Managerial Finance Exam Questions
with Answers
One of the most important disadvantages of the corporate form of business is
a. limited owner liability
b. ease of transferring ownership
c. double taxation
d. unlimited owner liability - ✔✔c. double taxation
Which of the following are disadvantages of a partnership?
I. limited life of the firm
II. personal liability for firm debt
III. greater ability to raise capital than a sole proprietorship IV. lack of ability to transfer
partnership interest
a. I and II only
b. II and III only
c. I, II, and IV only
d. I, III, and IV only - ✔✔c. I, II, and IV
Characteristic(s) of sole proprietorships is (are):
a. they are easily and cheaply setup.
b. the proprietorship life is limited to the business owner's life.
c. all business taxes are paid as individual tax.
d. All of the above. - ✔✔d. all of the above
Twitter Inc decides to issue additional stock with the assistance of its investment banker. An
investor purchases some of the newly issued shares. Is this a primary market transaction or a
, secondary market transaction? - ✔✔Since new shares of stock are being issued, this is a
primary market transaction.
What if instead an investor buys existing shares of Twitter stock in the open market - is this a
primary or secondary market transaction? - ✔✔Since no new shares are created, this is a
secondary market transaction.
Which of the following statements is CORRECT?
a. The New York Stock Exchange is an auction market with a physical location.
b. If an investor sells shares of stock through a broker, then it would be a primary market
transaction. - ✔✔a. The New York Stock Exchange is an auction market with a physical location.
Which of the following statements is CORRECT?
a. If you purchase 100 shares of Disney stock from your brother-in-law, this is an example of a
primary market transaction.
b. If Disney issues additional shares of common stock through an investment banker, this would
be a primary market transaction.
c. The NYSE is an example of an over-the-counter market. - ✔✔b. If Disney issues additional
shares of common stock through an investment banker, this would be a primary market
transaction.
Which of the following are advantages of a corporation?
I. limited life of the firm
II. personal liability for firm debt
III. greater ability to raise capital than sole propietorship
IV. lack of ability to transfer partnership interest - ✔✔III only
characteristics of sole propietorship
a. easily and cheaply setup
with Answers
One of the most important disadvantages of the corporate form of business is
a. limited owner liability
b. ease of transferring ownership
c. double taxation
d. unlimited owner liability - ✔✔c. double taxation
Which of the following are disadvantages of a partnership?
I. limited life of the firm
II. personal liability for firm debt
III. greater ability to raise capital than a sole proprietorship IV. lack of ability to transfer
partnership interest
a. I and II only
b. II and III only
c. I, II, and IV only
d. I, III, and IV only - ✔✔c. I, II, and IV
Characteristic(s) of sole proprietorships is (are):
a. they are easily and cheaply setup.
b. the proprietorship life is limited to the business owner's life.
c. all business taxes are paid as individual tax.
d. All of the above. - ✔✔d. all of the above
Twitter Inc decides to issue additional stock with the assistance of its investment banker. An
investor purchases some of the newly issued shares. Is this a primary market transaction or a
, secondary market transaction? - ✔✔Since new shares of stock are being issued, this is a
primary market transaction.
What if instead an investor buys existing shares of Twitter stock in the open market - is this a
primary or secondary market transaction? - ✔✔Since no new shares are created, this is a
secondary market transaction.
Which of the following statements is CORRECT?
a. The New York Stock Exchange is an auction market with a physical location.
b. If an investor sells shares of stock through a broker, then it would be a primary market
transaction. - ✔✔a. The New York Stock Exchange is an auction market with a physical location.
Which of the following statements is CORRECT?
a. If you purchase 100 shares of Disney stock from your brother-in-law, this is an example of a
primary market transaction.
b. If Disney issues additional shares of common stock through an investment banker, this would
be a primary market transaction.
c. The NYSE is an example of an over-the-counter market. - ✔✔b. If Disney issues additional
shares of common stock through an investment banker, this would be a primary market
transaction.
Which of the following are advantages of a corporation?
I. limited life of the firm
II. personal liability for firm debt
III. greater ability to raise capital than sole propietorship
IV. lack of ability to transfer partnership interest - ✔✔III only
characteristics of sole propietorship
a. easily and cheaply setup
