Principles of Finance Exam 1 (Cedarville
University) fully solved graded A+
Forms of Business Organization - correct answer ✔✔proprietorship, partnership, corporation
Proprietorship - correct answer ✔✔unincorporated business owned by one individual
Advantages of Proprietorship - correct answer ✔✔1. they are easy and inexpensive to form
2. they are subject to few governments regulations
3. they are subject to lower income taxes than are corporations
Disadvantages of Proprietorship - correct answer ✔✔Limited to life of owner
Equity capital limited to owner's personal wealth
Unlimited liability
Partnership - correct answer ✔✔An unincorporated business owned by two or more persons.
Advantages of Partnership - correct answer ✔✔Ease of start-up
Availability of capital and credit
Personal interest
Combined business skills and knowledge
Retention of profits
No special taxes
Disadvantages of Partnership - correct answer ✔✔Unlimited liability
, Management disagreements
Lack of continuity
Frozen investment
Corporation - correct answer ✔✔A legal entity created by a state, separate and distinct from its
owners and managers, having unlimited life, easy transferability of ownership, and limited
liability.
Advantages of a corporation - correct answer ✔✔Limited liability
Unlimited life
Separation of ownership and management
Transfer of ownership is easy
Easier to raise capital
Disadvantages of a corporation - correct answer ✔✔double taxation
To create value for the stockholders. - correct answer ✔✔What is the main goal of a
corporation?
board of directors - correct answer ✔✔a group of persons elected by the stockholders to
manage a corporation
CEO (Chief Executive Officer) - correct answer ✔✔the person who is in charge of a company
COO (Chief Operating Officer) - correct answer ✔✔directs the firm's operations, which include
marketing, manufacturing, sales, and other operating departments
University) fully solved graded A+
Forms of Business Organization - correct answer ✔✔proprietorship, partnership, corporation
Proprietorship - correct answer ✔✔unincorporated business owned by one individual
Advantages of Proprietorship - correct answer ✔✔1. they are easy and inexpensive to form
2. they are subject to few governments regulations
3. they are subject to lower income taxes than are corporations
Disadvantages of Proprietorship - correct answer ✔✔Limited to life of owner
Equity capital limited to owner's personal wealth
Unlimited liability
Partnership - correct answer ✔✔An unincorporated business owned by two or more persons.
Advantages of Partnership - correct answer ✔✔Ease of start-up
Availability of capital and credit
Personal interest
Combined business skills and knowledge
Retention of profits
No special taxes
Disadvantages of Partnership - correct answer ✔✔Unlimited liability
, Management disagreements
Lack of continuity
Frozen investment
Corporation - correct answer ✔✔A legal entity created by a state, separate and distinct from its
owners and managers, having unlimited life, easy transferability of ownership, and limited
liability.
Advantages of a corporation - correct answer ✔✔Limited liability
Unlimited life
Separation of ownership and management
Transfer of ownership is easy
Easier to raise capital
Disadvantages of a corporation - correct answer ✔✔double taxation
To create value for the stockholders. - correct answer ✔✔What is the main goal of a
corporation?
board of directors - correct answer ✔✔a group of persons elected by the stockholders to
manage a corporation
CEO (Chief Executive Officer) - correct answer ✔✔the person who is in charge of a company
COO (Chief Operating Officer) - correct answer ✔✔directs the firm's operations, which include
marketing, manufacturing, sales, and other operating departments
