TEST BANK for Corporate Finance
4th Edition by Jonathan Berk & Peter
DeMarzo
ALL CHAPTERS 1-16 WITH VERIFIED QUESTIONS &
CORRECT ANSWERS| A+ PASS
Page | 1
, Chapter 1 The Corporation
1.1The Four Types of Firms
1) A sole proprietorship is owned by:
A) one person.
B) two of more persons.
C) shareholders.
D) bankers. Correct Answer: A Diff: 1
Section: 1.1 The Four Types of Firms Skill: Definition
2) Which of the following organization forms for a business does NOT avoid double taxation?
A) Limited partnership
B) "C" corporation
C) "S" corporation
D) Limited liability company Correct Answer: B
Diff: 1
Section: 1.1 The Four Types of Firms Skill: Conceptual
3) Which of the following organization forms accounts for the most revenue?
A) "S" corporation
B) Limited partnership
C) "C" corporation
D) Limited liability company Correct Answer: C
Diff: 1
Section: 1.1 The Four Types of Firms Skill: Conceptual
Page | 2
,4) Which of the following organization forms accounts for the greatest number of firms?
A) "S" corporation
B) Limited partnership
C) Sole proprietorship
D) "C" corporation Correct Answer: C
Diff: 1
Section: 1.1 The Four Types of Firms Skill: Conceptual
5) Which of the following is NOT an advantage of a sole proprietorship?
A) Single taxation
B) Ease of setup
C) Limited liability
D) No separation of ownership and control Correct Answer: C
Diff: 2
Section: 1.1 The Four Types of Firms Skill: Conceptual
6) Which of the following statements regarding limited partnerships is TRUE?
A) There is no limit on a limited partner's liability.
B) A limited partner's liability is limited by the amount of their investment.
C) A limited partner is not liable until all the assets of the general partners have been exhausted.
D) A general partner's liability is limited by the amount of their investment. Correct Answer: B
Diff: 2
Section: 1.1 The Four Types of Firms Skill: Conceptual
7) Which of the following is/are an advantage of incorporation?
A) Access to capital markets
Page | 3
, B) Limited liability
C) Unlimited life
D) All of the above Correct Answer: D
Diff: 2
Section: 1.1 The Four Types of Firms Skill: Conceptual
8) Which of the following statements is most correct?
A) An advantage to incorporation is that it allows for less regulation of the business.
B) An advantage of a corporation is that it is subject to double taxation.
C) Unlike a partnership, a disadvantage of a corporation is that has limited liability.
D) Corporations face more regulations when compared to partnerships. Correct Answer: D
Diff: 2
Section: 1.1 The Four Types of Firms Skill: Conceptual
9) A limited liability company is essentially:
A) a limited partnership without limited partners.
B) a limited partnership without a general partner.
C) just another name for a limited partnership.
D) just another name for a corporation. Correct Answer: B
Diff: 1
Section: 1.1 The Four Types of Firms Skill: Conceptual
10) The distinguishing feature of a corporation is that:
A) their is no legal difference between the corporation and its owners.
B) it is a legally defined, artificial being, separate from its owners.
C) it spreads liability for its corporate obligations to all shareholders.
Page | 4
4th Edition by Jonathan Berk & Peter
DeMarzo
ALL CHAPTERS 1-16 WITH VERIFIED QUESTIONS &
CORRECT ANSWERS| A+ PASS
Page | 1
, Chapter 1 The Corporation
1.1The Four Types of Firms
1) A sole proprietorship is owned by:
A) one person.
B) two of more persons.
C) shareholders.
D) bankers. Correct Answer: A Diff: 1
Section: 1.1 The Four Types of Firms Skill: Definition
2) Which of the following organization forms for a business does NOT avoid double taxation?
A) Limited partnership
B) "C" corporation
C) "S" corporation
D) Limited liability company Correct Answer: B
Diff: 1
Section: 1.1 The Four Types of Firms Skill: Conceptual
3) Which of the following organization forms accounts for the most revenue?
A) "S" corporation
B) Limited partnership
C) "C" corporation
D) Limited liability company Correct Answer: C
Diff: 1
Section: 1.1 The Four Types of Firms Skill: Conceptual
Page | 2
,4) Which of the following organization forms accounts for the greatest number of firms?
A) "S" corporation
B) Limited partnership
C) Sole proprietorship
D) "C" corporation Correct Answer: C
Diff: 1
Section: 1.1 The Four Types of Firms Skill: Conceptual
5) Which of the following is NOT an advantage of a sole proprietorship?
A) Single taxation
B) Ease of setup
C) Limited liability
D) No separation of ownership and control Correct Answer: C
Diff: 2
Section: 1.1 The Four Types of Firms Skill: Conceptual
6) Which of the following statements regarding limited partnerships is TRUE?
A) There is no limit on a limited partner's liability.
B) A limited partner's liability is limited by the amount of their investment.
C) A limited partner is not liable until all the assets of the general partners have been exhausted.
D) A general partner's liability is limited by the amount of their investment. Correct Answer: B
Diff: 2
Section: 1.1 The Four Types of Firms Skill: Conceptual
7) Which of the following is/are an advantage of incorporation?
A) Access to capital markets
Page | 3
, B) Limited liability
C) Unlimited life
D) All of the above Correct Answer: D
Diff: 2
Section: 1.1 The Four Types of Firms Skill: Conceptual
8) Which of the following statements is most correct?
A) An advantage to incorporation is that it allows for less regulation of the business.
B) An advantage of a corporation is that it is subject to double taxation.
C) Unlike a partnership, a disadvantage of a corporation is that has limited liability.
D) Corporations face more regulations when compared to partnerships. Correct Answer: D
Diff: 2
Section: 1.1 The Four Types of Firms Skill: Conceptual
9) A limited liability company is essentially:
A) a limited partnership without limited partners.
B) a limited partnership without a general partner.
C) just another name for a limited partnership.
D) just another name for a corporation. Correct Answer: B
Diff: 1
Section: 1.1 The Four Types of Firms Skill: Conceptual
10) The distinguishing feature of a corporation is that:
A) their is no legal difference between the corporation and its owners.
B) it is a legally defined, artificial being, separate from its owners.
C) it spreads liability for its corporate obligations to all shareholders.
Page | 4
