QUESTION In a leveraged buyout, a purchasing firm uses the assets of the firm it is acquiring as security for the loan being used to finance the purchase. What could happen after a leveraged buyout if the purchased company performed poorly? A) The security for the loan would be affected, and the acquiring company could […]
QUESTION Phillip has a sales showroom from which he sells only Paul Bunyon farm equipment. What kind of business is Phillip’s? Explain. What will be an ideal response? ANSWER Answer: Phillip has a product-distribution franchise, also called a distributorship. The franchisee, Phillip, has been given the right to sell trademarked products purchased from the […]
QUESTION Which of the following describes a leveraged buyout? A) The firm in danger of being purchased by an unwanted company quickly finds a more acceptable buyer for itself. B) The firm’s employees sell shares of their stock to the highest bidder in exchange for proxy votes of the board of directors. C) The purchasing […]
QUESTION Elizabeth and her son Marcus are looking for a business opportunity to enter into together Both enjoy cleaning, and they have quite a lot of capital to invest. But they don’t have a lot of experience running a business and don’t know how to start. Why might a Merry Maids franchise be a good […]
QUESTION Which of the following describes an employee buyout? A) The firm’s employees borrow money against their own assets, such as their houses or their pension funds, to purchase the firm from its present owners. B) The firm’s employees vote to replace the board of directors with proxies of their own choosing. C) The firm’s […]
QUESTION Ace Computers is a computer manufacturer. Jack of All Trades Software Company wants to buy Ace and sell the Ace Computers loaded with their own software. Ace wants to continue to allow users to decide which company’s software to load into their own computers. Jack of All Trades is trying to buy as much […]
QUESTION PheelGood Pharmaceuticals is in danger of being taken over in a hostile takeover. Company managers are looking for a way to stop this from happening, so they are looking for a white knight. What are the managers hoping to find? A) a corporate raider B) a proxy to cast votes C) a more acceptable […]
QUESTION Briefly explain the drawback associated with being a sole proprietor and having limited financial resources and few fringe benefits. What will be an ideal response? ANSWER Answer: Sole proprietors don’t have much borrowing power as they are usually limited to the owner’s personal credit limit. In addition, fringe benefits such as vacation pay, […]
QUESTION List the five benefits of being a sole proprietor. What will be an ideal response? ANSWER Answer: (1) Start up the business with ease. (2) Make all your own decisions. (3) Keep all the profits. (4) Keep your taxes relatively simple. (5) End the business with ease. Explanation: The five benefits of being […]
QUESTION What is a limited partnership? What will be an ideal response? ANSWER Answer: A limited partnership has at least one general partner plus other limited partners who invest in the company but do not have any say in the management of the company or any liability in the company. Explanation: A limited partnership […]
