FOUNDATIONS OF FINANCIAL MANAGEMENT
COMPREHENSIVE QUESTIONS AND
SOLUTIONS
◉ Limited liability partnership.
Answer: a special form of partnership to limit liability for most of
the partners. Under this arrangement, one or more partners are
designated as general partners and have unlimited liability for the
debts of the firm, while the other partners are designated as limited
partners and are liable only for their initial contribution.
◉ Corporation.
Answer: A form of ownership in which a separate legal entity is
created. A corporation may sue or be sued, engage in contracts, and
acquire property. It has a continual life and is not dependent on any
one stockholder for maintaining its legal existence. A corporation is
owned by stockholders who enjoy the privilege of limited liability.
There is, however, the potential for double taxation in the corporate
form of organization: the first time at the corporate level in the form
of profits, and again at the stockholder level in the form of dividends.
◉ articles of incorporation.
Answer: A document that establishes a corporation and specifies the
rights and limitations of the business entity
, ◉ S Corporation.
Answer: A special corporate form of ownership, in which profit is
taxed as direct income to the stockholders and thus is taxed only
once, as would be true of a partnership. The stockholders still
receive all the organizational benefits of a corporation, including
limited liability. The Subchapter S designation can apply only to
corporations with up to 75 stockholders.
◉ LLC.
Answer: A special form of partnership to limit liability for most of
the partners. Under this arrangement, one or more partners are
designated as general partners and have unlimited liability for the
debts of the firm, while the other partners are designated as limited
partners and are liable only for their initial contribution
◉ Sarbanes Oxley Act 2002.
Answer: An act that was intended to restore confidence in the
financial markets by demanding accuracy in financial reporting.
◉ Dodd Frank Act.
Answer: The wall street reform and consumer protection act of 2010
passed by Congress in response to the financial crisis of 2007-2009
◉ Agency Theory.
COMPREHENSIVE QUESTIONS AND
SOLUTIONS
◉ Limited liability partnership.
Answer: a special form of partnership to limit liability for most of
the partners. Under this arrangement, one or more partners are
designated as general partners and have unlimited liability for the
debts of the firm, while the other partners are designated as limited
partners and are liable only for their initial contribution.
◉ Corporation.
Answer: A form of ownership in which a separate legal entity is
created. A corporation may sue or be sued, engage in contracts, and
acquire property. It has a continual life and is not dependent on any
one stockholder for maintaining its legal existence. A corporation is
owned by stockholders who enjoy the privilege of limited liability.
There is, however, the potential for double taxation in the corporate
form of organization: the first time at the corporate level in the form
of profits, and again at the stockholder level in the form of dividends.
◉ articles of incorporation.
Answer: A document that establishes a corporation and specifies the
rights and limitations of the business entity
, ◉ S Corporation.
Answer: A special corporate form of ownership, in which profit is
taxed as direct income to the stockholders and thus is taxed only
once, as would be true of a partnership. The stockholders still
receive all the organizational benefits of a corporation, including
limited liability. The Subchapter S designation can apply only to
corporations with up to 75 stockholders.
◉ LLC.
Answer: A special form of partnership to limit liability for most of
the partners. Under this arrangement, one or more partners are
designated as general partners and have unlimited liability for the
debts of the firm, while the other partners are designated as limited
partners and are liable only for their initial contribution
◉ Sarbanes Oxley Act 2002.
Answer: An act that was intended to restore confidence in the
financial markets by demanding accuracy in financial reporting.
◉ Dodd Frank Act.
Answer: The wall street reform and consumer protection act of 2010
passed by Congress in response to the financial crisis of 2007-2009
◉ Agency Theory.
