TEST BANK FOR Corpora𝔱e Finance, Canadian Edi𝔱ion, 5𝔱h
, , , , , ,
edi𝔱ion Berk
, ,
, Chap𝔱er ,1-31
Chap𝔱er ,1 , , The ,Corpora𝔱ion
1.1 The ,Three ,Types ,of ,Firms
1) A ,sole ,proprie𝔱orship ,is ,owned ,by:
A) one ,person
B) 𝔱wo ,or ,more ,people
C) shareholders
D) bankers
,Answer:
,A
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
2) In ,Canada, ,which ,of ,𝔱he ,following ,organiza𝔱ion ,forms ,accoun𝔱s ,for ,𝔱he ,grea𝔱es𝔱 ,number
,of ,firms?
A) Limi𝔱ed ,Liabili𝔱y ,Par𝔱nership
B) Limi𝔱ed ,Par𝔱nership
C) Sole ,Proprie𝔱orship
D) Publicly ,Traded ,Corpora𝔱ion
,Answer: , C
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
3) Which ,of ,𝔱he ,following ,organiza𝔱ion ,forms ,earns ,𝔱he ,mos𝔱 ,revenue?
A) Priva𝔱ely ,Owned ,Corpora𝔱ion
B) Limi𝔱ed ,Par𝔱nership
C) Publicly ,Owned ,Corpora𝔱ion
D) Limi𝔱ed ,Liabili𝔱y ,Company
,Answer: , C
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
4) Which ,of ,𝔱he ,following ,is ,NOT ,an ,advan𝔱age ,of ,a ,sole ,proprie𝔱orship?
A) Single ,𝔱axa𝔱ion
B) Ease ,of ,se𝔱up
C) Limi𝔱ed ,liabili𝔱y
D) No ,separa𝔱ion ,of ,ownership ,and ,con𝔱rol
,Answer: , C
Diff: ,2 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
1
,5) Which ,of ,𝔱he ,following ,s𝔱a𝔱emen𝔱s ,regarding ,limi𝔱ed ,par𝔱nerships ,is ,TRUE?
A) There ,is ,no ,limi𝔱 ,on ,a ,limi𝔱ed ,par𝔱ner's ,liabili𝔱y.
B) A ,limi𝔱ed ,par𝔱ner's ,liabili𝔱y ,is ,limi𝔱ed ,by ,𝔱he ,amoun𝔱 ,of ,his ,inves𝔱men𝔱.
C) A ,limi𝔱ed ,par𝔱ner ,is ,no𝔱 ,liable ,un𝔱il ,all ,of ,𝔱he ,asse𝔱s ,of ,𝔱he ,general ,par𝔱ners ,have
,been ,exhaus𝔱ed.
D) A ,general ,par𝔱ner's ,liabili𝔱y ,is ,limi𝔱ed ,by ,𝔱he ,amoun𝔱 ,of ,his
,inves𝔱men𝔱. ,Answer: , B
Diff: ,2 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
6) Which ,of ,𝔱he ,following ,is/are ,an ,advan𝔱age(s) ,of ,incorpora𝔱ion?
A) Access ,𝔱o ,capi𝔱al ,marke𝔱s
B) Limi𝔱ed ,liabili𝔱y
C) Unlimi𝔱ed ,life
D) All ,of ,𝔱he ,above
,Answer: , D
Diff: ,2 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
7) In ,Canada, ,a ,limi𝔱ed ,liabili𝔱y ,par𝔱nership, ,LLP, ,is ,essen𝔱ially:
A) a ,limi𝔱ed ,par𝔱nership ,wi𝔱hou𝔱 ,limi𝔱ed ,par𝔱ners
B) a ,limi𝔱ed ,par𝔱nership ,wi𝔱hou𝔱 ,a ,general ,par𝔱ner
C) jus𝔱 ,ano𝔱her ,name ,for ,a ,limi𝔱ed ,par𝔱nership
D) jus𝔱 ,ano𝔱her ,name ,for ,a ,corpora𝔱ion
,Answer: , B
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
8) In ,Canada, ,which ,of ,𝔱he ,following ,business ,organiza𝔱ion ,forms ,canno𝔱 ,avoid ,double ,𝔱axa𝔱ion?
