Accounting Multiple Choice Question – 3 August 2024

Alex Ltd is considering several options to market a new product called the Staffordshire with Lucy Ltd’s help.

Which of the following business structures is a joint venture?

Select ONE answer:

1. Buy Lucy Ltd and market the Staffordshire through that company
2. Form a project team with employees of both Alex Ltd and Lucy Ltd and market the Staffordshire through that team
3. With Lucy Ltd as equal partner, form Allu Ltd and market the Staffordshire through that company
4. Sell Lucy Ltd the right to market the Staffordshire in return for a percentage of the revenues

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct –> Purchasing the company will make it part of a group; forming a project team is a form of strategic alliance (a strategic alliance is more informal), while selling Lucy the marketing rights in return for a fee is a licensing. agreement.  Allu Ltd would be a separate legal entity owned 50:50 by the two companies and this is the most usual form of joint venture.
4. Not correct

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