Sample Exam
Spring 2012 Finance 3130
1.
Sample Exam 1A Questions for Review
The form of organization for a business is an important issue, as this decision has very significant effect on the income and wealth of the firm 's owners. a. b. True False
2. 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. a. b. True False
3.
If an individual investor buys or sells a currently owned stock through a broker, this is a primary market transaction. a. True b. False One of the functions of NYSE specialists is to facilitate trading by keeping an inventory of shares of the stocks in which they specialize, buying when investors want to sell and selling when they want to buy. They change the bid and ask prices of the securities so as to keep supply and demand in balance. a. b. True False
4.
5.
Which of the following statements is CORRECT? a. b. c. d. e. It is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required. Corporations face fewer regulations than sole proprietorships. 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. One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership. 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.
6.
Jane 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
1.
Sample Exam 1A Questions for Review
The form of organization for a business is an important issue, as this decision has very significant effect on the income and wealth of the firm 's owners. a. b. True False
2. 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. a. b. True False
3.
If an individual investor buys or sells a currently owned stock through a broker, this is a primary market transaction. a. True b. False One of the functions of NYSE specialists is to facilitate trading by keeping an inventory of shares of the stocks in which they specialize, buying when investors want to sell and selling when they want to buy. They change the bid and ask prices of the securities so as to keep supply and demand in balance. a. b. True False
4.
5.
Which of the following statements is CORRECT? a. b. c. d. e. It is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required. Corporations face fewer regulations than sole proprietorships. 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. One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership. 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.
6.
Jane 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