COB 300 Finance Exam 1 (Liu)
Finance - correct answer ✔✔the system that includes the circulation of money, the granting of credit,
the making of investments, and the provision of banking facilities
Three Parts Finance is Divided Into - correct answer ✔✔financial management
capital markets
investments
Sarbanes-Oxley Act - correct answer ✔✔a law passed by Congress that requires the CEO and CFO to
certify that their firm's financial statements are accurate.
Proprietorship - correct answer ✔✔a business owned by one person
Partnership - correct answer ✔✔a business owned by two or more people
Advantages of Proprietorship and Partnership - correct answer ✔✔few regulations
no corporate income tax
easy to set up
Disadvantages of Proprietorship and Partnership - correct answer ✔✔unlimited liability
limited life
difficult to raise capital
Corporation - correct answer ✔✔a business owned by stockholders who share in its profits but are not
personally responsible for its debts
Advantages of Corporation - correct answer ✔✔limited liability
ability to raise capital
, easy transfer of ownership
unlimited life
Disadvantages of Corporation - correct answer ✔✔double taxation
expensive set up and report filing
LLC (Limited Liability Company) - correct answer ✔✔limited liability, pass through income taxation,
flexibility
only responsible for their investments
LLP (Limited Liability Partnership) - correct answer ✔✔used for professional firms
S-Corp - correct answer ✔✔a corporation that is taxed as though it were a partnership
the corporation's income is taxed only as the personal income of its stockholders
only 100 stockholders
Maximized as Corporation - correct answer ✔✔limited liability reduces risk borne by investors
firms value is dependent on growth opportunity
greater liquidity
Marginal Investor - correct answer ✔✔an investor whose views determine the actual stock price
Corporate Raider - correct answer ✔✔investor conducting a type of hostile corporate takeover against
the wishes of the company because the company is UNDERVALUED
Finance - correct answer ✔✔the system that includes the circulation of money, the granting of credit,
the making of investments, and the provision of banking facilities
Three Parts Finance is Divided Into - correct answer ✔✔financial management
capital markets
investments
Sarbanes-Oxley Act - correct answer ✔✔a law passed by Congress that requires the CEO and CFO to
certify that their firm's financial statements are accurate.
Proprietorship - correct answer ✔✔a business owned by one person
Partnership - correct answer ✔✔a business owned by two or more people
Advantages of Proprietorship and Partnership - correct answer ✔✔few regulations
no corporate income tax
easy to set up
Disadvantages of Proprietorship and Partnership - correct answer ✔✔unlimited liability
limited life
difficult to raise capital
Corporation - correct answer ✔✔a business owned by stockholders who share in its profits but are not
personally responsible for its debts
Advantages of Corporation - correct answer ✔✔limited liability
ability to raise capital
, easy transfer of ownership
unlimited life
Disadvantages of Corporation - correct answer ✔✔double taxation
expensive set up and report filing
LLC (Limited Liability Company) - correct answer ✔✔limited liability, pass through income taxation,
flexibility
only responsible for their investments
LLP (Limited Liability Partnership) - correct answer ✔✔used for professional firms
S-Corp - correct answer ✔✔a corporation that is taxed as though it were a partnership
the corporation's income is taxed only as the personal income of its stockholders
only 100 stockholders
Maximized as Corporation - correct answer ✔✔limited liability reduces risk borne by investors
firms value is dependent on growth opportunity
greater liquidity
Marginal Investor - correct answer ✔✔an investor whose views determine the actual stock price
Corporate Raider - correct answer ✔✔investor conducting a type of hostile corporate takeover against
the wishes of the company because the company is UNDERVALUED
