5.05 EXAM: BUSINESS BANKING AND
FINANCE - PART 1 WITH ACCURATE
SOLUTIONS
List dthe dcharacteristics dof dsole dproprietorships dand dpartnerships. d- dcorrect
danswers d-Sole dProprietorships: dOwner dmakes dall ddecisions, dkeeps dall dprofits, dis
dsolely dresponsible dfor ddebts, dand downs dall dcapital, dfew dregulations, deasy dto
dstart dup.
Partnerships: dCo-owners dshare dthe dprofits, dmake deconomic ddecisions dtogether,
dassist din dthe dbusiness' dsuccess. dIn dmany dcases, deach dpartner dshoulders dan
dequal damount dof dthe dresponsibilities, deach da dportion dof dthe dstart-up dcosts dout
dof dtheir down dpockets, dand din dsome dtypes dof dpartnerships, dco-owners dare
, dresponsible dfor dthe ddebts dthat dare dincurred dfrom ddoing dbusiness. dPartnerships
dgenerally dhave dfew dregulations dand dare dfairly deasy dto dstart dup.
Describe dthe droles dof dsole dproprietorships dand dpartnerships din dthe deconomy. d-
dcorrect danswers d-Sole dProprietorships: dThree-fourths dof dall dbusinesses din dthe
dUnited dStates dare dsole dproprietorships dbut donly dconduct dabout dsix dpercent dof
dthe dtotal dsales dconducted din dthe dUnited dStates din da dyear. dWhile dthis dtype
daccounts dfor dthe dmajority dof dbusinesses downed din dthe dU.S., dtheir dimpact don
dsales dis dsmall.
Partnerships: dLess dthan dten dpercent dof dall dbusinesses din dthe dUnited dStates dare
dpartnerships; dthey dalso dgenerate da dsmall damount dof dtotal dsales d(between dfive
dand dseven dpercent). dTheir dimpact dis dsmall das dwell. dTogether, dthese dbusinesses
dgenerate dless dthan dthirteen dpercent dof dthe dsales din dthe dU.S.; dcorporations dare
dresponsible dfor dthe dmajority dof dsales
What dare dthe dsimilarities dand ddifferences dbetween dsole dproprietorships dand
dpartnerships? d- dcorrect danswers d-Similarities: dBoth dare dbusinesses, dare deasy dto
dstart dup, dand dhave dfew dgovernment dregulations. d
Differences: dSole dproprietorships dare donly downed dand doperated dby done dperson,
dwhile dtwo dor dmore dpeople dare dinvolved din dpartnerships. dIn dpartnerships,
dpartners dshare din dthe dinvestment dof dthe dbusiness.
How dare dcorporations dstructured? d- dcorrect danswers d-Individuals dpurchase dthe
dshares dof dstock, dand dthis dmoney dis dused dto dfund dthe dbusiness dand dfor
doperating dcosts. dPeople dwho dbuy dshares dof dstock dare dcalled dstockholders. dThe
dshares dthat dthey down drepresent dthe dportion dof dthe dcompany dthat dthey down.
dStockholders dvote dfor da dgroup dof dpeople dto dlead dthe dcorporation, dknown das
dthe dBoard dof dDirectors. dIt dis dthe dBoard dof dDirectors dthat ddecides dhow dthe
dcorporation dwill dbe drun. dThe dBoard dhires dofficers dwho dsee dto dthe dday-to-day
doperations dof dthe dcompany. dThe dofficers din dturn dhire dstaff dpeople dto dwork dthe
ddifferent ddepartments dand dperform dthe dfunctions dnecessary dto doperate dthe
dcompany.
Describe dthe ddifferent dtypes dof dcorporate dcombinations. d- dcorrect danswers d-
Horizontal dMergers: dTwo dcompanies dthat dproduce dthe dsame dproduct din dthe
dsame dmarket dcombine dor dmerge.
Vertical dMergers: dTwo dor dmore dcompanies dthat dproduce ddifferent dcomponents dof
dthe dsame dgood dor dservice dcombine dor dmerge.
Conglomerates: dCorporations dbuy dother dcorporations dthat dare dinvolved din dthe
dproduction dof dgoods dand dservices dthat dare dtotally dunlike dthe dothers.
What dare dmonopolies dand doligopolies? d- dcorrect danswers d-Monopolies dare
dcreated dwhen done dfirm dis dable dto ddominate dthe dmarket dand dno dother dfirm dis
dable dto denter dthe dmarket. dA dcompany dthat dis da dmonopoly dis dthe donly dseller din
dthe dmarket dand dbuyers dare dliterally dat dthe dmercy dof dthe dcompany dto dobtain
dthe dproduct.
FINANCE - PART 1 WITH ACCURATE
SOLUTIONS
List dthe dcharacteristics dof dsole dproprietorships dand dpartnerships. d- dcorrect
danswers d-Sole dProprietorships: dOwner dmakes dall ddecisions, dkeeps dall dprofits, dis
dsolely dresponsible dfor ddebts, dand downs dall dcapital, dfew dregulations, deasy dto
dstart dup.
Partnerships: dCo-owners dshare dthe dprofits, dmake deconomic ddecisions dtogether,
dassist din dthe dbusiness' dsuccess. dIn dmany dcases, deach dpartner dshoulders dan
dequal damount dof dthe dresponsibilities, deach da dportion dof dthe dstart-up dcosts dout
dof dtheir down dpockets, dand din dsome dtypes dof dpartnerships, dco-owners dare
, dresponsible dfor dthe ddebts dthat dare dincurred dfrom ddoing dbusiness. dPartnerships
dgenerally dhave dfew dregulations dand dare dfairly deasy dto dstart dup.
Describe dthe droles dof dsole dproprietorships dand dpartnerships din dthe deconomy. d-
dcorrect danswers d-Sole dProprietorships: dThree-fourths dof dall dbusinesses din dthe
dUnited dStates dare dsole dproprietorships dbut donly dconduct dabout dsix dpercent dof
dthe dtotal dsales dconducted din dthe dUnited dStates din da dyear. dWhile dthis dtype
daccounts dfor dthe dmajority dof dbusinesses downed din dthe dU.S., dtheir dimpact don
dsales dis dsmall.
Partnerships: dLess dthan dten dpercent dof dall dbusinesses din dthe dUnited dStates dare
dpartnerships; dthey dalso dgenerate da dsmall damount dof dtotal dsales d(between dfive
dand dseven dpercent). dTheir dimpact dis dsmall das dwell. dTogether, dthese dbusinesses
dgenerate dless dthan dthirteen dpercent dof dthe dsales din dthe dU.S.; dcorporations dare
dresponsible dfor dthe dmajority dof dsales
What dare dthe dsimilarities dand ddifferences dbetween dsole dproprietorships dand
dpartnerships? d- dcorrect danswers d-Similarities: dBoth dare dbusinesses, dare deasy dto
dstart dup, dand dhave dfew dgovernment dregulations. d
Differences: dSole dproprietorships dare donly downed dand doperated dby done dperson,
dwhile dtwo dor dmore dpeople dare dinvolved din dpartnerships. dIn dpartnerships,
dpartners dshare din dthe dinvestment dof dthe dbusiness.
How dare dcorporations dstructured? d- dcorrect danswers d-Individuals dpurchase dthe
dshares dof dstock, dand dthis dmoney dis dused dto dfund dthe dbusiness dand dfor
doperating dcosts. dPeople dwho dbuy dshares dof dstock dare dcalled dstockholders. dThe
dshares dthat dthey down drepresent dthe dportion dof dthe dcompany dthat dthey down.
dStockholders dvote dfor da dgroup dof dpeople dto dlead dthe dcorporation, dknown das
dthe dBoard dof dDirectors. dIt dis dthe dBoard dof dDirectors dthat ddecides dhow dthe
dcorporation dwill dbe drun. dThe dBoard dhires dofficers dwho dsee dto dthe dday-to-day
doperations dof dthe dcompany. dThe dofficers din dturn dhire dstaff dpeople dto dwork dthe
ddifferent ddepartments dand dperform dthe dfunctions dnecessary dto doperate dthe
dcompany.
Describe dthe ddifferent dtypes dof dcorporate dcombinations. d- dcorrect danswers d-
Horizontal dMergers: dTwo dcompanies dthat dproduce dthe dsame dproduct din dthe
dsame dmarket dcombine dor dmerge.
Vertical dMergers: dTwo dor dmore dcompanies dthat dproduce ddifferent dcomponents dof
dthe dsame dgood dor dservice dcombine dor dmerge.
Conglomerates: dCorporations dbuy dother dcorporations dthat dare dinvolved din dthe
dproduction dof dgoods dand dservices dthat dare dtotally dunlike dthe dothers.
What dare dmonopolies dand doligopolies? d- dcorrect danswers d-Monopolies dare
dcreated dwhen done dfirm dis dable dto ddominate dthe dmarket dand dno dother dfirm dis
dable dto denter dthe dmarket. dA dcompany dthat dis da dmonopoly dis dthe donly dseller din
dthe dmarket dand dbuyers dare dliterally dat dthe dmercy dof dthe dcompany dto dobtain
dthe dproduct.
