Mercantile Law 2005-Solved MCQs Competitive Exams Set 1

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(1) Talal is forming a business which he wants to control completely. He knows nobody else

with whom he wishes to work, he values his privacy, and he dislikes formality, paper work, state

filing requirements, and lawyers. What type of business organization should he prefer?

(a) General partnership

(b) Sole Proprietorship

(c) Single Member Company

(d) None of these

Answer: (b)

(2) The Articles of Association of a company contain:

(a) a set of governing rules adopting by the company

(b) Resolutions of the board of directors

(c) Information about the corporation, including its organization and functions.

(d) None of these

Answer: (a)

(3) A partnership involves three essential elements. Which of the following is not one of those


(a) An equal right in the management of the business

(b) Limited liability for the liabilities of the firm

(c) A joint ownership of the business

(d) None of these

Answer: (b)

(4) Rashid, Shahid and Talal agree to form a computer business. Rashid agrees to manage the

business and to assume full personal liability. Shahid and Talal agree to invest in the firm but to

be liable only to that extent. These three have formed

(a) A limited liability company

(b) A limited liability partnership

(c) An unlimited partnership

(d) None of these

Answer: (d)

(5) The members of a limited partnership include:

(a) General and limited partners

(b) General partners only

(c) Creditors

(d) None of these

Answer: (d)

(6) A bearer cheque may be negotiated by:

(a) Mere delivery

(b) Endorsement and delivery

(c) Delivery with a separate written contract

(d) None of these

Answer: (a)

(7) The responsibility of overall management of a company belongs to:

(a) The chief financial officer

(b) The employees

(c) The board of directors

(d) None of these

Answer: (d)

(8) The best definition of a quorum is which of the following?

(a) It is 51 % of all shareholders

(b) It is the number of members of a company that must be present before business may be


(c) It is the number of voters who must agree to alter the company՚s articles.

(d) None of these

Answer: (b)

(9) When a partnership is found liable for a debt, which assets are first used to pay the debt?

(a) Individual assets of the partners

(b) Personal property of the limited partners

(c) Partnership assets

(d) None of these

Answer: (c)

(10) The board of directors does not have responsibility over which of the following areas?

(a) The appointment, supervision, and removal of corporate officers

(b) The appointment, supervision, and removal of employees generally

(c) The declaration and payment of corporate dividends

(d) None of these

Answer: (b)