Question 1

Which of the following statements is CORRECT?

Accepted Answer

A) It is usually easier to transfer ownership in a corporation than it is to transfer ownership in a sole proprietorship. 
B) Corporate shareholders are exposed to unlimited liability. 
C) Corporations generally face fewer regulations than sole proprietorships. 
D) Corporate shareholders are exposed to unlimited liability, and this factor may be compounded by the tax disadvantages of incorporation. 
E) Shareholders in a regular corporation (not an S corporation) pay higher taxes than owners of an otherwise identical proprietorship. 
A) It is usually easier to transfer ownership in a corporation than it is to transfer ownership in a sole proprietorship. 
B) Corporate shareholders are exposed to unlimited liability. 
C) Corporations generally face fewer regulations than sole proprietorships. 
D) Corporate shareholders are exposed to unlimited liability, and this factor may be compounded by the tax disadvantages of incorporation. 
E) Shareholders in a regular corporation (not an S corporation) pay higher taxes than owners of an otherwise identical proprietorship. A

Question 2

Which of the following statements is CORRECT?

Accepted Answer

A) In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business. 
B) Partnerships have more difficulty attracting large amounts of capital than corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests. 
C) A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company. 
D) In a limited partnership, the limited partners have voting control, while the general partner has operating control over the business.Also, the limited partners are individually responsible, on a pro rata basis, for the firm's debts in the event of bankruptcy. 
E) A major disadvantage of all partnerships relative to all corporations is the fact that federal income taxes must be paid by the partners rather than by the firm itself. 
A) In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business. 
B) Partnerships have more difficulty attracting large amounts of capital than corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests. 
C) A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company. 
D) In a limited partnership, the limited partners have voting control, while the general partner has operating control over the business.Also, the limited partners are individually responsible, on a pro rata basis, for the firm's debts in the event of bankruptcy. 
E) A major disadvantage of all partnerships relative to all corporations is the fact that federal income taxes must be paid by the partners rather than by the firm itself. B

Question 3

Which of the following would be most likely to lead to higher interest rates on all debt securities in the economy?

Accepted Answer

A) Households start saving a larger percentage of their income. 
B) The economy moves from a boom to a recession. 
C) The level of inflation begins to decline. 
D) Corporations step up their expansion plans and thus increase their demand for capital. 
E) The Federal Reserve uses monetary policy in an attempt to stimulate the economy. 
A) Households start saving a larger percentage of their income. 
B) The economy moves from a boom to a recession. 
C) The level of inflation begins to decline. 
D) Corporations step up their expansion plans and thus increase their demand for capital. 
E) The Federal Reserve uses monetary policy in an attempt to stimulate the economy. D

Question 4

which of the following statements would most people in business agree?

Accepted Answer

A) A corporation's short-run profits will almost always increase if the firm takes actions that the government has determined are in the best interests of the nation. 
B) Firms and government agencies almost always agree with one another regarding the restrictions that should be placed on hiring and firing employees. 
C) Although people's moral characters are probably developed before they get into a business school, it is still useful for business schools to cover ethics, including giving students an idea about the adverse consequences of unethical behavior to themselves, their firms, and the nation. 
D) It is not useful for a large corporation to develop a formal set of rules defining ethical and unethical behavior.Such rules generally can't be applied in many specific instances, so it is better to deal with ethical issues on a case-by-case basis. 
E) "Whistle blowers," because of the courage it takes to blow the whistle, are generally promoted more rapidly than other employees. 
A) A corporation's short-run profits will almost always increase if the firm takes actions that the government has determined are in the best interests of the nation. 
B) Firms and government agencies almost always agree with one another regarding the restrictions that should be placed on hiring and firing employees. 
C) Although people's moral characters are probably developed before they get into a business school, it is still useful for business schools to cover ethics, including giving students an idea about the adverse consequences of unethical behavior to themselves, their firms, and the nation. 
D) It is not useful for a large corporation to develop a formal set of rules defining ethical and unethical behavior.Such rules generally can't be applied in many specific instances, so it is better to deal with ethical issues on a case-by-case basis. 
E) "Whistle blowers," because of the courage it takes to blow the whistle, are generally promoted more rapidly than other employees.

Question 5

There are three primary disadvantages of a regular partnership: (1) unlimited liability, (2) limited life of the organization, and (3) difficulty of transferring ownership.These combine to make it difficult for partnerships to attract large amounts of capital and thus to grow to a very large size.

Accepted Answer

A) True 
 B)False

Question 6

primary operating goal of a publicly-owned firm interested in serving its stockholders should be to

Accepted Answer

A) Maximize the stock price per share over the long run, which is the stock's intrinsic value. 
B) Maximize the firm's expected EPS. 
C) Minimize the chances of losses. 
D) Maximize the firm's expected total income. 
E) Maximize the stock price on a specific target date. 
A) Maximize the stock price per share over the long run, which is the stock's intrinsic value. 
B) Maximize the firm's expected EPS. 
C) Minimize the chances of losses. 
D) Maximize the firm's expected total income. 
E) Maximize the stock price on a specific target date.

Question 7

Which of the following statements is CORRECT?

Accepted Answer

A) One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. 
B) It is generally easier to transfer one's ownership interest in a partnership than in a corporation. 
C) One of the advantages of the corporate form of organization is that it avoids double taxation. 
D) One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., "one person, one vote." 
E) Corporations of all types are subject to the corporate income tax. 
A) One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. 
B) It is generally easier to transfer one's ownership interest in a partnership than in a corporation. 
C) One of the advantages of the corporate form of organization is that it avoids double taxation. 
D) One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., "one person, one vote." 
E) Corporations of all types are subject to the corporate income tax.

Question 8

a firm's goal is to maximize its earnings per share, this is the best way to maximize the price of the common stock and thus shareholders' wealth.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following factors would be most likely to lead to an increase in interest rates in the economy?

Accepted Answer

A) Households reduce their consumption and increase their savings. 
B) The Federal Reserve decides to try to stimulate the economy. 
C) There is a decrease in expected inflation. 
D) The economy falls into a recession. 
E) Most businesses decide to modernize and expand their manufacturing capacity, and to install new equipment to reduce labor costs. 
A) Households reduce their consumption and increase their savings. 
B) The Federal Reserve decides to try to stimulate the economy. 
C) There is a decrease in expected inflation. 
D) The economy falls into a recession. 
E) Most businesses decide to modernize and expand their manufacturing capacity, and to install new equipment to reduce labor costs.

Question 10

recently sold to your brother 200 shares of Disney stock, and the transfer was made through a broker, and the trade occurred on the NYSE.This is an example of:

Accepted Answer

A) A futures market transaction. 
B) A primary market transaction. 
C) A secondary market transaction. 
D) A money market transaction. 
E) An over-the-counter market transaction. 
A) A futures market transaction. 
B) A primary market transaction. 
C) A secondary market transaction. 
D) A money market transaction. 
E) An over-the-counter market transaction.

Question 11

Which of the following statements is CORRECT?

Accepted Answer

A) It is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required. 
B) Corporations face fewer regulations than sole proprietorships. 
C) One disadvantage of operating a business as a sole proprietorship is that the firm is subject to double taxation, at both the firm level and the owner level. 
D) One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership. 
E) If a regular partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business. 
A) It is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required. 
B) Corporations face fewer regulations than sole proprietorships. 
C) One disadvantage of operating a business as a sole proprietorship is that the firm is subject to double taxation, at both the firm level and the owner level. 
D) One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership. 
E) If a regular partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business.

Question 12

Which of the following statements is CORRECT?

Accepted Answer

A) One of the disadvantages of incorporating a business is that the owners then become subject to liabilities in the event the firm goes bankrupt. 
B) Sole proprietorships are subject to more regulations than corporations. 
C) In any type of partnership, every partner has the same rights, privileges, and liability exposure as every other partner. 
D) Sole proprietorships and partnerships generally have a tax advantage over many corporations, especially large ones. 
E) Corporations of all types are subject to the corporate income tax. 
A) One of the disadvantages of incorporating a business is that the owners then become subject to liabilities in the event the firm goes bankrupt. 
B) Sole proprietorships are subject to more regulations than corporations. 
C) In any type of partnership, every partner has the same rights, privileges, and liability exposure as every other partner. 
D) Sole proprietorships and partnerships generally have a tax advantage over many corporations, especially large ones. 
E) Corporations of all types are subject to the corporate income tax.

Question 13

Doe, who has substantial personal wealth and income, is considering the possibility of starting a new business in the chemical waste management field.She will be the sole owner, and she has enough funds to finance the operation.The business will have a relatively high degree of risk, and it is expected that the firm will incur losses for the first few years.However, the prospects for growth and positive future income look good, and Jane plans to have the firm pay out all of its income as dividends to her once it is well established.Which of the legal forms of business organization would probably best suit her needs?

