FIN2601
ASSIGNMENT 1
FIRST SEMSTER 2023
BY: MTHOMBENI: 0767297208
1
, WORKINGS STARTS FROM PAGE 10
QUESTION 1
What is a partnership's primary flaw, as a legal structure for conducting business?
1. The owners have unlimited liability, in that personal wealth can be taken to satisfy debts.
2. The owners lack secrecy, because regulations require firms to disclose financial results.
3. The owners, who are limited partners, have limited liability and cannot lose more than they invested.
4. The owners, who are general partners, have unlimited liability and may have to cover the debts of other
partners.
QUESTION 2
Which of the following is the best illustration of an agency problem? (Assume the company is paying
its employees’ travel expenses.)
1. Ariel, the controller, travels to Zimbabwe, in southeast Africa, to visit the Victoria Falls with friends.
While there, she talks to her friends about employment opportunities at the firm.
2. Benjamin, the chief financial officer, travels to Mozambique to meet with the bank that is loaning the firm
money to build a factory inMozambique. While there, he tours Inhaca Island.
3. Zachariah, the president, travels to the Western Cape to attend an international convention related to the
company's line of business. While there, he goes on the Robben Island half-day tour.
4. Eunice, the marketing director, travels to KwaZulu-Natal to attend a sales convention. While there, she visits
the Drakensberg Mountain range.
QUESTION 3
Which one of the following would reduce the share price of a company?
1. decreasing the cash outflows
2. collecting money from customers at a faster rate
3. improving the timing of cash inflows
4. increasing the riskiness of future cash flows
2
ASSIGNMENT 1
FIRST SEMSTER 2023
BY: MTHOMBENI: 0767297208
1
, WORKINGS STARTS FROM PAGE 10
QUESTION 1
What is a partnership's primary flaw, as a legal structure for conducting business?
1. The owners have unlimited liability, in that personal wealth can be taken to satisfy debts.
2. The owners lack secrecy, because regulations require firms to disclose financial results.
3. The owners, who are limited partners, have limited liability and cannot lose more than they invested.
4. The owners, who are general partners, have unlimited liability and may have to cover the debts of other
partners.
QUESTION 2
Which of the following is the best illustration of an agency problem? (Assume the company is paying
its employees’ travel expenses.)
1. Ariel, the controller, travels to Zimbabwe, in southeast Africa, to visit the Victoria Falls with friends.
While there, she talks to her friends about employment opportunities at the firm.
2. Benjamin, the chief financial officer, travels to Mozambique to meet with the bank that is loaning the firm
money to build a factory inMozambique. While there, he tours Inhaca Island.
3. Zachariah, the president, travels to the Western Cape to attend an international convention related to the
company's line of business. While there, he goes on the Robben Island half-day tour.
4. Eunice, the marketing director, travels to KwaZulu-Natal to attend a sales convention. While there, she visits
the Drakensberg Mountain range.
QUESTION 3
Which one of the following would reduce the share price of a company?
1. decreasing the cash outflows
2. collecting money from customers at a faster rate
3. improving the timing of cash inflows
4. increasing the riskiness of future cash flows
2
