Q. If a partner contributes capital but does not participate in management, they are known as a:
A.
General partner
B.
Silent partner
C.
Active partner
D.
Managing partner
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Solution
A silent partner contributes capital but does not take part in the management of the business.
Correct Answer:
B
— Silent partner
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Q. If a partner contributes capital but does not participate in management, they are likely a: (2023)
A.
General partner
B.
Silent partner
C.
Active partner
D.
Managing partner
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Solution
A silent partner contributes capital but does not take part in the management of the business.
Correct Answer:
B
— Silent partner
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Q. If a partner wishes to leave a partnership, what is the most common procedure?
A.
Notify the other partners verbally
B.
Sell their share to an outsider
C.
Follow the terms outlined in the partnership agreement
D.
Leave without any formalities
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Solution
The most common procedure is to follow the terms outlined in the partnership agreement regarding withdrawal.
Correct Answer:
C
— Follow the terms outlined in the partnership agreement
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Q. If a partner wishes to leave the partnership, what is typically required?
A.
A unanimous decision from all partners
B.
A written notice to the remaining partners
C.
Immediate withdrawal without notice
D.
A financial penalty
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Solution
Typically, a partner must provide written notice to the remaining partners if they wish to leave.
Correct Answer:
B
— A written notice to the remaining partners
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Q. If a partner withdraws from a partnership, what is the term used to describe this process?
A.
Dissolution
B.
Retirement
C.
Liquidation
D.
Termination
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Solution
The process of a partner withdrawing from a partnership is commonly referred to as retirement.
Correct Answer:
B
— Retirement
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Q. If a partnership agreement is silent on profit sharing, how are profits typically divided?
A.
Equally among all partners
B.
Based on the capital contribution of each partner
C.
According to the seniority of the partners
D.
By mutual agreement only
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Solution
In the absence of a specific agreement, profits are typically divided equally among all partners.
Correct Answer:
A
— Equally among all partners
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Q. If Partner A contributes 60% of the capital and Partner B contributes 40%, how should profits be divided if not stated otherwise?
A.
Equally among partners
B.
In the ratio of their capital contributions
C.
Based on the time invested in the business
D.
According to a pre-agreed percentage
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Solution
In the absence of any other agreement, profits are typically divided in the ratio of capital contributions.
Correct Answer:
B
— In the ratio of their capital contributions
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Q. If Partner A contributes 60% of the capital and Partner B contributes 40%, how should profits be divided if they agree to split them based on capital contribution?
A.
60% to A and 40% to B
B.
50% to A and 50% to B
C.
70% to A and 30% to B
D.
40% to A and 60% to B
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Solution
Profits should be divided in accordance with their capital contributions, so A receives 60% and B receives 40%.
Correct Answer:
A
— 60% to A and 40% to B
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Q. If Partner A contributes 60% of the capital and Partner B contributes 40%, how should profits be divided if they agreed to split based on capital contribution?
A.
60% to A and 40% to B
B.
50% to A and 50% to B
C.
70% to A and 30% to B
D.
40% to A and 60% to B
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Solution
Profits should be divided in accordance with their capital contributions, hence 60% to A and 40% to B.
Correct Answer:
A
— 60% to A and 40% to B
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Q. If Partner A contributes 60% of the capital and Partner B contributes 40%, how should profits be divided if they agree to split based on capital contribution?
A.
60% to A and 40% to B
B.
50% to A and 50% to B
C.
70% to A and 30% to B
D.
40% to A and 60% to B
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Solution
Profits should be divided in accordance with their capital contributions, which are 60% for A and 40% for B.
Correct Answer:
A
— 60% to A and 40% to B
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Q. If Partner A contributes 60% of the capital and Partner B contributes 40%, how should profits be divided if they agree to split them equally?
A.
60% to Partner A and 40% to Partner B
B.
50% to each partner
C.
70% to Partner A and 30% to Partner B
D.
40% to Partner A and 60% to Partner B
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Solution
Despite the capital contribution, the partners agreed to split profits equally, hence 50% to each.
Correct Answer:
B
— 50% to each partner
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Q. If two partners decide to dissolve their partnership, what is the first step they should take?
A.
Notify their clients
B.
Liquidate the assets
C.
Draft a dissolution agreement
D.
File for bankruptcy
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Solution
The first step in dissolving a partnership is to draft a dissolution agreement that outlines the terms of the dissolution.
Correct Answer:
C
— Draft a dissolution agreement
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Q. If two partners decide to share profits equally but one partner contributes more capital, what is the likely outcome?
A.
The partner with more capital will receive a larger share of profits
B.
The partners will renegotiate their profit-sharing agreement
C.
The partnership will dissolve
D.
The partner with less capital will receive a larger share of profits
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Solution
Typically, partners who contribute more capital may negotiate for a larger share of profits.
Correct Answer:
B
— The partners will renegotiate their profit-sharing agreement
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Q. If two partners in a business decide to split their profits equally, which of the following statements is true? (2023)
A.
They must have equal investments in the business.
B.
They can have different levels of involvement in the business.
C.
They are legally required to file taxes jointly.
D.
They cannot change the profit-sharing ratio later.
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Solution
Partners can agree to share profits equally regardless of their investment or involvement levels.
Correct Answer:
B
— They can have different levels of involvement in the business.
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Q. In a partnership agreement, what is typically included?
A.
The personal assets of each partner
B.
The method of profit sharing
C.
The partners' family backgrounds
D.
