Understanding Business 10Th Edition Nickels Test Bank Full Chapter PDF

Chapter 05 - How to Form a Business
Understanding Business 10th Edition

Nickels Test Bank
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Test Planning Table for Chapter 5
LL:1 LL:2 LL:3

Learning Goal Knows Basic Understands Applies Principles
Terms and Facts Concepts and
Principles
1. Compare the 1,2,3,4,5,6,7,8,9,10,11,12, 18,19,20,21, 22,23,24,
advantages and 13,14,15,16,17, 203,204,205,206,207, 209,210,211,212,213,
disadvantages of sole 192,193,194,195,196,197, 208 214,215,
proprietorships. 198,199,200,201,202 344,
350*
2. Describe the 25,26,27,28,29,30,31,32, 46,47,48~,49,50~,51, 52,53,54,55,56,57,58,
differences between 33,34,35,36,37,38,39,40, 225,226,227,228,229, 59~,60,
general and limited 41,42,43,44,45, 230,231 232,233,234,235,236~,
partners, and compare 216,217,218,219,220,221, 237,238,239,240,241,
the advantages and 222,223,224 345,
disadvantages of 351*,352*
partnerships.
3. Compare the 61,62,63,64,65,66,67,68, 102,103,104,105,106, 113,114,115,116,117,
advantages and 69,70,71,72,73,74,75,76, 107,108,109,110,111, 118,119,120~,121,122,
disadvantages of 77,78,79,80,81,82,83,84, 112, 269,270,271,272,273,
corporations, and 85,86,87,88,89,90,91,92, 260,261,262,263,264, 274,275,276,277,278,
summarize the 93,94,95,96,97,98,99,100, 265,266,267,268 279~,280~,
differences between C 101, 346,347,
corporations, S 242,243,244,245,246,247, 353*
corporations, and limited 248,249,250,251,252,253,
liability companies. 254,255,256,257,258,259
4. Define and give 123,124,125,126,127,128, 136,137,138,139,140, 142,143,144,145,146,

examples of three types 129,130,131,132,133,134, 141, 299,300,301,302,303,
of corporate mergers, 135, 293,294,295,296,297, 304,305,306,
and explain the role of 281,282,283,284,285,286, 298 348
leveraged buyouts and 287,288,289,290,291,292
taking a firm private.
5. Outline the 147,148,149,150,151,152, 166,167,168,169,170, 173,174,175,176,177,
advantages and 153,154,155,156,157,158, 171,172, 178~,179,180,181,
disadvantages of 159,160,161,162,163,164, 320,321,322,323,324 325,326,327,328,329~,
franchises, and discuss 165, 330,331,332,333,
the opportunities for 307,308,309,310,311,312, 349,
5-1
diversity in franchising 313,314,315,316,317,318, 354*,355*

and the challenges of 319
global franchising.
6. Explain the role of 182,183,184,185,186,187, 188,189, 190,191,
cooperatives 334,335,336,337,338 339,340,341 342,343
Total number of test items: 355
True/false questions are in plain text.

