New Horizon Business, Accounting and Financial Studies
Business Environment and Introduction to Management
Question Bank
MULTIPLE-CHOICE QUESTIONS
B2T1Q001 (2018)
Which of the following statements about sole proprietorship are not correct?
(1) Funds are mainly financed by personal resources.
(2) The profits tax rate is 16%.
(3) The owner bears limited liability.
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
Answer: C
B2T1Q002 (2018)
Which of the following is not a type of partner?
A. General partner
B. Abnormal partner
C. Limited partner
D. Nominal partner
Answer: B
B2T1Q003 (2018)
Which of the following statements about franchises are correct?
(1) The franchisor needs to provide training to the franchisee.
(2) The franchisor’s brand name is well-known.
(3) The franchisee is required to share the promotional costs created by the franchisor.
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
Answer: D
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Chapter 2 Forms of Business Ownership © Hong Kong Educational Publishing Co.
New Horizon Business, Accounting and Financial Studies
Business Environment and Introduction to Management
Question Bank
B2T1Q004 (2018)*
James and Joey are in a partnership. James bears limited liability and Joey is responsible for managing the
company. James is a ___________ partner and Joey is a __________ partner.
A. general......nominal
B. limited......general
C. limited......nominal
D. nominal......limited
Answer: B
B2T1Q005 (2018)
Hong Kong Disneyland Resort is owned by ______________________.
A. a sole proprietorship
B. a partnership
C. a joint venture
D. a listed company
Answer: C
B2T1Q006 (2018)
Which of the following is not the responsibility of a franchisor?
A. Share the loss if the franchisee results in a loss
B. Provide management training and assistance
C. Offer unified promotional campaign
D. Supply goods to the franchisee
Answer: A
B2T1Q007 (2018)
Which of the following descriptions about a public limited company is not correct?
A. The minimum number of shareholders is 1.
B. Its shares can be traded freely on the stock market.
C. Its financial information must be disclosed to the public.
D. The maximum number of shareholders is 1 million.
Answer: D
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Chapter 2 Forms of Business Ownership © Hong Kong Educational Publishing Co.
New Horizon Business, Accounting and Financial Studies
Business Environment and Introduction to Management
Question Bank
B2T1Q008 (2018)*
Rachel wants to set up a company. She has invited 10 friends to invest and become owners. They would all
have limited liability and the company would not be listed on the Hong Kong Stock Exchange. Which type of
ownership is Rachel’s company part of?
A. A joint venture
B. A limited partnership
C. A private limited company
D. A public limited company
Answer: C
B2T1Q009 (2018)
Alan and Andy are the ordinary and preference shareholders of Bravo Limited respectively. Which of the
following statements is correct?
A. They both have voting rights.
B. Neither of them has voting rights.
C. Only Alan has voting rights.
D. Only Andy has voting rights.
Answer: C
B2T1Q010 (2018)
A _____________ is an agreement between two or more businesses to form another entity for the production
and / or sale of a product or service.
A. partnership
B. franchise
C. private limited company
D. joint venture
Answer: D
B2T1Q011 (2018)
Which of the following is not a public corporation in Hong Kong?
A. Hong Kong Science and Technology Parks Corporation
B. Hong Kong Tramways
C. Hong Kong Housing Authority
D. Ocean Park Corporation
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Chapter 2 Forms of Business Ownership © Hong Kong Educational Publishing Co.
New Horizon Business, Accounting and Financial Studies
Business Environment and Introduction to Management
Question Bank
Answer: B
B2T1Q012 (2018)
Which of the following is not a feature of a multinational corporation (MNC) in Hong Kong?
A. It has managerial headquarters in the home country.
B. It operates in more than one country in the world.
C. It has to bear higher political risks.
D. It does not have to pay tax to the Hong Kong Government.
Answer: D
B2T1Q013 (2018)*
Danny is a sole trader operating a small grocery store. Which of the following descriptions about his business
is correct?
A. In the event of Danny’s death, the business would close.
B. In the event of Danny’s death, his successor would be able to operate the business without registration.
C. Danny benefits from limited liability for debts.
D. Danny pays 16.5% profits tax to the government.
Answer: A
B2T1Q014 (2018)*
Which of the following are reasons for forming a public limited company rather than a private limited
company?
(1) There is no obligation to disclose financial information to the Inland Revenue Department.
(2) There is less chance of being taken over.
(3) There are more sources of capital.
A. (1) only
B. (3) only
C. (1) and (2) only
D. (2) and (3) only
Answer: B
B2T1Q015 (2018)
Which of the following are advantages of a private limited company compared with a partnership?