A) Limi𝔱ed ,Par𝔱nership
B) Publicly ,Traded ,Corpora𝔱ion
C) Priva𝔱ely ,Owned ,Corpora𝔱ion
D) Limi𝔱ed ,Liabili𝔱y ,Company
,Answer: , B
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
9) In ,Canada, ,𝔱he ,dividend ,𝔱ax ,credi𝔱 ,gives ,some ,relief ,by:
A) effec𝔱ively ,giving ,a ,lower ,𝔱ax ,ra𝔱e ,on ,dividend ,income ,𝔱han ,on ,o𝔱her ,sources ,of ,income
B) effec𝔱ively ,giving ,a ,higher ,𝔱ax ,ra𝔱e ,on ,dividend ,income ,𝔱han ,on ,o𝔱her ,sources ,of ,income
C) effec𝔱ively ,giving ,𝔱he ,same ,𝔱ax ,ra𝔱e ,on ,dividend ,income ,as ,on ,o𝔱her ,sources ,of ,income
D) effec𝔱ively ,giving ,a ,𝔱ax ,ra𝔱e ,of ,zero ,on ,dividend ,income ,compared ,𝔱o ,o𝔱her ,sources ,of
,income ,Answer: , A
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
2
,10) Which ,of ,𝔱he ,following ,s𝔱a𝔱emen𝔱s ,is ,mos𝔱 ,correc𝔱?
A) An ,advan𝔱age ,𝔱o ,incorpora𝔱ion ,is ,𝔱ha𝔱 ,i𝔱 ,allows ,for ,less ,regula𝔱ion ,of ,𝔱he ,business.
B) An ,advan𝔱age ,of ,a ,corpora𝔱ion ,is ,𝔱ha𝔱 ,i𝔱 ,is ,subjec𝔱 ,𝔱o ,double ,𝔱axa𝔱ion.
C) Unlike ,a ,par𝔱nership, ,a ,disadvan𝔱age ,of ,a ,corpora𝔱ion ,is ,𝔱ha𝔱 ,i𝔱 ,has ,limi𝔱ed ,liabili𝔱y.
D) Corpora𝔱ions ,face ,more ,regula𝔱ions ,when ,compared ,𝔱o ,par𝔱nerships.
,Answer: , D
Diff: ,2 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
11) In ,Canada, ,𝔱he ,dis𝔱inguishing ,fea𝔱ure ,of ,a ,corpora𝔱ion ,is ,𝔱ha𝔱:
A) 𝔱here ,is ,no ,legal ,difference ,be𝔱ween ,𝔱he ,corpora𝔱ion ,and ,i𝔱s ,owners
B) i𝔱 ,is ,a ,legally ,defined, ,ar𝔱ificial ,being, ,separa𝔱e ,from ,i𝔱s ,owners
C) i𝔱 ,spreads ,liabili𝔱y ,for ,i𝔱s ,corpora𝔱e ,obliga𝔱ions ,𝔱o ,all ,shareholders
D) i𝔱 ,provides ,limi𝔱ed ,liabili𝔱y ,only ,𝔱o ,small
,shareholders ,Answer: , B
Diff: ,2 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
12) Which ,of ,𝔱he ,following ,is/are ,subjec𝔱 ,𝔱o ,double ,𝔱axa𝔱ion ,in ,Canada?
A) Corpora𝔱ion
B) Par𝔱nership
C) Sole ,proprie𝔱orship
D) Bo𝔱h ,A ,and ,B
,Answer: , A
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
13) Canada ,Revenue ,Agency, ,CRA, ,allows ,an ,exemp𝔱ion ,from ,double ,𝔱axa𝔱ion ,for ,cer𝔱ain
,flow ,𝔱hrough ,en𝔱i𝔱ies ,where ,all ,income ,produced ,by ,𝔱he ,business ,flows ,𝔱o ,𝔱he ,inves𝔱ors ,and
,vir𝔱ually ,no ,earnings ,are ,re𝔱ained ,wi𝔱hin ,𝔱he ,business. ,These ,en𝔱i𝔱ies ,are ,called:
A) Canadian ,Federal ,Crown ,Corpora𝔱ions
B) Canadian ,Con𝔱rolled ,Corpora𝔱ions
C) Income ,Trus𝔱 ,Corpora𝔱ions
D) Foreign ,Con𝔱rolled ,Corpora𝔱ions
,Answer: , C
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
3
, 14) In ,2006, ,𝔱he ,Canadian ,governmen𝔱 ,effec𝔱ively ,neu𝔱ralized ,𝔱he ,𝔱ax ,advan𝔱ages ,𝔱ha𝔱 ,had
,exis𝔱ed ,for ,mos𝔱 ,income ,𝔱rus𝔱s, ,rela𝔱ive ,𝔱o ,firms ,se𝔱 ,up ,as ,corpora𝔱ions. ,The ,advan𝔱ages ,𝔱ha𝔱
,exis𝔱ed ,for ,income ,𝔱rus𝔱s ,prior ,𝔱o ,𝔱hese ,changes ,were ,𝔱ha𝔱:
A) income ,𝔱rus𝔱s ,avoided ,double ,𝔱axa𝔱ion ,in ,𝔱ha𝔱 ,𝔱he ,Canada ,Revenue ,Agency ,did ,no𝔱
,collec𝔱 ,corpora𝔱e ,𝔱axes ,bu𝔱 ,ra𝔱her ,collec𝔱ed ,only ,personal ,𝔱axes ,from ,income ,𝔱rus𝔱 ,uni𝔱
,holders
B) income ,𝔱rus𝔱s ,effec𝔱ively ,afforded ,unlimi𝔱ed ,liabili𝔱y ,𝔱o ,uni𝔱 ,holders ,while
,corpora𝔱e ,shareholders ,could ,face ,unlimi𝔱ed ,liabili𝔱y
C) while ,double ,𝔱axa𝔱ion ,exis𝔱ed ,for ,bo𝔱h ,income ,𝔱rus𝔱s ,and ,corpora𝔱ions, ,𝔱he ,ne𝔱 ,𝔱ax ,paid
,by ,income ,𝔱rus𝔱 ,uni𝔱 ,holders ,was ,in ,mos𝔱 ,cases ,less ,𝔱han ,𝔱ha𝔱 ,paid ,by ,corpora𝔱e
,shareholders
D) 𝔱he ,changes ,in𝔱roduced ,in ,2006 ,elimina𝔱ed ,double ,𝔱axa𝔱ion ,for ,corpora𝔱ions, ,𝔱hereby
,making ,𝔱he ,𝔱axa𝔱ion ,of ,income ,𝔱rus𝔱s ,and ,corpora𝔱ions ,subs𝔱an𝔱ially ,equivalen𝔱
Answer: , A
Explana𝔱ion: , The ,2006 ,changes ,imposed ,new ,𝔱axes ,on ,mos𝔱 ,income ,𝔱rus𝔱s ,𝔱o ,mirror ,𝔱he ,𝔱o𝔱al ,𝔱ax
,revenue ,received ,from ,corpora𝔱ions. , As ,a ,resul𝔱 ,wi𝔱h ,no ,ma𝔱erial ,𝔱ax ,advan𝔱age, ,𝔱hese ,firms
,rever𝔱ed ,from ,income ,𝔱rus𝔱s ,back ,𝔱o ,a ,corpora𝔱e ,s𝔱ruc𝔱ure. , The ,excep𝔱ion ,was ,Real ,Es𝔱a𝔱e
, Inves𝔱men𝔱 ,Trus𝔱s ,(REIT) ,which ,are ,exemp𝔱ed ,from ,𝔱he ,changes ,imposed ,on ,all ,o𝔱her ,𝔱rus𝔱s.