Multiple choice questions are in bold text.
Questions on boxed material are in bold text with a tilde~.
Essay questions are in bold underlined text.
Minicase questions are in bold with an asterisk*.
5-2
Chapter 05
How to Form a Business Answer Key
True / False Questions
1. The corporation is the most common form of business ownership.
Answer: False
Page: 116
AACSB: Reflective Thinking
Bloom's: Knowledge
Learning Goal: 05-1
Level of Difficulty 1: Knowledge of key terms
Topic: Basic Forms of Business Ownership
2. The three major forms of business ownership in the U.S. are sole proprietorships,
partnerships, and corporations.
Answer:
Page: 116
Bloom's: Knowledge
Learning Goal: 05-1
3. Few people today start their own business.
Answer: False
Page: 116
Bloom's: Knowledge
Learning Goal: 05-1
4. Once a business is established, it's almost impossible to change from one form of business
ownership to another.
Answer: False
Page: 116
Bloom's: Knowledge
Learning Goal: 05-1
5-3
5. When two or more people legally agree to become co-owners of a business, the form of
business is called a partnership.
Answer: True
Page: 116
Bloom's: Knowledge
Learning Goal: 05-1
6. A legal entity with authority to act and have liability separate from its owners is called a
partnership.
Answer: False
Page: 116-117
Bloom's: Knowledge
Learning Goal: 05-1
7. Corporations represent 20 percent of all the businesses in the U.S. and earn 81 percent of
the total U.S. business receipts.
Answer: True
Page: 116-117
Bloom's: Knowledge
Learning Goal: 05-1
8. A comparison of the three major forms of business ownership shows that sole
proprietorships are usually the most difficult type of business to establish.
Answer: False
Page: 116-117
Bloom's: Knowledge
Learning Goal: 05-1
5-4
9. The first step in starting a sole proprietorship is to fill out a proprietorship charter
application form and file it with the state government.
Answer: False
Page: 117
Bloom's: Knowledge
Learning Goal: 05-1
Topic: Advantages of Sole Proprietorships
10. It is usually easy to start and end a sole proprietorship.
Answer: True
Page: 117
Bloom's: Knowledge
Learning Goal: 05-1
11. The profits of a sole proprietorship are taxed as the personal income of the owner.
Answer: True
Page: 117
Bloom's: Knowledge
Learning Goal: 05-1
12. The sole proprietorship form of ownership tends to be attractive to people who want to
invest in a company without taking an active role in management.
Answer: False
Page: 117
Bloom's: Knowledge
Learning Goal: 05-1
13. A major advantage of sole proprietorships is that an owner has limited liability for the
debts of his or her business.
Answer: False
Page: 117
Bloom's: Knowledge
Learning Goal: 05-1
5-5
14. One of the strengths of the sole proprietorship is its ability to sustain rapid growth by
raising large amounts of financial resources.
Answer: False
Page: 117
Bloom's: Knowledge
Learning Goal: 05-1
15. The debts of a business operated as a sole proprietorship are considered to be the personal
debts of the owner of the business.
Answer: True
Page: 118
Bloom's: Knowledge
Learning Goal: 05-1
Topic: Disadvantages of Sole Proprietorships
16. A drawback of sole proprietorships is that they usually have limited access to additional
financial resources.
Answer: True
Page: 118
Bloom's: Knowledge
Learning Goal: 05-1
17. An advantage of forming a sole proprietorship is that it allows the owner to have more
time for leisure activities.
Answer: False
Page: 118
Bloom's: Knowledge
Learning Goal: 05-1
5-6
18. If a sole proprietorship fails, the owner may lose whatever was invested in the business,
however, the owner's personal assets are not at risk.
Feedback: Sole proprietors have unlimited liability for the debts of their business. This means
that if their business gets into financial trouble they can lose their personal assets.
Answer: False
Page: 118
Bloom's: Knowledge
Learning Goal: 05-1
Level of Difficulty 2: Understanding of concepts and principles
19. If the business is designated a sole proprietorship, profits are passed along to the owner.
For tax purposes, these profits are accounted for with any other personal income the
owner may have accumulated and taxed at the owner's personal income tax rate.
Feedback: The profits of a sole proprietorship are passed through to the owner, and taxed at
the owner's personal tax rate. However, owners do have to pay self employment tax (for
Social Security and Medicare). By law, sole proprietors are required to estimate their taxes
and make quarterly payments to the government or suffer penalties for nonpayment.
Answer: True
Page: 117
Bloom's: Knowledge
Learning Goal: 05-1
20. A difficulty that sole proprietors try to overcome is the fact that they have trouble
competing with large firms for expert talent. Large firms can usually pay better and offer
fringe benefits that are unaffordable to the sole proprietor.
Feedback: Sole proprietors often find it difficult to attract qualified employees to help run the
business because often they cannot compete with the salary and benefits offered by larger
companies.
Answer: True
Page: 118
Bloom's: Knowledge
Learning Goal: 05-1
5-7
21. Unlike partnerships, if sole proprietorships find themselves in bankruptcy, they need not
worry about a court of law requiring them to sell-off personal assets to pay for the debts of
the firm.
Feedback: Sole proprietorships have unlimited liability. This means that the proprietor is
financially responsible for all debts incurred by the company. In a court of law, a judge could
require the owner/proprietor to liquidate personal assets to pay the debts of the business.
Answer: False
Page: 118
Bloom's: Knowledge
Learning Goal: 05-1
22. Eric wants to start a business. He is attracted to the idea of being his own boss, and wants
to get started with a minimum of expense and hassle. He is confident in his abilities, and
the market he can draw from, so he is not particularly worried about financial risks. All of
