TEST BANK For Corporate Finance 6th Canadian Edition by
Berk & DeMarzo, All Chapters ||Complete A+ Guide
,TEST BANK FOR
r r
Corporate rFinance, rCanadian rEdition, r6th redition rBerk
rChapter r1-31
Chapter r1 r r The rCorporation rand rFinancial rMarkets
1.1 The rThree rTypes rof rFirms
1) A rsole rproprietorship ris rowned rby:
A) one rperson
B) two ror rmore rpeople
C) shareholders
D) bankers
rAnswer:
r A
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
2) In rCanada, rwhich rof rthe rfollowing rorganization rforms raccounts rfor rthe rgreatest rnumber
rof rfirms?
A) Limited rLiability rPartnership
B) Limited rPartnership
C) Sole rProprietorship
D) Publicly rTraded rCorporation
rAnswer: r C
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
3) Which rof rthe rfollowing rorganization rforms rearns rthe rmost rrevenue?
A) Privately rOwned rCorporation
B) Limited rPartnership
C) Publicly rOwned rCorporation
D) Limited rLiability rCompany
rAnswer: r C
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
4) Which rof rthe rfollowing ris rNOT ran radvantage rof ra rsole rproprietorship?
A) Single rtaxation
B) Ease rof rsetup
C) Limited rliability
D) No rseparation rof rownership rand rcontrol
rAnswer: r C
Diff: r2 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
,5) Which rof rthe rfollowing rstatements rregarding rlimited rpartnerships ris rTRUE?
A) There ris rno rlimit ron ra rlimited rpartner's rliability.
B) A rlimited rpartner's rliability ris rlimited rby rthe ramount rof rhis rinvestment.
C) A rlimited rpartner ris rnot rliable runtil rall rof rthe rassets rof rthe rgeneral rpartners rhave
rbeen rexhausted.
D) A rgeneral rpartner's rliability ris rlimited rby rthe ramount rof rhis
rinvestment. rAnswer: r B
Diff: r2 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
6) Which rof rthe rfollowing ris/are ran radvantage(s) rof rincorporation?
A) Access rto rcapital rmarkets
B) Limited rliability
C) Unlimited rlife
D) All rof rthe rabove
rAnswer: r D
Diff: r2 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
7) In rCanada, ra rlimited rliability rpartnership, rLLP, ris ressentially:
A) a rlimited rpartnership rwithout rlimited rpartners
B) a rlimited rpartnership rwithout ra rgeneral rpartner
C) just ranother rname rfor ra rlimited rpartnership
D) just ranother rname rfor ra rcorporation
rAnswer: r B
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
8) In rCanada, rwhich rof rthe rfollowing rbusiness rorganization rforms rcannot ravoid rdouble rtaxation?
A) Limited rPartnership
B) Publicly rTraded rCorporation
C) Privately rOwned rCorporation
D) Limited rLiability rCompany
rAnswer: r B
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
9) In rCanada, rthe rdividend rtax rcredit rgives rsome rrelief rby:
A) effectively rgiving ra rlower rtax rrate ron rdividend rincome rthan ron rother rsources rof rincome
B) effectively rgiving ra rhigher rtax rrate ron rdividend rincome rthan ron rother rsources rof rincome
C) effectively rgiving rthe rsame rtax rrate ron rdividend rincome ras ron rother rsources rof rincome
D) effectively rgiving ra rtax rrate rof rzero ron rdividend rincome rcompared rto rother rsources rof
rincome rAnswer: r A
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
, 10) Which rof rthe rfollowing rstatements ris rmost rcorrect?
A) An radvantage rto rincorporation ris rthat rit rallows rfor rless rregulation rof rthe rbusiness.
B) An radvantage rof ra rcorporation ris rthat rit ris rsubject rto rdouble rtaxation.
C) Unlike ra rpartnership, ra rdisadvantage rof ra rcorporation ris rthat rit rhas rlimited rliability.
D) Corporations rface rmore rregulations rwhen rcompared rto rpartnerships.
rAnswer: r D
Diff: r2 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
11) In rCanada, rthe rdistinguishing rfeature rof ra rcorporation ris rthat:
A) there ris rno rlegal rdifference rbetween rthe rcorporation rand rits rowners
B) it ris ra rlegally rdefined, rartificial rbeing, rseparate rfrom rits rowners
C) it rspreads rliability rfor rits rcorporate robligations rto rall rshareholders
D) it rprovides rlimited rliability ronly rto rsmall rshareholders
rAnswer: r B
Diff: r2 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
12) Which rof rthe rfollowing ris/are rsubject rto rdouble rtaxation rin rCanada?
A) Corporation
B) Partnership
C) Sole rproprietorship
D) Both rA rand rB
rAnswer: r A
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
13) Canada rRevenue rAgency, rCRA, rallows ran rexemption rfrom rdouble rtaxation rfor rcertain
rflow rthrough rentities rwhere rall rincome rproduced rby rthe rbusiness rflows rto rthe rinvestors rand
rvirtually rno rearnings rare rretained rwithin rthe rbusiness. rThese rentities rare rcalled:
A) Canadian rFederal rCrown rCorporations
B) Canadian rControlled rCorporations
C) Income rTrust rCorporations
D) Foreign rControlled rCorporations
rAnswer: r C
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
Berk & DeMarzo, All Chapters ||Complete A+ Guide
,TEST BANK FOR
r r
Corporate rFinance, rCanadian rEdition, r6th redition rBerk
rChapter r1-31
Chapter r1 r r The rCorporation rand rFinancial rMarkets
1.1 The rThree rTypes rof rFirms
1) A rsole rproprietorship ris rowned rby:
A) one rperson
B) two ror rmore rpeople
C) shareholders
D) bankers
rAnswer:
r A
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
2) In rCanada, rwhich rof rthe rfollowing rorganization rforms raccounts rfor rthe rgreatest rnumber
rof rfirms?