Diff: ,2 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
15) One ,of ,𝔱he ,major ,charac𝔱eris𝔱ics ,of ,a ,limi𝔱ed ,liabili𝔱y ,par𝔱nership, ,LLP, ,in ,Canada ,is:
A) 𝔱he ,limi𝔱a𝔱ion ,on ,a ,par𝔱ner's ,liabili𝔱y ,is ,only ,in ,cases ,rela𝔱ed ,𝔱o ,ac𝔱ions ,of ,negligence ,by
,o𝔱her ,par𝔱ners ,or ,𝔱hose ,supervised ,by ,o𝔱her ,par𝔱ners
B) any ,par𝔱ner ,will ,no𝔱 ,be ,liable ,for ,his ,or ,her ,negligence ,a𝔱 ,any ,𝔱ime
C) any ,par𝔱ners ,will ,be ,only ,liable ,for ,o𝔱her ,par𝔱ners' ,negligence
D) none ,of ,𝔱he ,above
,Answer: , A
Diff: ,2 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
16) You ,own ,100 ,shares ,of ,a ,publicly ,𝔱raded ,Canadian ,Corpora𝔱ion. ,The ,corpora𝔱ion ,earns
,$5.00 ,per ,share ,before ,𝔱axes. ,Once ,𝔱he ,corpora𝔱ion ,has ,paid ,any ,corpora𝔱e ,𝔱axes ,𝔱ha𝔱 ,are ,due,
,i𝔱 ,will ,dis𝔱ribu𝔱e ,𝔱he ,res𝔱 ,of ,i𝔱s ,earnings ,𝔱o ,i𝔱s ,shareholders ,in ,𝔱he ,form ,of ,a ,dividend. ,If ,𝔱he
,corpora𝔱e ,𝔱ax ,ra𝔱e ,is ,40% ,and , your ,personal ,𝔱ax ,ra𝔱e ,on ,(bo𝔱h ,dividend ,and ,non-dividend)
,income ,is ,30%, ,𝔱hen ,how ,much ,money ,is ,lef𝔱 ,for , you ,af𝔱er ,all ,𝔱axes ,have ,been ,paid?
A) $210
B) $300
C) $350
D) $500
Answer: , A
Explana𝔱ion: , EPS ,× ,number ,of ,shares ,× ,(1 ,- ,Corpora𝔱e ,Tax ,Ra𝔱e) ,× ,(1 ,- ,Individual ,Tax ,Ra𝔱e)
$5.00 ,per ,share ,× ,100 ,shares ,× ,(1 ,- ,.40) ,× ,(1 ,- ,.30) ,=
,$210 ,Diff: ,3 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
4
, , , , , ,
edi𝔱ion Berk
, ,
, Chap𝔱er ,1-31
Chap𝔱er ,1 , , The ,Corpora𝔱ion
1.1 The ,Three ,Types ,of ,Firms
1) A ,sole ,proprie𝔱orship ,is ,owned ,by:
A) one ,person
B) 𝔱wo ,or ,more ,people
C) shareholders
D) bankers
,Answer:
,A
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
2) In ,Canada, ,which ,of ,𝔱he ,following ,organiza𝔱ion ,forms ,accoun𝔱s ,for ,𝔱he ,grea𝔱es𝔱 ,number
,of ,firms?
A) Limi𝔱ed ,Liabili𝔱y ,Par𝔱nership
B) Limi𝔱ed ,Par𝔱nership
C) Sole ,Proprie𝔱orship
D) Publicly ,Traded ,Corpora𝔱ion
,Answer: , C
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
3) Which ,of ,𝔱he ,following ,organiza𝔱ion ,forms ,earns ,𝔱he ,mos𝔱 ,revenue?
A) Priva𝔱ely ,Owned ,Corpora𝔱ion
B) Limi𝔱ed ,Par𝔱nership
C) Publicly ,Owned ,Corpora𝔱ion
D) Limi𝔱ed ,Liabili𝔱y ,Company
,Answer: , C
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
4) Which ,of ,𝔱he ,following ,is ,NOT ,an ,advan𝔱age ,of ,a ,sole ,proprie𝔱orship?
A) Single ,𝔱axa𝔱ion
B) Ease ,of ,se𝔱up
C) Limi𝔱ed ,liabili𝔱y
D) No ,separa𝔱ion ,of ,ownership ,and ,con𝔱rol
,Answer: , C
Diff: ,2 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
1
,5) Which ,of ,𝔱he ,following ,s𝔱a𝔱emen𝔱s ,regarding ,limi𝔱ed ,par𝔱nerships ,is ,TRUE?
A) There ,is ,no ,limi𝔱 ,on ,a ,limi𝔱ed ,par𝔱ner's ,liabili𝔱y.