Accepted Answer

A) Proprietorship, because of ease of entry. 
B) S corporation, to gain some tax advantages and also to obtain limited liability. 
C) Partnership, but only if she needs additional capital. 
D) Regular corporation, because of the limited liability. 
E) In this situation, the various forms of organization seem equally desirable. 
A) Proprietorship, because of ease of entry. 
B) S corporation, to gain some tax advantages and also to obtain limited liability. 
C) Partnership, but only if she needs additional capital. 
D) Regular corporation, because of the limited liability. 
E) In this situation, the various forms of organization seem equally desirable.

Question 14

Which of the following statements is CORRECT?

Accepted Answer

A) A hostile takeover is the main method of transferring ownership interest in a corporation. 
B) Unlimited liability and limited life are two key advantages of the corporate form over other forms of business organization. 
C) A corporation is a legal entity that is generally created by a state, and it has a life and existence that is separate from the lives of its individual owners and managers. 
D) Limited liability of its stockholders is an advantage of the corporate form of organization, but corporations have more trouble raising money in financial markets because of the complexity of this form of organization. 
E) Although its stockholders are insulated by limited legal liability, the legal status of the corporation does not protect the firm's managers in the same way, i.e., bondholders can sue its managers if the firm defaults on its debt, even if the default is the result of poor economic conditions. 
A) A hostile takeover is the main method of transferring ownership interest in a corporation. 
B) Unlimited liability and limited life are two key advantages of the corporate form over other forms of business organization. 
C) A corporation is a legal entity that is generally created by a state, and it has a life and existence that is separate from the lives of its individual owners and managers. 
D) Limited liability of its stockholders is an advantage of the corporate form of organization, but corporations have more trouble raising money in financial markets because of the complexity of this form of organization. 
E) Although its stockholders are insulated by limited legal liability, the legal status of the corporation does not protect the firm's managers in the same way, i.e., bondholders can sue its managers if the firm defaults on its debt, even if the default is the result of poor economic conditions.

Question 15

disadvantages of a proprietorship are (1) the relative difficulty of raising new capital and (2) the owner's unlimited personal liability for the business' debts.

Accepted Answer

A) True 
 B)False

Question 16

facts that a proprietorship, as a business, pays no corporate income tax, and that it is easily and inexpensively formed, are two key advantages to that form of business.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements is CORRECT?

Accepted Answer

A) Corporations generally are subject to fewer regulations and more favorable tax treatment than sole proprietorships and partnerships.This is why corporations do most of the business in the United States. 
B) Managers who face the threat of hostile takeovers are less likely to pursue policies that maximize shareholder value than are managers who do not face the threat of hostile takeovers. 
C) One advantage of the corporate form of organization is that liability of the owners of the firm is limited to their investment in the firm. 
D) Because of their simplified organization, it is easier for sole proprietorships and partnerships to raise large amounts of outside capital than it is for corporations. 
E) Bond covenants are an effective way to resolve conflicts between shareholders and managers. 
A) Corporations generally are subject to fewer regulations and more favorable tax treatment than sole proprietorships and partnerships.This is why corporations do most of the business in the United States. 
B) Managers who face the threat of hostile takeovers are less likely to pursue policies that maximize shareholder value than are managers who do not face the threat of hostile takeovers. 
C) One advantage of the corporate form of organization is that liability of the owners of the firm is limited to their investment in the firm. 
D) Because of their simplified organization, it is easier for sole proprietorships and partnerships to raise large amounts of outside capital than it is for corporations. 
E) Bond covenants are an effective way to resolve conflicts between shareholders and managers.

Question 18

Which of the following is a primary market transaction?

Accepted Answer

A) You sell 200 shares of IBM stock on the NYSE through your broker. 
B) IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker. 
C) You buy 200 shares of IBM stock from your brother.The trade is not made through a broker--you just give him cash and he gives you the stock. 
D) One financial institution buys 200,000 shares of IBM stock from another institution.An investment banker arranges the transaction. 
E) You invest $10,000 in a mutual fund, which then uses the money to buy $10,000 of IBM shares on the NYSE. 
A) You sell 200 shares of IBM stock on the NYSE through your broker. 
B) IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker. 
C) You buy 200 shares of IBM stock from your brother.The trade is not made through a broker--you just give him cash and he gives you the stock. 
D) One financial institution buys 200,000 shares of IBM stock from another institution.An investment banker arranges the transaction. 
E) You invest $10,000 in a mutual fund, which then uses the money to buy $10,000 of IBM shares on the NYSE.

