Created By: A Solution
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A+ Page 1
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,Created By: A Solution
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Test Bank for Corporate Finance, 6th Canadian Edition by
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gg Jonathan Berk, Peter DeMarzo - Complete Chapters gg gg gg gg gg gg
gg Included (Chap 1 to 31) A+ gg gg gg gg gg
Chapter 1 gg The Corporation and Financial Markets
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1.1 The Three Types of Firms
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1) A sole proprietorship is owned by:
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A) one person. gg
B) two or more people.
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C) shareholders.
D) bankers. Answer: A gg gg
Diff: 1 Type: MC
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Topic : 1.1
gg gg g g g g The Three Types of Firms
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2) Which of the following organization forms is the most common in the economy?
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A) Limited Liability Partnership gg gg
B) Limited Partnership gg
C) Sole Proprietorship gg
D) Publicly Traded Corporation Answer: C gg gg gg gg
Diff: 1 Type: MC
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Topic : 1.1
gg gg g g g g The Three Types of Firms
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3) Which of the following organization forms earns the most revenue?
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A) Privately Owned Corporation gg gg
B) Limited Partnership gg
C) Publicly Owned Corporation gg gg
D) Limited Liability Company Answer: C gg gg gg gg
Diff: 1 Type: MC
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Topic : 1.1
gg gg g g g g The Three Types of Firms
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A+ Page 2 gg
,Created By: A Solution
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4) Which of the following is NOT an advantage of a sole proprietorship?
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A) Single taxation gg
B) Ease of setup gg gg
C) Limited liability gg
D) No separation of ownership and control Answer: C
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gg Diff: 2 Type: MC
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Topic : 1.1 gg gg g g g g The Three Types of Firms gg gg gg gg
5) Which of the following statements regarding limited partnerships is true?
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A) There is no limit on a limited partner's liability.
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B) A limited partner's liability is limited by the amount of his investment.
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C) A limited partner is not liable until all of the assets of the general partners have
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been exhausted.
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D) A general partner's liability is limited by the amount of his investment. Answer:
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B Diff: 2 Type: MC
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Topic : 1.1 gg gg g g g g The Three Types of Firms gg gg gg gg
6) Which of the following are advantages of incorporation?
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A) Access to capital markets gg gg gg
B) Limited liability gg
C) Unlimited life gg
D) All of the above Answer: D
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gg Diff: 2 Type: MC
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Topic : 1.1 gg gg g g g g The Three Types of Firms gg gg gg gg
7) In Canada, a limited liability partnership, LLP, is essentially:
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A) a limited partnership without limited partners.
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B) a limited partnership without a general partner.
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C) just another name for a limited partnership.
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D) just another name for a corporation. Answer: B
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A+ Page 3
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, Created By: A Solution gg gg gg
Diff: 1 Type: MC
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Topic : 1.1 gg gg g g g g The Three Types of Firms gg gg gg gg
8) In Canada, which of the following business organization forms cannot avoid
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double taxation?
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A) Limited Partnership gg
B) Publicly Traded Corporation gg gg
C) Privately Owned Corporation gg gg
D) Limited Liability Company Answer: B gg gg gg gg
gg Diff: 1 Type: MC
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Topic : 1.1 gg gg g g g g The Three Types of Firms gg gg gg gg
9) In Canada, the dividend tax credit gives some relief by effectively giving:
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A) a lower tax rate on dividend income than on other sources of income.
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B) a higher tax rate on dividend income than on other sources of income.
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C) the same tax rate on dividend income as on other sources of income.
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D) a tax rate of zero on dividend income compared to other sources of income. Answer:
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A Diff: 1 Type: MC
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Topic : 1.1 gg gg g g g g The Three Types of Firms gg gg gg gg
10) Which of the following statements is most correct?
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A) An advantage to incorporation is that it allows for less business regulation.
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B) An advantage of a corporation is that it is subject to double taxation.
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C) Unlike a partnership, a disadvantage of a corporation is that it has limited liability.
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D) Corporations face more regulations when compared to partnerships. Answer: D gg gg gg gg gg gg gg gg gg
gg Diff: 2 Type: MC
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Topic : 1.1 gg gg g g g g The Three Types of Firms gg gg gg gg
11) In Canada, the distinguishing feature of a corporation is that:
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A) there is no legal difference between the corporation and its owners.
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B) it is a legally defined, artificial being, separate from its owners.
