BA318 Finance UO22 || 100% no Error.
Sole Proprietorship correct answers A business owned by one person
carries unlimited liability
Simplest and least regulated
Owner keeps all profits
Company life is limited to owners lifespan
Ownership is difficult to transfer
Partnership correct answers A business owned by two or more persons
Carries unlimited liability
Owners keeps all profits
Company life is limited to owners lifespans
Ownership is difficult to transfer
Corperation correct answers A business created as a distinct legal entity owned by one or more
individuals or entities.
Which of the following statements about the corporate form of business organization is true?
- The corporate form is preferred over the sole proprietorship because a corporation is easier to
form and faces less regulation.
- Sole proprietorships are the most common form of business organization because liability is
limited to the amount invested in the business by the sole proprietor.
- The corporate form has the disadvantage of double taxation relative to a sole proprietorship.
- The corporate form has the advantage of unlimited liability. correct answers The corporate form
has the disadvantage of double taxation relative to a sole proprietorship.
The goal of the firm should be:
,- maximization of shareholder wealth.
- maximization of sales.
- maximization of profits (net income per share).
- maximization of market share. correct answers maximization of shareholder wealth
Which of the following statements are true regarding "Agency Problem"?
-The agency problem may interfere with the implementation of maximizing shareholder wealth.
-The agency problem results from the separation of management and the ownership of the firm.
- all of these
-Managers might attempt to benefit themselves in terms of salary and perquisites at the expense
of shareholders. correct answers all of these
The corporation is a legal entity separate from it owners; thus it is possible for the corporation to
continue even upon the death of one or more shareholders.
True
False correct answers T
Capital structure decisions include all of the following EXCEPT:
Deciding how to pay for long term projects.
Deciding the mix of debt and equity for the firm.
Deciding the total amount of debt the firm should take on.
Deciding what assets to purchase. correct answers Deciding what assets to purchase
Short-term assets and short-term liabilities are referred to as the firm's:
financing mix.
capital budget.
capital structure.
working capital.
, cash flow. correct answers Working Capital
Any situation where a potential conflict can arise between the firm's owners and its managers is
referred to as a(n):
personnel conflict.
agency problem.
compensation issue.
control issue.
organizational problem. correct answers Agency Problem
Anyone other than the firm's stockholders or creditors that might have a claim on the cash flows
of a firm is called a:
shareholder.
stakeholder.
provisional partner.
liaison.
residual owner. correct answers stakeholder
Capital budgeting is the process of:
determining how to raise the money required to fund a project.
deciding the amount of earnings that a firm should retain.
planning and managing a firm's long-term investments.
choosing how much cash to keep on hand correct answers planning and managing a firm's long-
term investments
The capital structure of a firm refers to the firm's:
available cash.
buildings and equipment.
Sole Proprietorship correct answers A business owned by one person
carries unlimited liability
Simplest and least regulated
Owner keeps all profits
Company life is limited to owners lifespan
Ownership is difficult to transfer
Partnership correct answers A business owned by two or more persons
Carries unlimited liability
Owners keeps all profits
Company life is limited to owners lifespans
Ownership is difficult to transfer
Corperation correct answers A business created as a distinct legal entity owned by one or more
individuals or entities.
Which of the following statements about the corporate form of business organization is true?
- The corporate form is preferred over the sole proprietorship because a corporation is easier to
form and faces less regulation.
- Sole proprietorships are the most common form of business organization because liability is
limited to the amount invested in the business by the sole proprietor.
- The corporate form has the disadvantage of double taxation relative to a sole proprietorship.
- The corporate form has the advantage of unlimited liability. correct answers The corporate form
has the disadvantage of double taxation relative to a sole proprietorship.
The goal of the firm should be:
,- maximization of shareholder wealth.
- maximization of sales.
- maximization of profits (net income per share).
- maximization of market share. correct answers maximization of shareholder wealth
Which of the following statements are true regarding "Agency Problem"?
-The agency problem may interfere with the implementation of maximizing shareholder wealth.
-The agency problem results from the separation of management and the ownership of the firm.
- all of these
-Managers might attempt to benefit themselves in terms of salary and perquisites at the expense
of shareholders. correct answers all of these
The corporation is a legal entity separate from it owners; thus it is possible for the corporation to
continue even upon the death of one or more shareholders.
True
False correct answers T
Capital structure decisions include all of the following EXCEPT:
Deciding how to pay for long term projects.
Deciding the mix of debt and equity for the firm.
Deciding the total amount of debt the firm should take on.
Deciding what assets to purchase. correct answers Deciding what assets to purchase
Short-term assets and short-term liabilities are referred to as the firm's:
financing mix.
capital budget.
capital structure.
working capital.
, cash flow. correct answers Working Capital
Any situation where a potential conflict can arise between the firm's owners and its managers is
referred to as a(n):
personnel conflict.
agency problem.
compensation issue.
control issue.
organizational problem. correct answers Agency Problem
Anyone other than the firm's stockholders or creditors that might have a claim on the cash flows
of a firm is called a:
shareholder.
stakeholder.
provisional partner.
liaison.
residual owner. correct answers stakeholder
Capital budgeting is the process of:
determining how to raise the money required to fund a project.
deciding the amount of earnings that a firm should retain.
planning and managing a firm's long-term investments.
choosing how much cash to keep on hand correct answers planning and managing a firm's long-
term investments
The capital structure of a firm refers to the firm's:
available cash.
buildings and equipment.
