Principles of Finance Exam 1 (Cedarville
University)
Advantages of Proprietorship - ANSWER-1. they are easy and inexpensive to form
2. they are subject to few government regulations
3. they are subject to lower income taxes than are corporations
Disadvantages of Proprietorship - ANSWER-Limited to life of owner
Equity capital limited to owner's personal wealth
Unlimited liability
Partnership - ANSWER-An unincorporated business owned by two or more persons.
Advantages of Partnership - ANSWER-Ease of start-up
Availability of capital and credit
Personal interest
Combined business skills and knowledge
Retention of profits
No special taxes
Forms of Business Organization - ANSWER-proprietorship, partnership, corporation
Propreitorship - ANSWER-unincorporated business owned by one individual
Disadvantages of Partnership - ANSWER-Unlimited liability
Management disagreements
Lack of continuity
Frozen investment
Corporation - ANSWER-A legal entity created by a state, separate and distinct from its
owners and managers, having unlimited life, easy transferability of ownership, and
limited liability.
Advantages of a corporation - ANSWER-Limited liability
Unlimited life
Separation of ownership and management
Transfer of ownership is easy
Easier to raise capital
Disadvantages of a corporation - ANSWER-double taxation
To create value for the stockholders. - ANSWER-What is the main goal of a
corporation?
University)
Advantages of Proprietorship - ANSWER-1. they are easy and inexpensive to form
2. they are subject to few government regulations
3. they are subject to lower income taxes than are corporations
Disadvantages of Proprietorship - ANSWER-Limited to life of owner
Equity capital limited to owner's personal wealth
Unlimited liability
Partnership - ANSWER-An unincorporated business owned by two or more persons.
Advantages of Partnership - ANSWER-Ease of start-up
Availability of capital and credit
Personal interest
Combined business skills and knowledge
Retention of profits
No special taxes
Forms of Business Organization - ANSWER-proprietorship, partnership, corporation
Propreitorship - ANSWER-unincorporated business owned by one individual
Disadvantages of Partnership - ANSWER-Unlimited liability
Management disagreements
Lack of continuity
Frozen investment
Corporation - ANSWER-A legal entity created by a state, separate and distinct from its
owners and managers, having unlimited life, easy transferability of ownership, and
limited liability.
Advantages of a corporation - ANSWER-Limited liability
Unlimited life
Separation of ownership and management
Transfer of ownership is easy
Easier to raise capital
Disadvantages of a corporation - ANSWER-double taxation
To create value for the stockholders. - ANSWER-What is the main goal of a
corporation?
