Question 1

The distinguishing feature of a corporation is that:

Accepted Answer

A)  their is no legal difference between the corporation and its owners.
B)  it is a legally defined,artificial being,separate from its owners.
C)  it spreads liability for its corporate obligations to all shareholders.
D)  provides limited liability only to small shareholders.

Question 2

Which of the following organization forms accounts for the most revenue?

Accepted Answer

A)  "S" corporation
B)  Limited partnership
C)  "C" corporation
D)  Limited liability company C

Question 3

The Principal-Agent Problem arises:

Accepted Answer

A)  because managers have little incentive to work in the interest of shareholders when this means working against their own self-interest.
B)  because of the separation of ownership and control in a corporation.
C)  Both A and B
D)  None of the above

Question 4

Which of the following is NOT an advantage of a sole proprietorship?

Accepted Answer

A)  Single taxation
B)  Ease of setup
C)  Limited liability
D)  No separation of ownership and control

Question 5

What type of company trades on an organized stock exchange?

Accepted Answer

A)  A limited liability company
B)  A private company
C)  An "S" corporation
D)  A public company

Question 6

The person charged with running the corporation by instituting the rules and policies set by the board of directors is called:

Accepted Answer

A)  the chief operating officer.
B)  the company president.
C)  the chief executive officer.
D)  the chief financial officer.

Question 7

You own 100 shares of a "C" corporation.The corporation earns $5.00 per share before taxes.Once the corporation has paid any corporate taxes that are due,it will distribute the rest of its earnings to its shareholders in the form of a dividend.If the corporate tax rate is 40% and your personal tax rate on (both dividend and non-dividend) income is 30%,then how much money is left for you after all taxes have been paid?

Accepted Answer

A)  $210
B)  $300
C)  $350
D)  $500

Question 8

Use the table for the question(s)below.
Consider the following two quotes for XYZ stock: 
-What are your net proceeds if you purchased 2500 shares of XYZ stock on November 11th and then sold them a week later on November 18th?

Accepted Answer

buy at ask price 11/11 = 2500 ...

Question 9

Which of the following statements regarding limited partnerships is TRUE?

Accepted Answer

A)  There is no limit on a limited partner's liability.
B)  A limited partner's liability is limited by the amount of their investment.
C)  A limited partner is not liable until all the assets of the general partners have been exhausted.
D)  A general partner's liability is limited by the amount of their investment.

Question 10

An investment is said to be liquid if the investment:

Accepted Answer

A)  has large day to day fluctuations in price.
B)  has a large bid-ask spread.
C)  can easily be converted into cash.
D)  is traded on a stock exchange.

Question 11

Which of the following is/are an advantage of incorporation?

Accepted Answer

A)  Access to capital markets
B)  Limited liability
C)  Unlimited life
D)  All of the above

Question 12

The most senior financial manager in a corporation is usually called:

Accepted Answer

A)  the chief executive officer.
B)  the chief financial officer.
C)  the chief operating officer.
D)  the chairman of the board.

Question 13

You are a shareholder in a "C" corporation.This corporation earns $4 per share before taxes.After it has paid taxes,it will distribute the remainder of its earnings to you as a dividend.The dividend is income to you,so you will then pay taxes on these earnings.The corporate tax rate is 35% and your tax rate on dividend income is 15%.The effective tax rate on your share of the corporations earnings is closest to:

Accepted Answer

A)  15%
B)  35%
C)  45%
D)  50%

Question 14

An agency problem can be alleviated by:

Accepted Answer

A)  requiring all firms to be sole proprietorships.
B)  compensating managers in such a way that acting in the best interest of shareholders is also in the best interest of managers.
C)  asking managers to take on more risk than they are comfortable taking.
D)  A and B.

Question 15

Which of the following are subject to double taxation?

Accepted Answer

A)  Corporation
B)  Partnership
C)  Sole proprietorship
D)  A and B A

Question 16

Which of the following organization forms accounts for the greatest number of firms?

Accepted Answer

A)  "S" corporation
B)  Limited partnership
C)  Sole proprietorship
D)  "C" corporation

Question 17

Which of the following statements is FALSE?

Accepted Answer

A)  On Nasdaq,stocks can and do have multiple market makers who compete with each other.Each market maker must post bid and ask prices in the Nasdaq network where they can be viewed by all participants.
B)  Bid prices exceed ask prices.
C)  Because customers always buy at the ask and sell at the bid,the bid-ask spread is a transaction cost investors have to pay in order to trade.
D)  On the floor of the NYSE,prior to 2005 market makers (known on the NYSE as specialists) matched buyers and sellers.