these factors suggest that Eric may favor starting his business as a sole proprietorship.
Feedback: People who want to be their own boss often prefer to operate their business, at
least initially, as a sole proprietorship. An advantage of the sole proprietorship is that it is a
relatively easy and inexpensive form of business to set up. One drawback of a sole
proprietorship is that the owner has unlimited liability. However, at this time, Eric is not
worried about risk. The unlimited liability factor does not appear to be a problem for him.
Answer: True
Page: 117-118
Bloom's: Application
Learning Goal: 05-1
Level of Difficulty 3: Application of principles
Topic: Sole Proprietorships
5-8
23. Sandy Beech, a talented fashion designer who wants to start her own women's swimwear
and beach towel line, is trying to decide which form of business ownership is right for her.
As a young mother who aspires to send her children to college some day, she does not
want to jeopardize her savings account in any way. In order to overcome these risks,
Sandy should start her business as a sole proprietorship.
Feedback: Sandy is concerned about the risk of losing personal assets if her business does not
succeed. Although the sole proprietorship is easy to set-up, it may not be the best form of
business ownership for Sandy due to her need to protect personal assets. She may want to
consider a form of ownership that provides limited liability.
Answer: False
Page: 117-118
Learning Goal: 05-1
24. Rocky Rhodes is convinced that he has a great idea for a new business. Unfortunately, the
type of business he wants to start would require a fairly high initial investment and Rocky
has a poor credit rating and very little personal wealth. Rocky would be unlikely to find
success if he organized his business as a sole proprietorship.
Feedback: Funds available to sole proprietorships are often limited to the amount the owner
can raise. Thus, Rocky's business would probably have a hard time raising enough money if
he organized it as a sole proprietorship.
Answer: True
Page: 117-118
Learning Goal: 05-1
25. A general partner takes an active role in the management of the business.
Answer: True
Page: 119
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Partnerships
5-9
26. All partners in a general partnership have limited liability for the debts of their firm.
Answer: False
Page: 119
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Partnerships
27. In a general partnership, all partners share in management of the business and in the
liability for the firm's debts.
Answer: True
Page: 119
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Partnerships
28. In a general partnership, all partners are entitled to an equal share of the firm's profits.
Answer: False
Page: 119
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Partnerships
29. Limited partnerships are just like general partnerships, except that they are partners for a
limited time period.
Answer: False
Page: 119
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Partnerships
5-10
30. A limited partner is an owner who assumes no management responsibility and has no
liability for losses beyond the amount invested.
Answer: True
Page: 119
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Partnerships
31. A limited partnership consists of one or more general partners and one or more limited
partners.
Answer: True
Page: 119
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Partnerships
32. Although shares of master limited partnerships can be purchased on one of the national
stock exchanges, these companies are taxed like partnerships.
Answer: True
Page: 119
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Partnerships
33. The Uniform Partnership Act is law in every state except Louisiana.
Answer: True
Page: 119
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Partnerships
5-11
34. According to the Uniform Partnership Act, the three key elements of any general
partnership are (1) shares of stock to represent ownership, (2) limited liability, and (3)
ease of ownership transfer.
Answer: False
Page: 120
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Partnerships
35. According to the Uniform Partnership Act, the three key elements of any general
partnership are (1) common ownership, (2) shared profits and losses, and (3) the right to
participate in managing the operations of the business.
Answer: True
Page: 120
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Partnerships
36. A recent study showed that partnerships are more likely to fail than sole proprietorships.
Answer: False
Page: 120
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Advantages of Partnerships
37. A major objective of limited liability partnerships (LLPs) is to limit each partner's
personal liability to the consequences of their own acts and those of people under their
supervision.
Answer: True
Page: 119
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Partnerships
5-12
38. One of the major disadvantages of a partnership is that profits must be divided equally.
Answer: False
Page: 121
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Disadvantages of Partnerships
39. A general partner has unlimited liability for the debts of the partnership only if he or she
personally approved the decisions that resulted in those debts.
Answer: False
Page: 119
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Partnerships
40. In order to protect all parties and minimize misunderstandings among partners, all terms
of the partnership should be spelled out in writing.
Answer: True
Page: 121
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Disdvantages of Partnerships
41. One advantage of a partnership is that there is a simple process for partners to terminate
their business.
Answer: False
Page: 121
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Disdvantages of Partnerships s
5-13
42. Compared to sole proprietorships, an advantage of partnerships is their ability to obtain

