articles of incorporation are filed
· Novations are executed; Articles of incorporation are filed; Incorporators select a name for the corporation; Business selects a state of incorporation
· Incorporators select a name for the corporation; Articles of incorporation are filed; Business selects a state of incorporation; Novations are executed
24.Hal and Miranda have a general partnership business for landscaping projects. Hal makes a contract with a customer for a project one day while Miranda is absent and leaves on vacation the next day. Miranda does not feel she has the time to perform the contract for the customer. Which of the following is true?
· Only Hal is obligated to perform the contract.
· Miranda is obligated to perform the contract.
· Miranda may relinquish her obligation to perform the contract since Hal signed it without her knowledge.
· Indeterminable without more information.
25.What is the correct order of events for the formation of a corporation?
· Business selects a state of incorporation; Incorporators select a name for the corporation; Articles of incorporation are filed; Novations are executed
· Business selects a state of incorporation; Novations are executed; Incorporators select a name for the corporation; Articles of incorporation are filed
· Novations are executed; Articles of incorporation are filed; Incorporators select a name for the corporation; Business selects a state of incorporation
· Incorporators select a name for the corporation; Articles of incorporation are filed; Business selects a state of incorporation; Novations are executed
26. Mario and Johnny want to start a business. They have very little capital. They are new partners and largely unfamiliar with each other’s management practices. They are happy, however, to be organizing a business together in order to avoid full liability for the business. Which detail(s) of this situation would be the largest contributor toward Mario and Johnny’s decision to organize a general partnership?
· Avoiding full liability
· Unfamiliar with each other’s management practices
· Sharing profits
· Little capital
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