Corporate Finance, 3e (Berk/DeMarzo)
Chapter 1 The Corporation
1.1 The Four Types of Firms
1) A sole proprietorship is owned by:
A) one person.
B) two of more persons.
C) shareholders.
D) bankers.
Answer: A
Diff: 1
Section: 1.1 The Four Types of Firms
Skill: Definition
2) Which of the following organization forms for a business does NOT avoid double
taxation?
A) Limited partnership
B) "C" corporation
C) "S" corporation
D) Limited liability company
Answer: B
Diff: 1
Section: 1.1 The Four Types of Firms
Skill: Conceptual
,3) Which of the following organization forms accounts for the most revenue?
A) "S" corporation
B) Limited partnership
C) "C" corporation
D) Limited liability company
Answer: C
Diff: 1
Section: 1.1 The Four Types of Firms
Skill: Conceptual
4) Which of the following organization forms accounts for the greatest number of firms?
A) "S" corporation
B) Limited partnership
C) Sole proprietorship
D) "C" corporation
Answer: C
Diff: 1
Section: 1.1 The Four Types of Firms
Skill: Conceptual
,5) Which of the following is NOT an advantage of a sole proprietorship?
A) Single taxation
B) Ease of setup
C) Limited liability
D) No separation of ownership and control
Answer: C
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
6) Which of the following statements regarding limited partnerships is TRUE?
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.
Answer: B
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
7) Which of the following is/are an advantage of incorporation?
A) Access to capital markets
B) Limited liability
C) Unlimited life
, D) All of the above
Answer: D
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
8) Which of the following statements is most correct?
A) An advantage to incorporation is that it allows for less regulation of the business.
B) An advantage of a corporation is that it is subject to double taxation.
C) Unlike a partnership, a disadvantage of a corporation is that has limited liability.
D) Corporations face more regulations when compared to partnerships.
Answer: D
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
Chapter 1 The Corporation
1.1 The Four Types of Firms
1) A sole proprietorship is owned by:
A) one person.
B) two of more persons.
C) shareholders.
D) bankers.
Answer: A
Diff: 1
Section: 1.1 The Four Types of Firms
Skill: Definition
2) Which of the following organization forms for a business does NOT avoid double
taxation?
A) Limited partnership
B) "C" corporation
C) "S" corporation
D) Limited liability company
Answer: B
Diff: 1
Section: 1.1 The Four Types of Firms
Skill: Conceptual
,3) Which of the following organization forms accounts for the most revenue?
A) "S" corporation
B) Limited partnership
C) "C" corporation
D) Limited liability company
Answer: C
Diff: 1
Section: 1.1 The Four Types of Firms
Skill: Conceptual
4) Which of the following organization forms accounts for the greatest number of firms?
A) "S" corporation
B) Limited partnership
C) Sole proprietorship
D) "C" corporation
Answer: C
Diff: 1
Section: 1.1 The Four Types of Firms
Skill: Conceptual
,5) Which of the following is NOT an advantage of a sole proprietorship?
A) Single taxation
B) Ease of setup
C) Limited liability
D) No separation of ownership and control
Answer: C
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
6) Which of the following statements regarding limited partnerships is TRUE?
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.
Answer: B
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
7) Which of the following is/are an advantage of incorporation?
A) Access to capital markets
B) Limited liability
C) Unlimited life
, D) All of the above
Answer: D
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
8) Which of the following statements is most correct?
A) An advantage to incorporation is that it allows for less regulation of the business.
B) An advantage of a corporation is that it is subject to double taxation.
C) Unlike a partnership, a disadvantage of a corporation is that has limited liability.
D) Corporations face more regulations when compared to partnerships.
Answer: D
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