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A+ Page 4
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A+ Page 1
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,Created By: A Solution
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Test Bank for Corporate Finance, 6th Canadian Edition by
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gg Jonathan Berk, Peter DeMarzo - Complete Chapters gg gg gg gg gg gg
gg Included (Chap 1 to 31) A+ gg gg gg gg gg
Chapter 1 gg The Corporation and Financial Markets
gg gg gg gg
1.1 The Three Types of Firms
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1) A sole proprietorship is owned by:
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A) one person. gg
B) two or more people.
gg gg gg
C) shareholders.
D) bankers. Answer: A gg gg
Diff: 1 Type: MC
gg gg g g gg
Topic : 1.1
gg gg g g g g The Three Types of Firms
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2) Which of the following organization forms is the most common in the economy?
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A) Limited Liability Partnership gg gg
B) Limited Partnership gg
C) Sole Proprietorship gg
D) Publicly Traded Corporation Answer: C gg gg gg gg
Diff: 1 Type: MC
gg gg g g gg
Topic : 1.1
gg gg g g g g The Three Types of Firms
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3) Which of the following organization forms earns the most revenue?
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A) Privately Owned Corporation gg gg
B) Limited Partnership gg
C) Publicly Owned Corporation gg gg
D) Limited Liability Company Answer: C gg gg gg gg
Diff: 1 Type: MC
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Topic : 1.1
gg gg g g g g The Three Types of Firms
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A+ Page 2 gg
,Created By: A Solution
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4) Which of the following is NOT an advantage of a sole proprietorship?
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A) Single taxation gg
B) Ease of setup gg gg
C) Limited liability gg
D) No separation of ownership and control Answer: C
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gg Diff: 2 Type: MC
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Topic : 1.1 gg gg g g g g The Three Types of Firms gg gg gg gg
5) Which of the following statements regarding limited partnerships is true?
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A) There is no limit on a limited partner's liability.
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B) A limited partner's liability is limited by the amount of his investment.
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C) A limited partner is not liable until all of the assets of the general partners have
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been exhausted.
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D) A general partner's liability is limited by the amount of his investment. Answer:
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B Diff: 2 Type: MC
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Topic : 1.1 gg gg g g g g The Three Types of Firms gg gg gg gg
6) Which of the following are advantages of incorporation?
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A) Access to capital markets gg gg gg
B) Limited liability gg
C) Unlimited life gg
D) All of the above Answer: D
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gg Diff: 2 Type: MC
gg g g gg
Topic : 1.1 gg gg g g g g The Three Types of Firms gg gg gg gg
7) In Canada, a limited liability partnership, LLP, is essentially:
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A) a limited partnership without limited partners.
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B) a limited partnership without a general partner.
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C) just another name for a limited partnership.
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D) just another name for a corporation. Answer: B
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A+ Page 3
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, Created By: A Solution gg gg gg
Diff: 1 Type: MC
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Topic : 1.1 gg gg g g g g The Three Types of Firms gg gg gg gg
8) In Canada, which of the following business organization forms cannot avoid
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double taxation?
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A) Limited Partnership gg
B) Publicly Traded Corporation gg gg
C) Privately Owned Corporation gg gg
D) Limited Liability Company Answer: B gg gg gg gg
gg Diff: 1 Type: MC
gg g g gg
Topic : 1.1 gg gg g g g g The Three Types of Firms gg gg gg gg
9) In Canada, the dividend tax credit gives some relief by effectively giving:
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A) a lower tax rate on dividend income than on other sources of income.
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B) a higher tax rate on dividend income than on other sources of income.
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C) the same tax rate on dividend income as on other sources of income.
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D) a tax rate of zero on dividend income compared to other sources of income. Answer:
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A Diff: 1 Type: MC
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Topic : 1.1 gg gg g g g g The Three Types of Firms gg gg gg gg
10) Which of the following statements is most correct?
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A) An advantage to incorporation is that it allows for less business regulation.
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B) An advantage of a corporation is that it is subject to double taxation.
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C) Unlike a partnership, a disadvantage of a corporation is that it has limited liability.
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D) Corporations face more regulations when compared to partnerships. Answer: D gg gg gg gg gg gg gg gg gg
gg Diff: 2 Type: MC
gg g g gg
Topic : 1.1 gg gg g g g g The Three Types of Firms gg gg gg gg
11) In Canada, the distinguishing feature of a corporation is that:
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A) there is no legal difference between the corporation and its owners.
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B) it is a legally defined, artificial being, separate from its owners.
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A+ Page 4
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