Question 18

A ________ is when a rich individual or organization purchases a large fraction of the stock of a poorly performing firm and in doing so gets enough votes to replace the board of directors and the CEO.

Accepted Answer

A)  shareholder proposal
B)  leveraged buyout
C)  shareholder action
D)  hostile takeover

Question 19

Explain the difference between a sub-chapter "S" corporation and a sub-chapter "C" corporation.

Accepted Answer

The answer of Explain the difference between a sub-chapter "S"...

Question 20

In a corporation,the ultimate decisions regarding business matters are made by:

Accepted Answer

A)  the Board of Directors.
B)  debt holders.
C)  shareholders.
D)  investors. A

Exam 1: The Corporation

The distinguishing feature of a corporation is that:

Correct Answer
verified

Which of the following organization forms accounts for the most revenue?

Correct Answer
verified
C

The Principal-Agent Problem arises:

Correct Answer
verified

Which of the following is NOT an advantage of a sole proprietorship?

Correct Answer
verified

What type of company trades on an organized stock exchange?

Correct Answer
verified

The person charged with running the corporation by instituting the rules and policies set by the board of directors is called:

Correct Answer
verified

Correct Answer
verified

Use the table for the question(s)below. Consider the following two quotes for XYZ stock: -What are your net proceeds if you purchased 2500 shares of XYZ stock on November 11th and then sold them a week later on November 18th?

Correct Answer
verified
buy at ask price 11/11 = 2500 ...
View Answer

Which of the following statements regarding limited partnerships is TRUE?

Correct Answer
verified

An investment is said to be liquid if the investment:

Correct Answer
verified

Which of the following is/are an advantage of incorporation?

Correct Answer
verified

The most senior financial manager in a corporation is usually called:

Correct Answer
verified

Correct Answer
verified

An agency problem can be alleviated by:

Correct Answer
verified

Which of the following are subject to double taxation?

Correct Answer
verified
A

Which of the following organization forms accounts for the greatest number of firms?

Correct Answer
verified

Which of the following statements is FALSE?

Correct Answer
verified

A ________ is when a rich individual or organization purchases a large fraction of the stock of a poorly performing firm and in doing so gets enough votes to replace the board of directors and the CEO.

Correct Answer
verified

Explain the difference between a sub-chapter "S" corporation and a sub-chapter "C" corporation.

Correct Answer
verified

In a corporation,the ultimate decisions regarding business matters are made by:

Correct Answer
verified
A

Exam 1: The Corporation

The distinguishing feature of a corporation is that:

Correct AnswerverifiedShow Answer

Which of the following organization forms accounts for the most revenue?

Correct AnswerverifiedC

The Principal-Agent Problem arises:

Correct AnswerverifiedShow Answer

Which of the following is NOT an advantage of a sole proprietorship?

Correct AnswerverifiedShow Answer

What type of company trades on an organized stock exchange?

Correct AnswerverifiedShow Answer

The person charged with running the corporation by instituting the rules and policies set by the board of directors is called:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Use the table for the question(s)below. Consider the following two quotes for XYZ stock: -What are your net proceeds if you purchased 2500 shares of XYZ stock on November 11th and then sold them a week later on November 18th?

Correct Answerverifiedbuy at ask price 11/11 = 2500 ...View AnswerShow Answer

Which of the following statements regarding limited partnerships is TRUE?

Correct AnswerverifiedShow Answer

An investment is said to be liquid if the investment:

Correct AnswerverifiedShow Answer

Which of the following is/are an advantage of incorporation?

Correct AnswerverifiedShow Answer

The most senior financial manager in a corporation is usually called:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An agency problem can be alleviated by:

Correct AnswerverifiedShow Answer

Which of the following are subject to double taxation?

Correct AnswerverifiedA

Which of the following organization forms accounts for the greatest number of firms?

Correct AnswerverifiedShow Answer

Which of the following statements is FALSE?

Correct AnswerverifiedShow Answer

A ________ is when a rich individual or organization purchases a large fraction of the stock of a poorly performing firm and in doing so gets enough votes to replace the board of directors and the CEO.

Correct AnswerverifiedShow Answer

Explain the difference between a sub-chapter "S" corporation and a sub-chapter "C" corporation.

Correct AnswerverifiedShow Answer

In a corporation,the ultimate decisions regarding business matters are made by:

Correct AnswerverifiedA

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
buy at ask price 11/11 = 2500 ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A