Question 19

Cheers Inc.operates as a partnership.Now the partners have decided to convert the business into a regular corporation.Which of the following statements is CORRECT?

Accepted Answer

A) Assuming Cheers is profitable, less of its income will be subject to federal income taxes. 
B) Cheers will now be subject to fewer regulations. 
C) Cheers' shareholders (the ex-partners) will now be exposed to less liability. 
D) Cheers' investors will be exposed to less liability, but they will find it more difficult to transfer their ownership. 
E) Cheers will find it more difficult to raise additional capital. 
A) Assuming Cheers is profitable, less of its income will be subject to federal income taxes. 
B) Cheers will now be subject to fewer regulations. 
C) Cheers' shareholders (the ex-partners) will now be exposed to less liability. 
D) Cheers' investors will be exposed to less liability, but they will find it more difficult to transfer their ownership. 
E) Cheers will find it more difficult to raise additional capital.

Question 20

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

Accepted Answer

A) Corporations generally find it relatively difficult to raise large amounts of capital. 
B) Less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership. 
C) Corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization. 
D) Corporate investors are exposed to unlimited liability. 
E) Corporations generally face relatively few regulations. 
A) Corporations generally find it relatively difficult to raise large amounts of capital. 
B) Less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership. 
C) Corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization. 
D) Corporate investors are exposed to unlimited liability. 
E) Corporations generally face relatively few regulations.

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

Which of the following would be most likely to lead to higher interest rates on all debt securities in the economy?

which of the following statements would most people in business agree?

There are three primary disadvantages of a regular partnership: (1) unlimited liability, (2) limited life of the organization, and (3) difficulty of transferring ownership.These combine to make it difficult for partnerships to attract large amounts of capital and thus to grow to a very large size.

primary operating goal of a publicly-owned firm interested in serving its stockholders should be to

Which of the following statements is CORRECT?

a firm's goal is to maximize its earnings per share, this is the best way to maximize the price of the common stock and thus shareholders' wealth.

Which of the following factors would be most likely to lead to an increase in interest rates in the economy?

recently sold to your brother 200 shares of Disney stock, and the transfer was made through a broker, and the trade occurred on the NYSE.This is an example of:

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

disadvantages of a proprietorship are (1) the relative difficulty of raising new capital and (2) the owner's unlimited personal liability for the business' debts.

facts that a proprietorship, as a business, pays no corporate income tax, and that it is easily and inexpensively formed, are two key advantages to that form of business.

Which of the following statements is CORRECT?

Which of the following is a primary market transaction?

Cheers Inc.operates as a partnership.Now the partners have decided to convert the business into a regular corporation.Which of the following statements is CORRECT?

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

Statements, CF, Taxes

Financial Analysis

Time Value of Money

Bonds

Risk and Return

Stocks

Financial Options

Cost of Capital

Capital Budgeting

Cash Flow and Risk

Forecasting

Valuation, Governanc

Dividends

CAP Structure

Working Capital

Multinational

Filters

Exam 1: Overview

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

Which of the following would be most likely to lead to higher interest rates on all debt securities in the economy?

which of the following statements would most people in business agree?

There are three primary disadvantages of a regular partnership: (1) unlimited liability, (2) limited life of the organization, and (3) difficulty of transferring ownership.These combine to make it difficult for partnerships to attract large amounts of capital and thus to grow to a very large size.

primary operating goal of a publicly-owned firm interested in serving its stockholders should be to

Which of the following statements is CORRECT?

a firm's goal is to maximize its earnings per share, this is the best way to maximize the price of the common stock and thus shareholders' wealth.

Which of the following factors would be most likely to lead to an increase in interest rates in the economy?

recently sold to your brother 200 shares of Disney stock, and the transfer was made through a broker, and the trade occurred on the NYSE.This is an example of:

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

disadvantages of a proprietorship are (1) the relative difficulty of raising new capital and (2) the owner's unlimited personal liability for the business' debts.

facts that a proprietorship, as a business, pays no corporate income tax, and that it is easily and inexpensively formed, are two key advantages to that form of business.

Which of the following statements is CORRECT?

Which of the following is a primary market transaction?

Cheers Inc.operates as a partnership.Now the partners have decided to convert the business into a regular corporation.Which of the following statements is CORRECT?

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

Statements, CF, Taxes

Financial Analysis

Time Value of Money

Bonds

Risk and Return

Stocks

Financial Options

Cost of Capital

Capital Budgeting

Cash Flow and Risk

Forecasting

Valuation, Governanc

Dividends

CAP Structure

Working Capital

Multinational

Filters