MGMT 200 Purdue Chapter 1 || QUESTIONS WITH
COMPLETE SOLUTIONS!!
Corporation correct answers a company that is legally separate from its owners
Advantage of Corporation correct answers Answer:
-limited liability
Limited Liability correct answers -the investor can only lose how much they invested
-prevents stockholders from being held personally responsible for the financial obligations of
the corporation
Sole Proprietorship correct answers A business owned by one person
Partnership correct answers a business owned by two or more people
2 Disadvantages of Sole Prop. and Partnership correct answers Answer:
-owners must have sufficient personal funds to finance the business in addition to the ability
to borrow money
-neither offers limited liability
Disadv. of Corp. correct answers Answer:
-double taxation
Double Taxation correct answers company first pays corporate income taxes on income it
earns and stockholders then pay personal income taxes when the company distributes that
income as dividends to them
Financing activities correct answers transactions the company has with investors and
creditors.
Investing activities correct answers transactions involving the purchase and sale of resources /
investments that are expected to benefit the company for several years (long-term assets)
Operating activities correct answers transactions that relate to the primary operations of the
company, day to day activities
Examples of Financing Activities correct answers Answer:
-issuing stock
-borrowing money from a local bank.
Example of Investing Activities correct answers Answer:
-purchasing land
Examples of Operating Activities correct answers Answer:
-providing products and services to customers
-the associated costs of doing so, like rent, salaries, utilities, taxes, and advertising.
, Revenues correct answers are the amounts recognized when the company sells products or
provides services to customers.
Expenses correct answers are the costs of providing products and services and other business
activities during the current period.
Net Income correct answers -is the difference between revenues and expenses.
-Other common names for this include earnings or profit.
Dividends correct answers are distributions to stockholders, usually in the form of cash
payments
Dividends are NOT what? correct answers Answer:
-expenses!
When is revenue recognized? correct answers Answer:
-when we earn it by providing a service / good
-can come before or after cash
The financial statements are a key component of a company's what? correct answers Answer:
-annual report
2 Important Components of Annual Reports: correct answers Answer:
-management's discussion and analysis
-note disclosures to the financial statements
aka integral parts
Management discussion and analysis (MD&A) correct answers includes management's views
on significant events, trends, and uncertainties pertaining to the company's operations and
resources
Note Disclosures correct answers offer additional information either to explain the
information presented in the financial statements or to provide information not included in
the financial statements
Generally Accepted Accounting Principles (GAAP) correct answers Rules of financial
accounting created by the Financial Accounting Standards Board for use in the United States
The GAAP helps investors to accurately what financial information among companies when
they are making decisions about where to invest or lend their resources. correct answers
Answer:
-compare
Financial Accounting Standards Board (FASB) correct answers the private board that
establishes the generally accepted accounting principles used in the practice of financial
accounting
The Securities and Exchange Commission (SEC) correct answers a government agency
created in 1934, has both the power and the responsibility for setting accounting and
reporting standards for companies whose securities are publicly traded
COMPLETE SOLUTIONS!!
Corporation correct answers a company that is legally separate from its owners
Advantage of Corporation correct answers Answer:
-limited liability
Limited Liability correct answers -the investor can only lose how much they invested
-prevents stockholders from being held personally responsible for the financial obligations of
the corporation
Sole Proprietorship correct answers A business owned by one person
Partnership correct answers a business owned by two or more people
2 Disadvantages of Sole Prop. and Partnership correct answers Answer:
-owners must have sufficient personal funds to finance the business in addition to the ability
to borrow money
-neither offers limited liability
Disadv. of Corp. correct answers Answer:
-double taxation
Double Taxation correct answers company first pays corporate income taxes on income it
earns and stockholders then pay personal income taxes when the company distributes that
income as dividends to them
Financing activities correct answers transactions the company has with investors and
creditors.
Investing activities correct answers transactions involving the purchase and sale of resources /
investments that are expected to benefit the company for several years (long-term assets)
Operating activities correct answers transactions that relate to the primary operations of the
company, day to day activities
Examples of Financing Activities correct answers Answer:
-issuing stock
-borrowing money from a local bank.
Example of Investing Activities correct answers Answer:
-purchasing land
Examples of Operating Activities correct answers Answer:
-providing products and services to customers
-the associated costs of doing so, like rent, salaries, utilities, taxes, and advertising.
, Revenues correct answers are the amounts recognized when the company sells products or
provides services to customers.
Expenses correct answers are the costs of providing products and services and other business
activities during the current period.
Net Income correct answers -is the difference between revenues and expenses.
-Other common names for this include earnings or profit.
Dividends correct answers are distributions to stockholders, usually in the form of cash
payments
Dividends are NOT what? correct answers Answer:
-expenses!
When is revenue recognized? correct answers Answer:
-when we earn it by providing a service / good
-can come before or after cash
The financial statements are a key component of a company's what? correct answers Answer:
-annual report
2 Important Components of Annual Reports: correct answers Answer:
-management's discussion and analysis
-note disclosures to the financial statements
aka integral parts
Management discussion and analysis (MD&A) correct answers includes management's views
on significant events, trends, and uncertainties pertaining to the company's operations and
resources
Note Disclosures correct answers offer additional information either to explain the
information presented in the financial statements or to provide information not included in
the financial statements
Generally Accepted Accounting Principles (GAAP) correct answers Rules of financial
accounting created by the Financial Accounting Standards Board for use in the United States
The GAAP helps investors to accurately what financial information among companies when
they are making decisions about where to invest or lend their resources. correct answers
Answer:
-compare
Financial Accounting Standards Board (FASB) correct answers the private board that
establishes the generally accepted accounting principles used in the practice of financial
accounting
The Securities and Exchange Commission (SEC) correct answers a government agency
created in 1934, has both the power and the responsibility for setting accounting and
reporting standards for companies whose securities are publicly traded