The location of the business
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Solution
A partnership agreement typically includes the method of profit sharing among the partners.
Correct Answer:
B
— The method of profit sharing
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Q. In a partnership agreement, what is typically outlined? (2023)
A.
The personal lives of the partners
B.
The distribution of profits and losses
C.
The location of the business
D.
The marketing strategy
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Solution
A partnership agreement typically outlines the distribution of profits and losses among the partners.
Correct Answer:
B
— The distribution of profits and losses
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Q. In a partnership agreement, which clause is essential for defining the roles of each partner?
A.
Profit-sharing clause
B.
Indemnity clause
C.
Duties and responsibilities clause
D.
Termination clause
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Solution
The duties and responsibilities clause is crucial for outlining the specific roles of each partner.
Correct Answer:
C
— Duties and responsibilities clause
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Q. In a partnership agreement, which clause is essential to avoid future disputes?
A.
Profit-sharing ratio
B.
Business location
C.
Partner's personal interests
D.
Market competition
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Solution
A clearly defined profit-sharing ratio is essential in a partnership agreement to prevent disputes.
Correct Answer:
A
— Profit-sharing ratio
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Q. In a partnership agreement, which clause is essential to prevent disputes?
A.
Profit-sharing ratio
B.
Business location
C.
Partner's personal interests
D.
Market competition
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Solution
A clearly defined profit-sharing ratio is crucial to prevent disputes among partners.
Correct Answer:
A
— Profit-sharing ratio
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Q. In a partnership, what does the term 'buy-sell agreement' refer to?
A.
An agreement to sell the business to a third party
B.
A clause that allows partners to buy out each other's shares
C.
An agreement to sell products at a discount
D.
A contract for purchasing supplies
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Solution
A buy-sell agreement is a legal contract that outlines how a partner's share of the business can be bought or sold.
Correct Answer:
B
— A clause that allows partners to buy out each other's shares
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Q. In a partnership, what does the term 'capital account' refer to?
A.
The total amount of money invested by the partners
B.
The account used for daily business transactions
C.
The account that tracks profits and losses
D.
The account that records partner withdrawals
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Solution
The capital account refers to the total amount of money invested by the partners in the partnership.
Correct Answer:
A
— The total amount of money invested by the partners
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Q. In a partnership, what does the term 'capital contribution' refer to?
A.
The profits earned by the partnership
B.
The amount of money or assets each partner invests
C.
The liabilities incurred by the partnership
D.
The salary paid to partners
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Solution
Capital contribution refers to the money or assets that each partner invests into the partnership.
Correct Answer:
B
— The amount of money or assets each partner invests
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Q. In a partnership, what does the term 'joint venture' refer to?
A.
A partnership formed for a specific project
B.
A permanent partnership with no end date
C.
A partnership that requires equal capital contribution
D.
A partnership that is limited to two partners only
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Solution
A joint venture is a partnership formed for a specific project or purpose, often with a defined time frame.
Correct Answer:
A
— A partnership formed for a specific project
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Q. In a partnership, what does the term 'profit-sharing ratio' refer to?
A.
The ratio of profits to losses
B.
The percentage of profits each partner receives
C.
The ratio of capital contributions
D.
The ratio of partners to employees
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Solution
The profit-sharing ratio refers to the percentage of profits that each partner receives, which may differ from their capital contributions.
Correct Answer:
B
— The percentage of profits each partner receives
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Q. In a partnership, what is the term for a partner who does not actively participate in the business but is known to the public?
A.
Silent partner
B.
Active partner
C.
General partner
D.
Limited partner
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Solution
A silent partner is one who does not participate in the day-to-day operations but is still recognized as a partner.
Correct Answer:
A
— Silent partner
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Q. In a partnership, what is the term for the share of profits that a partner is entitled to receive?
A.
Dividend
B.
Salary
C.
Draw
D.
Distribution
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Solution
The term 'distribution' refers to the share of profits that a partner is entitled to receive from the partnership.
Correct Answer:
D
— Distribution
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Q. In a partnership, which document outlines the rights and responsibilities of each partner?
A.
Partnership deed
B.
Memorandum of understanding
C.
Business plan
D.
Articles of incorporation
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Solution
The partnership deed is the legal document that outlines the rights and responsibilities of each partner in the partnership.
Correct Answer:
A
— Partnership deed
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Q. In a partnership, which of the following is NOT typically a reason for dissolution?
A.
Mutual agreement of partners
B.
Insolvency of one partner
C.
Change in business strategy
D.
Increase in profit margins
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Solution
Increase in profit margins is generally not a reason for dissolution; rather, it is a positive outcome.
Correct Answer:
D
— Increase in profit margins
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Q. In the context of partnerships, what does the term 'buy-sell agreement' refer to?
A.
An agreement to sell the business to a third party
B.
A contract outlining how a partner's share can be sold or transferred
C.
An agreement to buy out a partner's share at market value
D.
A clause that allows partners to sell their shares freely
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Solution
A buy-sell agreement outlines the terms under which a partner's share can be sold or transferred.
Correct Answer:
B
— A contract outlining how a partner's share can be sold or transferred
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Q. In the context of partnerships, what does the term 'fiduciary duty' imply?
A.
Partners must act in their own best interest.
B.
Partners must act in the best interest of the partnership.
C.
Partners can compete with each other.
D.
Partners can withdraw their contributions at any time.
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Solution
Fiduciary duty implies that partners must act in the best interest of the partnership.
Correct Answer:
B
— Partners must act in the best interest of the partnership.
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