Unit_4__Midterm_Exam__FI360DLCF2A2023_Financial_Management.

Unit 4: Midterm Exam Due 11:59pm Points 120 Questions 30 Time Limit 90 Minutes Instructions Directions The midterm exam covers material from week one through week three (Chapters 1 through 5). The exam consists of 30 multiple choice questions. You will have 90 minutes to complete the midterm exam. You are only able to take the exam once. The exam is open textbook and open notes. The exam is not proctored. Due Date: Submit the exam by 11:59 pm, on Sunday of Unit 4, CT. Attempt History Attempt Time Score LATEST Attempt 1 82 minutes 116 out of 120  Correct answers will be available on Nov 16 at 12am. Score for this quiz: 116 out of 120 Submitted at 10:25am This attempt took 82 minutes. Since bondholders receive fixed payments, they do not share in the gains if risky projects turn out to be highly successful. However, they do share in the losses if risky projects fail and drive the firm into bankruptcy. Therefore, bondholders generally prefer to see corporate managers invest in low risk/low return projects rather than high risk/high return projects. Because bankruptcy requires that corporate bondholders be paid in full before stockholders receive anything, bondholders generally prefer to see corporate managers invest in high risk/high return projects rather than low risk/low return projects. One advantage of operating a business as a corporation is that stockholders can deduct their pro rata share of the taxes the firm pays, thereby eliminating the double taxation investors would face in a partnership. One drawback of forming a corporation is that you lose the limited liability that you would otherwise receive as a proprietor. Potential conflicts between stockholders and bondholders are increased if a firm's bonds are convertible into its common stock. Incorrect Which of the following statements is CORRECT? One of the disadvantages of incorporating your business is that you could become subject to the firm's liabilities in the event of bankruptcy. In any partnership, every partner has the same rights, privileges, and liability exposure as every other partner. Proprietorships and partnerships generally have a tax advantage over corporations. Corporations of all types are subject to the corporate income tax. Proprietorships are subject to more regulations than corporations. Rationale: Some corporations (S corporations) are able to avoid the corporate income tax. Proprietorships and partnerships pay personal income tax, but they avoid the corporate income tax. ................................................continued..............................................