Corporate Finance (5th Edition) – Jonathan Berk & Peter M. DeMarzo | Complete Test Bank with Answers

TEST BANK Corporate Finance, 5th
Edition by Jonathan Berk & Peter M.
Demarzo
ALL CHAPTERS COVERED 1-31|
COMPREHENSIVE EXAM
QUESTIONS AND ANSWERS
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, Chapter 1: The Corporation and Financial Markets
1.1The Three Types of Firms
1) A sole proprietorship is owned by:

A) one person.

B) two or more people.

C) shareholders.

D) bankers. Answer: A

Diff: 1 Type: MC

Topic : 1.1 The Three Types of Firms



2) Which of the following organization forms is the most common in the economy?

A) Limited Liability Partnership

B) Limited Partnership
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C) Sole Proprietorship

D) Publicly Traded Corporation Answer: C
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Diff: 1 Type: MC
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Topic : 1.1 The Three Types of Firms



3) Which of the following organization forms earns the most revenue?

A) Privately Owned Corporation

B) Limited Partnership

C) Publicly Owned Corporation

D) Limited Liability Company Answer: C

Diff: 1 Type: MC

Topic : 1.1 The Three Types of Firms




4) Which of the following is NOT an advantage of a sole proprietorship?

A) