____ 34. Jane Doe, who has substantial personal wealth and
income, is considering the possibility of starting a new business
in the chemical waste management field. She will be the sole owner,
and she has enough funds to finance the operation. The business
will have a relatively high degree of risk, and it is expected that
the firm will incur losses for the first few years. However, the
prospects for growth and positive future income look good, and Jane
plans to have the firm pay out all of its income as dividends to
her once it is well established. Which of the legal forms of
business organization would probably best suit her needs?
a. Proprietorship, because of ease of entry.
b. S corporation, to gain some tax advantages and also to
obtain limited liability.
c. Partnership, but only if she needs additional
capital.
d. Regular corporation, because of the limited
liability.
e. In this situation, the various forms of organization seem
equally desirable.
____ 35. Which of the following statements is CORRECT?
a. The corporate bylaws are a standard set of rules
established by the state of incorporation. These rules are
identical for all corporations in the state, and their purpose is
to ensure that the firm's managers run the firm in accordance with
state laws.
b. The corporate charter is a standard document prescribed by
the state of incorporation, and its purpose is to ensure that the
firm's managers run the firm in accordance with state laws.
Procedures for electing corporate directors are contained in
bylaws, while the declaration of the activities that the firm will
pursue and the number of directors are included in the corporate
charter.
c. Companies must establish a home office, or domicile, in a
particular state, and that state must be the one in which most of
their business (sales, manufacturing, and so forth) is
conducted.
d. Attorney fees are generally involved when a company
develops its charter and bylaws, but since these documents are
voluntary, a new corporation can avoid these costs by deciding not
to have either a charter or bylaws.
e. The corporate charter is concerned with things like what
business the company will engage in, whereas the bylaws are
concerned with things like procedures for electing the board of
directors.
____ 36. With which of the following statements would most
people in business agree?
a. A corporation's short-run profits will almost always
increase if the firm takes actions that the government has
determined are in the best interests of the nation.
b. Firms and government agencies almost always agree with one
another regarding the restrictions that should be placed on hiring
and firing employees.
c. Although people's moral characters are probably developed
before they get into a business school, it is still useful for
business schools to cover ethics, including giving students an idea
about the adverse consequences of unethical behavior to themselves,
their firms, and the nation.
d. It is not useful for a large corporation to develop a
formal set of rules defining ethical and unethical behavior. Such
rules generally can't be applied in many specific instances, so it
is better to deal with ethical issues on a case-by-case
basis.
e. "Whistle blowers," because of the courage it takes to blow
the whistle, are generally promoted more rapidly than other
employees.
____ 37. The primary operating goal of a publicly-owned firm
interested in serving its stockholders should be to
a. Maximize the stock price per share over the long run, which
is the stock's intrinsic value.
b. Maximize the firm's expected EPS.
c. Minimize the chances of losses.
d. Maximize the firm's expected total income.
e. Maximize the stock price on a specific target date.