more financial resources.
Answer: True
Page: 120
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Advantages of Partnerships s
43. Setting up a partnership under the terms of a written agreement is a bad idea, because
written agreements tend to be too inflexible and impersonal.
Answer: False
Page: 121
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Disadvantages of Partnerships
44. Compared to sole proprietorships, partnerships offer the advantage of shared management
and pooled knowledge.
Answer: True
Page: 120
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Advantages of Partnerships
45. A limited partnership refers to a partnership set up for a temporary purpose, such as a real
estate development project.
Answer: False
Page: 119
Bloom's: Knowledge
Learning Goal: 05-2
Topic: Partnerships
5-14
46. In a limited partnership, the general partners should encourage the limited partners to take
a more active role in the operations of the business. After all, the limited partner has
comparable liability in the business, even though he/she may not be a partner for as long a
period of time as the general partners.
Feedback: By definition, a limited partnership will consist of one or more general partners
and one or more limited partners. The limited partners are passive investors. By law, they do
not take an active role in the management of the business, yet they may share in the profits of
the business and remain a partner for as long as the partnership exists.
Answer: False
Page: 119
Bloom's: Comprehension
Learning Goal: 05-2
Topic: Partnerships
47. If a partner in a limited partnership dies, the partnership ceases to exist.
Feedback: If a partner in any partnership dies, the partnership agreement automatically ceases
to exist. Good partnership agreements usually have provisions for these situations.
Answer: True
Page: 119-122
Learning Goal: 05-2
Topic: Partnerships
48. In the Spotlight on Small Business box, titled, "The Ties That Bind", the writer suggests
that potential partners discuss the types of skills that each brings to the business. Partners
with complimentary skills may enhance the business.
Feedback: It is suggested that you ask yourself what types of skills you and your potential
partners bring to the business, and whether those skills compliment each other. Successful
partners often come with varying backgrounds. Sometimes one partner will have the technical
skills to get the job done, while others might have the business or accounting knowledge.
Answer: True
Page: 121
Learning Goal: 05-2
Topic: Spotlight on Small Business box
5-15
Another random document with
no related content on Scribd:
answered by [238]a “burning, as in hell-fire, of priestly shams and
lies,” and not one out of twenty French monasteries escaped the fury
of the avengers. Our Protestant clergymen see their temple walls
cracked by a breach of ever-multiplying schisms, and can prop their
prestige only by more and more humiliating concessions, and in
every intelligent community have to purchase popularity by rank
heresies against the dogmas of their predecessors. Here and there
the orthodox tenets of the New Testament have survived the
progress of rationalism, but haunt the shade, like specters scenting
the morning air, and momentarily expecting the summons that shall
banish them to the realms of their native night.
[Contents]
E.—REFORM.
When the harbinger of day dispels the specters of darkness, half-

