Business Test 2 With Answer

Business Environment and Introduction to Management
Test 2 (Chapter 2 Forms of Business Ownership) Total marks: 15 marks
Name: ______________________ Class: _____ Class no.: _____ Date: ________________
Multiple Choice Questions (7 marks)

B. (2) and (3) only
Question 1 C. (2), (3) and (4) only
A sole proprietorship D. (1), (2), (3) and (4)
(i) is solely owned by one person.
(ii) has limited liability. Question 4
(iii) has a low setup cost. A public limited company
A. has no upper limit on the number of
A. (i) only shareholders.
B. (ii) only B. must have at least one shareholder.
C. (i) and (iii) C. can issue shares to the general public.
D. All of the above D. All of the above
Question 2
Which of the following statements about a Question 5
partnership is false? Which of the following is an advantage of a
A. A partnership can have more than 20 partners. partnership over a sole proprietorship?
B. All partners in a limited partnership have limited A. A partnership can have more sources of capital.
liability. B. A partnership enjoys a lower profits tax rate.
C. A limited partner is not involved in the planning C. A partnership is a separate legal entity but a
and management of the business. sole proprietorship is not.
D. A general partner has unlimited liability. D. A partnership can easily transfer ownership to
others while a sole proprietorship cannot.
Question 3
Which of the following are the advantages of a sole Question 6
proprietorship? Which of the following are the advantages of a
(1) A sole proprietorship can raise capital by franchise?
issuing shares to the general public. (i) Autonomy in operation and management
(2) The ownership of the business can easily be (ii) Well-known brand
transferred. (iii) Easy to set up
(3) The owner can easily monitor the whole (iv) Large shop’s benefit
production process and ensure a high quality
standard. A. (i) and (ii)
(4) A board of directors can be elected to run the B. (iii) and (iv)
business. C. (ii), (iii) and (iv)
D. All of the above
A. (1) and (2) only
Question 7
Which of the following is/are the disadvantage(s) of
a joint venture?
(i) A joint venture can be terminated without the
consent of all parties.
(ii) Partners may lose autonomy.
(iii) Product information may be leaked to
partners.
(iv) A joint venture needs to pay a higher profits
tax.
A. (i) only
B. (ii) and (iii)
C. (ii) and (iv)
D. All of the above
Short Questions (8 marks)
Question 1
Briefly explain two advantages of franchise to franchisors. (4 marks)
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Question 2
Briefly explain two differences between ordinary shares and preference shares. (4 marks)
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Answer:
C B B D A C B
Question 1
First, franchisors can earn money from franchisees. Franchisees have to pay franchise fee to the
franchisor to join the franchise. Also, franchisees have to pay management fees to the franchisor
whether or not a profit is made.
Second, franchisors can expand the business and build the brand with the capital and manpower
provided by franchisees. As more and more franchisees join the franchise, the business will expand
and more people will know about the business.
Question 2
First, the dividends from ordinary shares are not fixed. However, the dividends from preference
shares are fixed. Also, Preference shareholders receive dividends before ordinary shareholders are
paid.
Second, ordinary shareholders have voting rights at the annual general meeting. They can elect a
board of directors to run the company. However, preference shareholders do not have voting rights.

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Business Environment and Introduction to Management

Test 2 (Chapter 2 Forms of Business Ownership) Total marks: 15 marks

Name: ____________________ Class: _ Class no.: _ Date: ______________

Multiple Choice Questions (7 marks)

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