BUSINESS AND FINANCE – CORPORATE EXAM
QUESTIONS AND DETAILED ANSWERS 2024-2025
A business owned by two or more partners with unlimited liability and limited access to capital; profits
pass through as personal income.
General partnership
A partnership where general partners (GPs) have unlimited liability, while limited partners (LPs) have
limited liability; profits pass through as personal income.
Limited partnership (LP)
A business owned and managed by one person with unlimited liability and limited access to capital;
profits pass through as personal income.
Sole proprietorship
A separate legal entity managed by a board and managers; owners (shareholders) have limited liability
but may face double taxation.
Corporation
Corporations register with a regulatory body to become a separate legal entity; shareholders have
limited liability but profits may be subject to double taxation.
Corporation incorporation
Shareholders vote for a board of directors, who hire managers and declare dividends.
Corporate governance
,A company that lists its shares on a stock exchange for trading; must comply with regulatory and
disclosure requirements.
Public limited company
The fraction of total shares outstanding that are actively traded on the stock exchange.
Free float
Private companies raise capital through private placements rather than public trading.
Private company capital raising
A private company can go public through an IPO, a direct listing, or acquisition by a public company (e.g.,
a SPAC merger).
Ways a private company becomes public
Debtholders have a higher priority of claims than equity holders and must be paid before equity holders
receive any net assets.
Debtholders vs. equity holders
Debt has limited upside (fixed payments), while equity has unlimited upside potential, creating potential
conflicts of interest.
Debt vs. equity potential
, Include shareholders, debtholders, board of directors, senior management, employees, creditors,
suppliers, and government.
Primary stakeholders
Suggests that a company must balance the interests of all stakeholders rather than just maximizing
shareholder value.
Stakeholder theory
Includes climate change, pollution, deforestation, energy efficiency, waste management, and water
scarcity.
Environmental factors
Includes customer privacy, information security, customer satisfaction, employee engagement, diversity,
labor relations, and community relations.
Social factors
Includes board composition, executive compensation, internal audit function, bribery and corruption,
political contributions, and lobbying.
Corporate governance factors
Refers to owners employing agents to act in their interests, which can lead to conflicts if incentives are
misaligned.
Principal-agent relationship
QUESTIONS AND DETAILED ANSWERS 2024-2025
A business owned by two or more partners with unlimited liability and limited access to capital; profits
pass through as personal income.
General partnership
A partnership where general partners (GPs) have unlimited liability, while limited partners (LPs) have
limited liability; profits pass through as personal income.
Limited partnership (LP)
A business owned and managed by one person with unlimited liability and limited access to capital;
profits pass through as personal income.
Sole proprietorship
A separate legal entity managed by a board and managers; owners (shareholders) have limited liability
but may face double taxation.
Corporation
Corporations register with a regulatory body to become a separate legal entity; shareholders have
limited liability but profits may be subject to double taxation.
Corporation incorporation
Shareholders vote for a board of directors, who hire managers and declare dividends.
Corporate governance
,A company that lists its shares on a stock exchange for trading; must comply with regulatory and
disclosure requirements.
Public limited company
The fraction of total shares outstanding that are actively traded on the stock exchange.
Free float
Private companies raise capital through private placements rather than public trading.
Private company capital raising
A private company can go public through an IPO, a direct listing, or acquisition by a public company (e.g.,
a SPAC merger).
Ways a private company becomes public
Debtholders have a higher priority of claims than equity holders and must be paid before equity holders
receive any net assets.
Debtholders vs. equity holders
Debt has limited upside (fixed payments), while equity has unlimited upside potential, creating potential
conflicts of interest.
Debt vs. equity potential
, Include shareholders, debtholders, board of directors, senior management, employees, creditors,
suppliers, and government.
Primary stakeholders
Suggests that a company must balance the interests of all stakeholders rather than just maximizing
shareholder value.
Stakeholder theory
Includes climate change, pollution, deforestation, energy efficiency, waste management, and water
scarcity.
Environmental factors
Includes customer privacy, information security, customer satisfaction, employee engagement, diversity,
labor relations, and community relations.
Social factors
Includes board composition, executive compensation, internal audit function, bribery and corruption,
political contributions, and lobbying.
Corporate governance factors
Refers to owners employing agents to act in their interests, which can lead to conflicts if incentives are
misaligned.
Principal-agent relationship
