FIN 3403 Exam 1 Bliss Questions With Correct
Answers
What are the four types of firms? - CORRECT ANSWER✔✔-Sole Proprietorship,
| | | | | | | | | |
Partnership,
Limited Liability Companies (LLC),
| | |
| Corporations
Describe differences between them (4 firm types) and good and bad points
| | | | | | | | | | | |
related to each. - CORRECT ANSWER✔✔-Sole Proprietorship: most popular, Mom
| | | | | | | | | |
and pop shops, 1 owner
| | | |
+) Easy to start,
| | |
Control and flexibility, | |
Being own boss | |
-) Liable for the entire business and debt,
| | | | | | | |
Hard to transfer ownership,
| | | |
Business life = Owners life, | | | | |
Need to have expertise in all areas of the business,
| | | | | | | | | |
Raising capital | |
Partnerships: >1 owner, end when any partner dies or withdrawals, Liquidation
| | | | | | | | | | |
can be avoided if agreement provides for alternatives like buyout of deceased or
| | | | | | | | | | | | |
withdrawn partner |
, +) Relatively easy to establish,
| | | | |
Partners can pool their resources and expertise (Good for raising capital),
| | | | | | | | | | |
Advancement opportunities for employees | | | |
-) Liability exposure-personally liable for debt, Lender can require ANY partner to
| | | | | | | | | | | |
repay all debts | |
disagreement among partners, | |
Lack of continuity in business operations
| | | | |
LLC: Members are owners, No general partner, replacing sole propietorship, All
| | | | | | | | | | |
the owners have limited liability but they can also run the business
| | | | | | | | | | |
+) less risk,
| | |
# members is unlimited
| | |
-) fees may be higher, less control over cash flows than corporations
| | | | | | | | | | |
***Corporations: most important for this class, legally defined, artificial being, | | | | | | | | | |
separate from its owners, has legal powers that people have, stockholders are
| | | | | | | | | | |
"owners", no limit on # of owners
| | | | | | |
+) assets can not be ceased, corporation is responsible for its own obligations,
| | | | | | | | | | | | |
owners not liable for any obligations the corporations enter into
| | | | | | | | |
-) double taxation (corporation pays tax and shareholders pay tax, must be
| | | | | | | | | | | |
chartered in state it is incorporated, more costly to set up
| | | | | | | | | |
General partner: - CORRECT ANSWER✔✔-have the same rights/privileges as
| | | | | | | | |
partners in any general partnership,| | | |
Are personally liable for the firm's debt obligations
| | | | | | |
Answers
What are the four types of firms? - CORRECT ANSWER✔✔-Sole Proprietorship,
| | | | | | | | | |
Partnership,
Limited Liability Companies (LLC),
| | |
| Corporations
Describe differences between them (4 firm types) and good and bad points
| | | | | | | | | | | |
related to each. - CORRECT ANSWER✔✔-Sole Proprietorship: most popular, Mom
| | | | | | | | | |
and pop shops, 1 owner
| | | |
+) Easy to start,
| | |
Control and flexibility, | |
Being own boss | |
-) Liable for the entire business and debt,
| | | | | | | |
Hard to transfer ownership,
| | | |
Business life = Owners life, | | | | |
Need to have expertise in all areas of the business,
| | | | | | | | | |
Raising capital | |
Partnerships: >1 owner, end when any partner dies or withdrawals, Liquidation
| | | | | | | | | | |
can be avoided if agreement provides for alternatives like buyout of deceased or
| | | | | | | | | | | | |
withdrawn partner |
, +) Relatively easy to establish,
| | | | |
Partners can pool their resources and expertise (Good for raising capital),
| | | | | | | | | | |
Advancement opportunities for employees | | | |
-) Liability exposure-personally liable for debt, Lender can require ANY partner to
| | | | | | | | | | | |
repay all debts | |
disagreement among partners, | |
Lack of continuity in business operations
| | | | |
LLC: Members are owners, No general partner, replacing sole propietorship, All
| | | | | | | | | | |
the owners have limited liability but they can also run the business
| | | | | | | | | | |
+) less risk,
| | |
# members is unlimited
| | |
-) fees may be higher, less control over cash flows than corporations
| | | | | | | | | | |
***Corporations: most important for this class, legally defined, artificial being, | | | | | | | | | |
separate from its owners, has legal powers that people have, stockholders are
| | | | | | | | | | |
"owners", no limit on # of owners
| | | | | | |
+) assets can not be ceased, corporation is responsible for its own obligations,
| | | | | | | | | | | | |
owners not liable for any obligations the corporations enter into
| | | | | | | | |
-) double taxation (corporation pays tax and shareholders pay tax, must be
| | | | | | | | | | | |
chartered in state it is incorporated, more costly to set up
| | | | | | | | | |
General partner: - CORRECT ANSWER✔✔-have the same rights/privileges as
| | | | | | | | |
partners in any general partnership,| | | |
Are personally liable for the firm's debt obligations
| | | | | | |