awakened sleepers often mourn the fading visions of dreamland, as
they would mourn the memories of a vanished world, till they find
that the solid earth still remains, with its mountains and forests, and
that the enjoyment of real life has but just begun. With a similar
regret the dupes of Jesuitism mourn the collapse of their creed and
lament the decline of morality, till they find that religion still remains,
with its consolations and hopes, and that the true work of redemption
has but just begun.
The reign of superstition begins to yield to a religion of reason and

humanity. The first forerunners of that religion appeared at the end of
the sixteenth century, when the philosophers of northern Europe
[239]first dared to appeal from dogma to nature, and since that revival
of common-sense the prison walls of clerical obscurantism have
been shaken by shock after shock, till daylight now enters through a
thousand fissures.
But Secularism has a positive as well as a negative mission, and

after removing the ruins of exploded idols, the champions of reform
will begin the work of reconstruction. Temples dedicated to the
religion of progress will rise from the ruins of superstition.
Communities of reformants will intrust the work of education to
chosen teachers, who will combine the functions of an instructor with
those of an exhorter. In the languages of several European nations
the word “rector” still bears that twofold significance. The ministers of
Secularism will not sacrifice physical health to mental culture. They
will be gymnasiarchs, like the Grecian pedagogues who
superintended the athletic exercises of their pupils and accompanied
them on foot journeys and hunting excursions. They will be teachers
of hygiene, laboring to secure the foundations of mental energy by
the preservation of physical vigor, and to banish diseases by the
removal of their causes. They will seek to circumscribe the power of
prejudice by the extension of knowledge. They will obviate the perils
of poverty by lessons of industry and prudence. Their doctrines will
dispense with miracles; they will make experience the test of truth,
and justice the test of integrity; they will not suppress, but
encourage, free inquiry; their war against error will employ no
weapons but those of logic. [240]
The religion of reason will limit its proper sphere to the secular
welfare of mankind, but will ask, as well as grant, the fullest freedom
of metaphysical speculation. Why should the friends of light darken
the sunshine of earth with fanatical wars for the suppression of
private theories about the mystery of the unrevealed first cause?
Why should they rage about the riddle of the veiled hereafter to
please the ordainer of the eternal law that visits such inexorable
penalties upon the neglect of the present world? Should the friends
of common sense quarrel about guesses at the solution of
unknowable secrets? We need not grudge our wonder-loving brother
the luxury of meditating on the mysteries of the unseen or the
possibilities of resurrection. Shall the soul of the dying patriarch live
only in his children? Shall it wing its way to distant stars? Shall it
linger on earth:
“Sigh in the breeze, keep silence in the cave,

And glide with airy foot o’er yonder sea?”
Why should we wrangle about riddles which we cannot possibly

solve? But we might certainly have honesty enough to admit that
impossibility. Musing on the enigmas of the “land beyond the veil”
may entertain us with the visions of a dreamy hour, but should not
engross the time needed for the problems of the only world thus far
revealed.
Thus, founded on a basis of health-culture, reason, and justice, the

office of priesthood will regain its ancient prestige, and the best and
wisest of men will become ministers of Secularism by devoting their
lives to the science of happiness on earth. [241]
[Contents]
PROF. FELIX L. OSWALD’S WORKS.
THE SECRET OF THE EAST; or, The Origin of the

Christian Religion, and the Significance of its Rise
and Decline. Cloth, $1.
THE BIBLE OF NATURE; or, The Principles of

Secularism. A Contribution to the Religion of the
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PHYSICAL EDUCATION; or, The Health-Laws of

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HOUSEHOLD REMEDIES; for the Prevalent

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THE POISON PROBLEM; or, The Cause and Cure of

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SUMMERLAND SKETCHES; or, Rambles in the

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Profusely Illustrated from Designs by H. F. Farny and H.
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ZOOLOGICAL SKETCHES. A Contribution to the

Outdoor Study of Natural History. 8vo, cloth, $2.
For all of the above address
THE TRUTH SEEKER CO.,

28 Lafayette Place, New York. [242]
[Contents]
WORKS OF
L. K. WASHBURN.
Sunday and the Sabbath. “A law regulating human

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The False Teaching of the Christian Church. “The

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Spiritualism: Is It a Faith or a Fact? Price, 5 cents.
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America’s Debt to Thomas Paine. Price, 5 cents.
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Free Religion; or, The Religious Demand of To-day.
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The Brute God of the Old Testament. Price, 5 cents.
The Public Schools and the Catholic Church. 5 cents.