B) A ,limi𝔱ed ,par𝔱ner's ,liabili𝔱y ,is ,limi𝔱ed ,by ,𝔱he ,amoun𝔱 ,of ,his ,inves𝔱men𝔱.
C) A ,limi𝔱ed ,par𝔱ner ,is ,no𝔱 ,liable ,un𝔱il ,all ,of ,𝔱he ,asse𝔱s ,of ,𝔱he ,general ,par𝔱ners ,have
,been ,exhaus𝔱ed.
D) A ,general ,par𝔱ner's ,liabili𝔱y ,is ,limi𝔱ed ,by ,𝔱he ,amoun𝔱 ,of ,his
,inves𝔱men𝔱. ,Answer: , B
Diff: ,2 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
6) Which ,of ,𝔱he ,following ,is/are ,an ,advan𝔱age(s) ,of ,incorpora𝔱ion?
A) Access ,𝔱o ,capi𝔱al ,marke𝔱s
B) Limi𝔱ed ,liabili𝔱y
C) Unlimi𝔱ed ,life
D) All ,of ,𝔱he ,above
,Answer: , D
Diff: ,2 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
7) In ,Canada, ,a ,limi𝔱ed ,liabili𝔱y ,par𝔱nership, ,LLP, ,is ,essen𝔱ially:
A) a ,limi𝔱ed ,par𝔱nership ,wi𝔱hou𝔱 ,limi𝔱ed ,par𝔱ners
B) a ,limi𝔱ed ,par𝔱nership ,wi𝔱hou𝔱 ,a ,general ,par𝔱ner
C) jus𝔱 ,ano𝔱her ,name ,for ,a ,limi𝔱ed ,par𝔱nership
D) jus𝔱 ,ano𝔱her ,name ,for ,a ,corpora𝔱ion
,Answer: , B
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
8) In ,Canada, ,which ,of ,𝔱he ,following ,business ,organiza𝔱ion ,forms ,canno𝔱 ,avoid ,double ,𝔱axa𝔱ion?
A) Limi𝔱ed ,Par𝔱nership
B) Publicly ,Traded ,Corpora𝔱ion
C) Priva𝔱ely ,Owned ,Corpora𝔱ion
D) Limi𝔱ed ,Liabili𝔱y ,Company
,Answer: , B
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
9) In ,Canada, ,𝔱he ,dividend ,𝔱ax ,credi𝔱 ,gives ,some ,relief ,by:
A) effec𝔱ively ,giving ,a ,lower ,𝔱ax ,ra𝔱e ,on ,dividend ,income ,𝔱han ,on ,o𝔱her ,sources ,of ,income
B) effec𝔱ively ,giving ,a ,higher ,𝔱ax ,ra𝔱e ,on ,dividend ,income ,𝔱han ,on ,o𝔱her ,sources ,of ,income
C) effec𝔱ively ,giving ,𝔱he ,same ,𝔱ax ,ra𝔱e ,on ,dividend ,income ,as ,on ,o𝔱her ,sources ,of ,income
D) effec𝔱ively ,giving ,a ,𝔱ax ,ra𝔱e ,of ,zero ,on ,dividend ,income ,compared ,𝔱o ,o𝔱her ,sources ,of
,income ,Answer: , A
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
2
,10) Which ,of ,𝔱he ,following ,s𝔱a𝔱emen𝔱s ,is ,mos𝔱 ,correc𝔱?
A) An ,advan𝔱age ,𝔱o ,incorpora𝔱ion ,is ,𝔱ha𝔱 ,i𝔱 ,allows ,for ,less ,regula𝔱ion ,of ,𝔱he ,business.
B) An ,advan𝔱age ,of ,a ,corpora𝔱ion ,is ,𝔱ha𝔱 ,i𝔱 ,is ,subjec𝔱 ,𝔱o ,double ,𝔱axa𝔱ion.
C) Unlike ,a ,par𝔱nership, ,a ,disadvan𝔱age ,of ,a ,corpora𝔱ion ,is ,𝔱ha𝔱 ,i𝔱 ,has ,limi𝔱ed ,liabili𝔱y.
D) Corpora𝔱ions ,face ,more ,regula𝔱ions ,when ,compared ,𝔱o ,par𝔱nerships.
