Although It Is a Small Company, Zorn Enterprises Owns a Large

question 319

Multiple Choice

Although it is a small company, Zorn Enterprises owns a large number of inexpensive rental housing units in Texas and Louisiana. Currently, the company is a chartered C-corporation, but the owners are interested in switching to an S corporation. After consulting a lawyer, they learned that Zorn Enterprises does not qualify to be designated as an S corporation. Which of the following characteristics of Zorn Enterprises would prevent it from becoming an S corporation?

• A)The firm has fewer than 75 stockholders.
• B) The firm is chartered in one state, but owns property in another.
• C) The firm has only one class of stock, all owned by U.S. citizens.
• D)The firm receives more than 70 percent of its income from rents and other passive sources.

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Definitions:

Market-Based View

A strategic perspective that emphasizes the importance of external market conditions in developing a firm's strategy.

Industry Attractiveness

A measure of the potential profitability and prospects for growth within a particular industry, influenced by factors such as competition, barriers to entry, and market demand.

Transferable Resources

Assets or capabilities that can be used or applied in different areas within an organization or in different contexts.

Competitive Advantage

The attributes or conditions that allow a company to produce goods or services better or more cheaply than its competitors.