(1) The profits tax rate for a private limited company is lower than that of a partnership.
(2) The existence of the firm is not affected by the death or bankruptcy of the shareholders.
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Chapter 2 Forms of Business Ownership © Hong Kong Educational Publishing Co.
New Horizon Business, Accounting and Financial Studies
Business Environment and Introduction to Management
Question Bank
(3) The shareholders of a private limited company limit their liabilities to their investment.
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
Answer: C
SHORT QUESTIONS
B2T2Q001 (2018)
A private limited company is changing its form of ownership to a public limited company after listening to the
advice of some business consultants. Explain two advantages of switching from a private limited company to a
public limited company. (4 marks)
Answer
Advantages:
To improve the ability to raise funds: a public limited company can list its shares on the Hong Kong
Stock Exchange to raise funds through the public. (2)
To transfer ownership freely: the shares can be traded freely on the stock market. Shareholders are free to
opt out once they earn a reasonable return or want to prevent loss. (2)
B2T2Q002 (2018)*
Edwin wants to open a drinks shop selling different kinds of bubble tea. He has decided to run his business in
the form of a franchise. However, Roger, his friend does not recommend him to do so.
(a) List two of Edwin’s responsibilities as a franchisee if he runs his business in the form of a franchise.
(2 marks)
(b) Explain two reasons why Roger does not recommend Edwin to open his store in the form of franchise.
(4 marks)
Answer
(a) Responsibilities:
To operate according to the rules and procedures set by the franchisor
To pay the franchisor monthly royalty payments and other costs as agreed
To buy supplies and other standard materials from the franchisor or approved suppliers
(1 mark for each relevant responsibility, max. 2 marks)
(b) Reasons:
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Chapter 2 Forms of Business Ownership © Hong Kong Educational Publishing Co.
New Horizon Business, Accounting and Financial Studies
Business Environment and Introduction to Management
Question Bank
The franchisor is paid a monthly royalty fee even a loss is incurred.
The franchisor’s instructions have to be followed which reduces flexibility.
The business can be affected if the franchisor has a poor reputation.
(2 marks for each relevant reason, max. 4 marks)
B2T2Q003 (2018)*
Yanny is the owner of a local fast food restaurant chain. As her business experience is limited, she has invited
her friend, Candice, who has extensive experience, to be a nominal partner.
(a) State three characteristics Candice will have as a nominal partner. (3 marks)
(b) Explain one possible reason why Candice has been invited to be a nominal partner. (2 marks)
Answer
(a) Characteristics:
She is not required to invest capital into the business.
She does not own the business.
She does not have any active involvement in the business.
She does not bear any liability of the business.
(1 mark for each relevant characteristic, max. 3 marks)
(b) Reasons:
To improve the image of the business with her reputation
To improve the operational efficiency with her advice
(2 marks for each relevant reason, max. 2 marks)
B2T2Q004 (2018)
Toby wants to open a sweet shop. She is thinking whether to operate her business in the form of a general
partnership. Explain one advantage and one disadvantage if she runs her business in the form of a general
partnership. (4 marks)
Answer
Advantage:
She would have access to multiple sources of capital from different partners in starting up, running and
expanding the business.
Diversification in management and multiple sources of capital would allow Toby’s business to grow and
expand into new products or markets.
The set-up procedures for partnerships are relatively simple and the set-up costs are relatively low.
The risks could be shared by all partners.
(2 marks for each relevant advantage, max. 2 marks)
Disadvantage:
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Chapter 2 Forms of Business Ownership © Hong Kong Educational Publishing Co.
New Horizon Business, Accounting and Financial Studies
Business Environment and Introduction to Management
Question Bank
If the partnership incurred debts and liabilities, Toby would have to bear unlimited liability.
With no separate legal entity, a partnership lacks continuity and ceases in the event of the death,
withdrawal or bankruptcy of a partner.
Disagreements may happen and if not resolved, they may cause problems within the partnership.
(2 marks for each relevant disadvantage, max. 2 marks)
B2T2Q005 (2018)
A public enterprise is an organisation which is owned and operated by the government or public bodies
established by the government. List three reasons for setting up a public enterprise for the society. (3 marks)
Answer
Reasons:
To avoid unnecessary duplication
To set up and run services that might not be profitable
To control industries that are important to the country, for example, transport networks and water
supplies
To gain the benefits of large-scale production
To protect employment by creating job opportunities rather than gaining financial profit
(1 mark for each relevant reason, max. 3 marks)
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Chapter 2 Forms of Business Ownership © Hong Kong Educational Publishing Co.