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Metadata
The Bible of Nature;

Or, The Principles of
Title: Secularism. A
Contribution to the
Religion of the Future
Felix Leopold Oswald Info
Author:
(1845–1906) https://viaf.org/viaf/16832833/
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2023-11-15 20:45:25
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date:
Language: English
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distance
13 jailors jailers 1
31 - [Deleted] 1
38 night-shaft night-shift 1
42 Golgatha Golgotha 1
44 [Not in source] . 1
75 koenig König 3/2
75 koennen können 2/1
89 Jerstaecker Gerstäcker 3/2
90 Rhus Rushd 3
97 Hartz Harz 1
98 kreuze Kreuze 1
98 Luetzen Lützen 2/1
98 Oudenarde Oudenaarde 1
102 wordly worldly 1
105 Hooglyn Hooghly 2
117 cooperation coöperation 1/0
123 intemperence intemperance 1
124 eshalten erhalten 1
152 hypocrits hypocrites 1
160 michievousness mischievousness 1
165,
179, Moriscoes Moriscos 1
189
173 groessre grössre 2/1
188 gardenlands garden-lands 1
197 Budha-Pesth Buda-Pesth 1
226 favorit favorite 1
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Chapter 05 - How to Form a Business

Understanding Business 10th Edition

Test Bank: https://testbankpack.com/

Test Planning Table for Chapter 5

LL:1 LL:2 LL:3

4. Define and give 123,124,125,126,127,128, 136,137,138,139,140, 142,143,144,145,146,

diversity in franchising 313,314,315,316,317,318, 354*,355*

Total number of test items: 355

True/false questions are in plain text.

True / False Questions

1. The corporation is the most common form of business ownership.

3. Few people today start their own business.

10. It is usually easy to start and end a sole proprietorship.

42. Compared to sole proprietorships, an advantage of partnerships is their ability to obtain

47. If a partner in a limited partnership dies, the partnership ceases to exist.

When the harbinger of day dispels the specters of darkness, half-

The reign of superstition begins to yield to a religion of reason and

But Secularism has a positive as well as a negative mission, and

“Sigh in the breeze, keep silence in the cave,

Why should we wrangle about riddles which we cannot possibly

Thus, founded on a basis of health-culture, reason, and justice, the

THE SECRET OF THE EAST; or, The Origin of the

THE BIBLE OF NATURE; or, The Principles of

PHYSICAL EDUCATION; or, The Health-Laws of

HOUSEHOLD REMEDIES; for the Prevalent

THE POISON PROBLEM; or, The Cause and Cure of

SUMMERLAND SKETCHES; or, Rambles in the

ZOOLOGICAL SKETCHES. A Contribution to the

For all of the above address

THE TRUTH SEEKER CO.,

Sunday and the Sabbath. “A law regulating human

The False Teaching of the Christian Church. “The

The Foolishness of Prayer. “Think of a minister’s

Followers of Jesus. Price, 10 cents.

Religious Problems. Price, 10 cents.

Spiritualism: Is It a Faith or a Fact? Price, 5 cents.

Do You Love Jesus? Price, 5 cents.

America’s Debt to Thomas Paine. Price, 5 cents.

Is Liberalism Moral? Price, 5 cents.

A Holy Superstition. Price, 5 cents.

Temperance and the Bible. Price, 5 cents.

The Brute God of the Old Testament. Price, 5 cents.

The Public Schools and the Catholic Church. 5 cents.

This eBook is produced by the Online Distributed Proofreading Team

The Bible of Nature;

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diversity in franchising 313,314,315,316,317,318, 354,355