Finance Chap1
CHAPTER 1
AN OVERVIEW OF FINANCIAL MANAGEMENT
(Difficulty: E = Easy, M = Medium, and T = Tough)
Multiple Choice: Conceptual
Easy:
Firm organization Answer: c Diff: E
[i]. Which of the following statements is true?
a. One of the benefits of incorporating your business is that you become entitled to receive unlimited liability. b. Sole proprietorships are subject to more regulations than corporations. c. Sole proprietorships do not have to pay corporate tax. d. All of the statements above are correct. e. None of the statements above is correct.
Firm organization Answer: c Diff: E
[ii]. Which of the following statements is most correct?
a. One of the advantages of the corporate form of organization is that there is no double taxation. b. The partnership form of organization has easy transferability of ownership. c. One of the disadvantages of the sole proprietorship form of organi-zation is that there is unlimited liability. d. Statements b and c are correct. e. None of the statements above is correct.
Firm organization Answer: a Diff: E
[iii]. Which of the following statements is most correct?
a. One advantage of forming a corporation is that you have limited liability. b. Corporations face fewer regulations than sole proprietorships. c. One disadvantage of being a sole proprietor is that you have to pay corporate taxes, even though you don’t realize the benefits of being a corporation. d. Statements b and c are correct. e. None of the statements above is correct.
Firm organization Answer: a Diff: E
[iv]. Until this year, Cheers Inc. was organized as a partnership. This year, the partners have decided to organize the business as a corporation. As a result of this change in organizational form, which of the following statements is most correct?
a. Cheers’ shareholders (the ex-partners) will now have
AN OVERVIEW OF FINANCIAL MANAGEMENT
(Difficulty: E = Easy, M = Medium, and T = Tough)
Multiple Choice: Conceptual
Easy:
Firm organization Answer: c Diff: E
[i]. Which of the following statements is true?
a. One of the benefits of incorporating your business is that you become entitled to receive unlimited liability. b. Sole proprietorships are subject to more regulations than corporations. c. Sole proprietorships do not have to pay corporate tax. d. All of the statements above are correct. e. None of the statements above is correct.
Firm organization Answer: c Diff: E
[ii]. Which of the following statements is most correct?
a. One of the advantages of the corporate form of organization is that there is no double taxation. b. The partnership form of organization has easy transferability of ownership. c. One of the disadvantages of the sole proprietorship form of organi-zation is that there is unlimited liability. d. Statements b and c are correct. e. None of the statements above is correct.
Firm organization Answer: a Diff: E
[iii]. Which of the following statements is most correct?
a. One advantage of forming a corporation is that you have limited liability. b. Corporations face fewer regulations than sole proprietorships. c. One disadvantage of being a sole proprietor is that you have to pay corporate taxes, even though you don’t realize the benefits of being a corporation. d. Statements b and c are correct. e. None of the statements above is correct.
Firm organization Answer: a Diff: E
[iv]. Until this year, Cheers Inc. was organized as a partnership. This year, the partners have decided to organize the business as a corporation. As a result of this change in organizational form, which of the following statements is most correct?
a. Cheers’ shareholders (the ex-partners) will now have