BSNS114 LATEST 2024/2025 EXAM QUESTIONS WITH COMPLETE
ANSWERS/GRADED A+
1. Define working Deals with day to day financial matters and affect current
capital manage- assets, current liabilities
ment decision
2. Define invest- Determine what long term productive assets the firm will
ment decision purchase (tangible/intangible)
3. What is the Tangible assets - physical existence (land, product, facto-
difference be- ry)
tween tangible Intangible assets - non physical (patent, contract, etc.)
and intangible
long term as-
sets?
4. Define financing Determine the mix of long term debt and equity that will
decision be used to finance the firm's long term productive assets
5. What are the fea- Business owned by a single person
tures of sole pro- No separation of ownership and management
prietorship? One person responsible for providing capital and manag-
ing the business
6. What are the ad- Easy to form and end
vantages of sole Least expensive and regulated form of business
proprietorship? No sharing of profit and loss
Taxed once as personal income
7. What are the Limited access to capital
disadvantages of Costly to transfer ownership
sole proprietor- Unlimited liability
ship?
8. What are the fea- Two or more owners have jointed legally to manage a
tures of a part- business and share its profits
nership?
9. What is the dif- In a general partnership all partners are owners and
ference between managers
a general part- In a limited partnership there are both general partners
nership and a
, limited partner- who are owners and managers and limited partners who
ship? are owners but not managers
10. What are the ad- Two or more owners
vantages of a More capital available
partnership? Relatively easy to start
Income taxed once as personal income
11. What are the dis- Unlimited liability (general partnership)
advantages of a Partnership dissolves when one partner die or wishes to
partnership? sell
Difficult to transfer ownership
12. Define incorpo- Legal process used to form a corporate entity (company)
ration
13. What are the ad- Separate from its owner its owners legal entity
vantages of a Easy transfer of ownership
corporation? Limited liability (protects the personal assets of founders
of the company in case of bankruptcy
14. What are the dis- Separation of ownership and management may create
advantages of a conflicts of interest
corporation? All profits are taxed at a corporate tax rate
Costly to establish and register
15. Define agency Potential agency cost
problem Cost incurred because of conflicts of interest between a
principal and agent
16. Give examples of Managers make decisions that hurt firm value, and as a
an agency prob- result hurt shareholder's wealth
lem Managers lie to shareholders by holding back news about
the company, fabricate financial reports
Managers can waste firm resources to satisfy personal
need
17. What are Shareholders annual meeting
some discipli- Board of directors
nary mecha-
ANSWERS/GRADED A+
1. Define working Deals with day to day financial matters and affect current
capital manage- assets, current liabilities
ment decision
2. Define invest- Determine what long term productive assets the firm will
ment decision purchase (tangible/intangible)
3. What is the Tangible assets - physical existence (land, product, facto-
difference be- ry)
tween tangible Intangible assets - non physical (patent, contract, etc.)
and intangible
long term as-
sets?
4. Define financing Determine the mix of long term debt and equity that will
decision be used to finance the firm's long term productive assets
5. What are the fea- Business owned by a single person
tures of sole pro- No separation of ownership and management
prietorship? One person responsible for providing capital and manag-
ing the business
6. What are the ad- Easy to form and end
vantages of sole Least expensive and regulated form of business
proprietorship? No sharing of profit and loss
Taxed once as personal income
7. What are the Limited access to capital
disadvantages of Costly to transfer ownership
sole proprietor- Unlimited liability
ship?
8. What are the fea- Two or more owners have jointed legally to manage a
tures of a part- business and share its profits
nership?
9. What is the dif- In a general partnership all partners are owners and
ference between managers
a general part- In a limited partnership there are both general partners
nership and a
, limited partner- who are owners and managers and limited partners who
ship? are owners but not managers
10. What are the ad- Two or more owners
vantages of a More capital available
partnership? Relatively easy to start
Income taxed once as personal income
11. What are the dis- Unlimited liability (general partnership)
advantages of a Partnership dissolves when one partner die or wishes to
partnership? sell
Difficult to transfer ownership
12. Define incorpo- Legal process used to form a corporate entity (company)
ration
13. What are the ad- Separate from its owner its owners legal entity
vantages of a Easy transfer of ownership
corporation? Limited liability (protects the personal assets of founders
of the company in case of bankruptcy
14. What are the dis- Separation of ownership and management may create
advantages of a conflicts of interest
corporation? All profits are taxed at a corporate tax rate
Costly to establish and register
15. Define agency Potential agency cost
problem Cost incurred because of conflicts of interest between a
principal and agent
16. Give examples of Managers make decisions that hurt firm value, and as a
an agency prob- result hurt shareholder's wealth
lem Managers lie to shareholders by holding back news about
the company, fabricate financial reports
Managers can waste firm resources to satisfy personal
need
17. What are Shareholders annual meeting
some discipli- Board of directors
nary mecha-
