FIN 335 UNCW Exam One
Disadvantages of corporations? - ✔️✔️-separation of ownership and management
(agency problem, sometime the owners do what's best for them and not for the
stockholder)
-Double taxation meaning corporation report their income statement, gets to their
taxable income, pays taxes on that, gets to their net income and decides they can either
pay it out in dividends or reinvest it back into the company but if they pay it out in
dividends, those dividends are taxed again on the personal level
What is a Sub Chapter C? - ✔️✔️-Default selection means when you form it that is it
-taxed twice, while others are not and there is limited liability protection for the other
corporations
What is Sub Chapter S? - ✔️✔️-requirements include a maximum of 100 shareholders
-shareholders all have to be residents of the US
-Only one class of stock meaning
-avoids double taxation by if the corporation has a million in taxable income, that income
isn't taxed until it is distributed to the owners and the shareholders pay taxes on
personal level. But the corporation has a choice to pay it out or to reinvest it. If they
choose to reinvest it and you own 50% of that income they reported and should owe
you, you still have to pay taxes on that 500,000.Most companies don't want to do that so
they will give you at least enough for your tax liability.
What does the balance sheet have on the left side? - ✔️✔️Total Value of Assets
=Current Assets and Fixed Assets (Tangible and Intangible)
Current asset definition - ✔️✔️assets that are to convert to cash within a year
Examples of Current Assets - ✔️✔️A/R
Inventory
Cash
What is a tangible asset? - ✔️✔️Something you can put your arms around and touch
intangible assets are - ✔️✔️patents and goodwill
What is on the right side of the balance sheet? - ✔️✔️Total value of liabilities and
shareholders equity =
Current liabilities, long term debt and shareholders equity
Current Liabilities - ✔️✔️converted to cash before one year
Disadvantages of corporations? - ✔️✔️-separation of ownership and management
(agency problem, sometime the owners do what's best for them and not for the
stockholder)
-Double taxation meaning corporation report their income statement, gets to their
taxable income, pays taxes on that, gets to their net income and decides they can either
pay it out in dividends or reinvest it back into the company but if they pay it out in
dividends, those dividends are taxed again on the personal level
What is a Sub Chapter C? - ✔️✔️-Default selection means when you form it that is it
-taxed twice, while others are not and there is limited liability protection for the other
corporations
What is Sub Chapter S? - ✔️✔️-requirements include a maximum of 100 shareholders
-shareholders all have to be residents of the US
-Only one class of stock meaning
-avoids double taxation by if the corporation has a million in taxable income, that income
isn't taxed until it is distributed to the owners and the shareholders pay taxes on
personal level. But the corporation has a choice to pay it out or to reinvest it. If they
choose to reinvest it and you own 50% of that income they reported and should owe
you, you still have to pay taxes on that 500,000.Most companies don't want to do that so
they will give you at least enough for your tax liability.
What does the balance sheet have on the left side? - ✔️✔️Total Value of Assets
=Current Assets and Fixed Assets (Tangible and Intangible)
Current asset definition - ✔️✔️assets that are to convert to cash within a year
Examples of Current Assets - ✔️✔️A/R
Inventory
Cash
What is a tangible asset? - ✔️✔️Something you can put your arms around and touch
intangible assets are - ✔️✔️patents and goodwill
What is on the right side of the balance sheet? - ✔️✔️Total value of liabilities and
shareholders equity =
Current liabilities, long term debt and shareholders equity
Current Liabilities - ✔️✔️converted to cash before one year
