Fact Pattern 3-1 Ann Starts Up Bowls Bistro to Serve and Sell Soups

question 10

Multiple Choice

Fact Pattern 3-1
Ann starts up Bowls Bistro to serve and sell soups and salads. Ann leases space in an office building owned by Carly. The lease requires a base rent of $1,250, plus 10 percent of Bowls Bistro's profits, each month. The term is two years. Ann hires Demi to take and fill customers' orders at an hourly wage of $15.00, plus tips.
-Refer to Fact Pattern 3-1.Ann and Demi are

• A) ​not partners, because Demi does not have an ownership interest or management rights in Bowls Bistro.
• B) ​not partners, because the pay includes an hourly wage.
• C) ​not partners, because the pay includes only 10 percent of the profits.
• D) ​partners in a partnership.

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Definitions:

Warrants

Securities that grant the holder the right to purchase a company's stock at a specified price before a certain date, often attached to bonds.

Call Options

Financial contracts giving the buyer the right, but not the obligation, to buy an underlying asset or security at a specified price within a defined time period.

Convertible Bonds

Debt securities that can be converted into a predetermined number of the issuing company's shares, usually at the bondholder's option.

Bullwhip Effect

A phenomenon where small fluctuations in demand at the retail level cause progressively larger fluctuations in demand at the wholesale, distributor, and manufacturer levels.