A) Limited rLiability rPartnership
B) Limited rPartnership
C) Sole rProprietorship
D) Publicly rTraded rCorporation
rAnswer: r C
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
3) Which rof rthe rfollowing rorganization rforms rearns rthe rmost rrevenue?
A) Privately rOwned rCorporation
B) Limited rPartnership
C) Publicly rOwned rCorporation
D) Limited rLiability rCompany
rAnswer: r C
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
4) Which rof rthe rfollowing ris rNOT ran radvantage rof ra rsole rproprietorship?
A) Single rtaxation
B) Ease rof rsetup
C) Limited rliability
D) No rseparation rof rownership rand rcontrol
rAnswer: r C
Diff: r2 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
,5) Which rof rthe rfollowing rstatements rregarding rlimited rpartnerships ris rTRUE?
A) There ris rno rlimit ron ra rlimited rpartner's rliability.
B) A rlimited rpartner's rliability ris rlimited rby rthe ramount rof rhis rinvestment.
C) A rlimited rpartner ris rnot rliable runtil rall rof rthe rassets rof rthe rgeneral rpartners rhave
rbeen rexhausted.
D) A rgeneral rpartner's rliability ris rlimited rby rthe ramount rof rhis
rinvestment. rAnswer: r B
Diff: r2 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
6) Which rof rthe rfollowing ris/are ran radvantage(s) rof rincorporation?
A) Access rto rcapital rmarkets
B) Limited rliability
C) Unlimited rlife
D) All rof rthe rabove
rAnswer: r D
Diff: r2 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
7) In rCanada, ra rlimited rliability rpartnership, rLLP, ris ressentially:
A) a rlimited rpartnership rwithout rlimited rpartners
B) a rlimited rpartnership rwithout ra rgeneral rpartner
C) just ranother rname rfor ra rlimited rpartnership
D) just ranother rname rfor ra rcorporation
rAnswer: r B
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
8) In rCanada, rwhich rof rthe rfollowing rbusiness rorganization rforms rcannot ravoid rdouble rtaxation?
A) Limited rPartnership
B) Publicly rTraded rCorporation
C) Privately rOwned rCorporation
D) Limited rLiability rCompany
rAnswer: r B
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
9) In rCanada, rthe rdividend rtax rcredit rgives rsome rrelief rby:
A) effectively rgiving ra rlower rtax rrate ron rdividend rincome rthan ron rother rsources rof rincome
B) effectively rgiving ra rhigher rtax rrate ron rdividend rincome rthan ron rother rsources rof rincome
C) effectively rgiving rthe rsame rtax rrate ron rdividend rincome ras ron rother rsources rof rincome
D) effectively rgiving ra rtax rrate rof rzero ron rdividend rincome rcompared rto rother rsources rof
rincome rAnswer: r A
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
, 10) Which rof rthe rfollowing rstatements ris rmost rcorrect?
A) An radvantage rto rincorporation ris rthat rit rallows rfor rless rregulation rof rthe rbusiness.
B) An radvantage rof ra rcorporation ris rthat rit ris rsubject rto rdouble rtaxation.
C) Unlike ra rpartnership, ra rdisadvantage rof ra rcorporation ris rthat rit rhas rlimited rliability.
D) Corporations rface rmore rregulations rwhen rcompared rto rpartnerships.
rAnswer: r D
Diff: r2 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
11) In rCanada, rthe rdistinguishing rfeature rof ra rcorporation ris rthat:
A) there ris rno rlegal rdifference rbetween rthe rcorporation rand rits rowners
B) it ris ra rlegally rdefined, rartificial rbeing, rseparate rfrom rits rowners
C) it rspreads rliability rfor rits rcorporate robligations rto rall rshareholders
D) it rprovides rlimited rliability ronly rto rsmall rshareholders
rAnswer: r B
Diff: r2 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
12) Which rof rthe rfollowing ris/are rsubject rto rdouble rtaxation rin rCanada?
A) Corporation
B) Partnership
C) Sole rproprietorship
D) Both rA rand rB
rAnswer: r A
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
13) Canada rRevenue rAgency, rCRA, rallows ran rexemption rfrom rdouble rtaxation rfor rcertain
rflow rthrough rentities rwhere rall rincome rproduced rby rthe rbusiness rflows rto rthe rinvestors rand
rvirtually rno rearnings rare rretained rwithin rthe rbusiness. rThese rentities rare rcalled:
A) Canadian rFederal rCrown rCorporations
B) Canadian rControlled rCorporations
C) Income rTrust rCorporations
D) Foreign rControlled rCorporations
rAnswer: r C
Diff: r1 Type: rMC
Topic: r 1.1 r The rThree rTypes rof rFirms