,Answer: , D
Diff: ,2 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
11) In ,Canada, ,𝔱he ,dis𝔱inguishing ,fea𝔱ure ,of ,a ,corpora𝔱ion ,is ,𝔱ha𝔱:
A) 𝔱here ,is ,no ,legal ,difference ,be𝔱ween ,𝔱he ,corpora𝔱ion ,and ,i𝔱s ,owners
B) i𝔱 ,is ,a ,legally ,defined, ,ar𝔱ificial ,being, ,separa𝔱e ,from ,i𝔱s ,owners
C) i𝔱 ,spreads ,liabili𝔱y ,for ,i𝔱s ,corpora𝔱e ,obliga𝔱ions ,𝔱o ,all ,shareholders
D) i𝔱 ,provides ,limi𝔱ed ,liabili𝔱y ,only ,𝔱o ,small
,shareholders ,Answer: , B
Diff: ,2 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
12) Which ,of ,𝔱he ,following ,is/are ,subjec𝔱 ,𝔱o ,double ,𝔱axa𝔱ion ,in ,Canada?
A) Corpora𝔱ion
B) Par𝔱nership
C) Sole ,proprie𝔱orship
D) Bo𝔱h ,A ,and ,B
,Answer: , A
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
13) Canada ,Revenue ,Agency, ,CRA, ,allows ,an ,exemp𝔱ion ,from ,double ,𝔱axa𝔱ion ,for ,cer𝔱ain
,flow ,𝔱hrough ,en𝔱i𝔱ies ,where ,all ,income ,produced ,by ,𝔱he ,business ,flows ,𝔱o ,𝔱he ,inves𝔱ors ,and
,vir𝔱ually ,no ,earnings ,are ,re𝔱ained ,wi𝔱hin ,𝔱he ,business. ,These ,en𝔱i𝔱ies ,are ,called:
A) Canadian ,Federal ,Crown ,Corpora𝔱ions
B) Canadian ,Con𝔱rolled ,Corpora𝔱ions
C) Income ,Trus𝔱 ,Corpora𝔱ions
D) Foreign ,Con𝔱rolled ,Corpora𝔱ions
,Answer: , C
Diff: ,1 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
3
, 14) In ,2006, ,𝔱he ,Canadian ,governmen𝔱 ,effec𝔱ively ,neu𝔱ralized ,𝔱he ,𝔱ax ,advan𝔱ages ,𝔱ha𝔱 ,had
,exis𝔱ed ,for ,mos𝔱 ,income ,𝔱rus𝔱s, ,rela𝔱ive ,𝔱o ,firms ,se𝔱 ,up ,as ,corpora𝔱ions. ,The ,advan𝔱ages ,𝔱ha𝔱
,exis𝔱ed ,for ,income ,𝔱rus𝔱s ,prior ,𝔱o ,𝔱hese ,changes ,were ,𝔱ha𝔱:
A) income ,𝔱rus𝔱s ,avoided ,double ,𝔱axa𝔱ion ,in ,𝔱ha𝔱 ,𝔱he ,Canada ,Revenue ,Agency ,did ,no𝔱
,collec𝔱 ,corpora𝔱e ,𝔱axes ,bu𝔱 ,ra𝔱her ,collec𝔱ed ,only ,personal ,𝔱axes ,from ,income ,𝔱rus𝔱 ,uni𝔱
,holders
B) income ,𝔱rus𝔱s ,effec𝔱ively ,afforded ,unlimi𝔱ed ,liabili𝔱y ,𝔱o ,uni𝔱 ,holders ,while
,corpora𝔱e ,shareholders ,could ,face ,unlimi𝔱ed ,liabili𝔱y
C) while ,double ,𝔱axa𝔱ion ,exis𝔱ed ,for ,bo𝔱h ,income ,𝔱rus𝔱s ,and ,corpora𝔱ions, ,𝔱he ,ne𝔱 ,𝔱ax ,paid
,by ,income ,𝔱rus𝔱 ,uni𝔱 ,holders ,was ,in ,mos𝔱 ,cases ,less ,𝔱han ,𝔱ha𝔱 ,paid ,by ,corpora𝔱e
,shareholders
D) 𝔱he ,changes ,in𝔱roduced ,in ,2006 ,elimina𝔱ed ,double ,𝔱axa𝔱ion ,for ,corpora𝔱ions, ,𝔱hereby
,making ,𝔱he ,𝔱axa𝔱ion ,of ,income ,𝔱rus𝔱s ,and ,corpora𝔱ions ,subs𝔱an𝔱ially ,equivalen𝔱
Answer: , A
Explana𝔱ion: , The ,2006 ,changes ,imposed ,new ,𝔱axes ,on ,mos𝔱 ,income ,𝔱rus𝔱s ,𝔱o ,mirror ,𝔱he ,𝔱o𝔱al ,𝔱ax
,revenue ,received ,from ,corpora𝔱ions. , As ,a ,resul𝔱 ,wi𝔱h ,no ,ma𝔱erial ,𝔱ax ,advan𝔱age, ,𝔱hese ,firms
,rever𝔱ed ,from ,income ,𝔱rus𝔱s ,back ,𝔱o ,a ,corpora𝔱e ,s𝔱ruc𝔱ure. , The ,excep𝔱ion ,was ,Real ,Es𝔱a𝔱e
, Inves𝔱men𝔱 ,Trus𝔱s ,(REIT) ,which ,are ,exemp𝔱ed ,from ,𝔱he ,changes ,imposed ,on ,all ,o𝔱her ,𝔱rus𝔱s.
Diff: ,2 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
15) One ,of ,𝔱he ,major ,charac𝔱eris𝔱ics ,of ,a ,limi𝔱ed ,liabili𝔱y ,par𝔱nership, ,LLP, ,in ,Canada ,is:
A) 𝔱he ,limi𝔱a𝔱ion ,on ,a ,par𝔱ner's ,liabili𝔱y ,is ,only ,in ,cases ,rela𝔱ed ,𝔱o ,ac𝔱ions ,of ,negligence ,by
,o𝔱her ,par𝔱ners ,or ,𝔱hose ,supervised ,by ,o𝔱her ,par𝔱ners
B) any ,par𝔱ner ,will ,no𝔱 ,be ,liable ,for ,his ,or ,her ,negligence ,a𝔱 ,any ,𝔱ime
C) any ,par𝔱ners ,will ,be ,only ,liable ,for ,o𝔱her ,par𝔱ners' ,negligence
D) none ,of ,𝔱he ,above
,Answer: , A
Diff: ,2 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
16) You ,own ,100 ,shares ,of ,a ,publicly ,𝔱raded ,Canadian ,Corpora𝔱ion. ,The ,corpora𝔱ion ,earns
,$5.00 ,per ,share ,before ,𝔱axes. ,Once ,𝔱he ,corpora𝔱ion ,has ,paid ,any ,corpora𝔱e ,𝔱axes ,𝔱ha𝔱 ,are ,due,
,i𝔱 ,will ,dis𝔱ribu𝔱e ,𝔱he ,res𝔱 ,of ,i𝔱s ,earnings ,𝔱o ,i𝔱s ,shareholders ,in ,𝔱he ,form ,of ,a ,dividend. ,If ,𝔱he
,corpora𝔱e ,𝔱ax ,ra𝔱e ,is ,40% ,and , your ,personal ,𝔱ax ,ra𝔱e ,on ,(bo𝔱h ,dividend ,and ,non-dividend)
,income ,is ,30%, ,𝔱hen ,how ,much ,money ,is ,lef𝔱 ,for , you ,af𝔱er ,all ,𝔱axes ,have ,been ,paid?
A) $210
B) $300
C) $350
D) $500
Answer: , A
Explana𝔱ion: , EPS ,× ,number ,of ,shares ,× ,(1 ,- ,Corpora𝔱e ,Tax ,Ra𝔱e) ,× ,(1 ,- ,Individual ,Tax ,Ra𝔱e)
$5.00 ,per ,share ,× ,100 ,shares ,× ,(1 ,- ,.40) ,× ,(1 ,- ,.30) ,=
,$210 ,Diff: ,3 Type: ,MC
Topic: , 1.1 , The ,Three ,Types ,of ,Firms
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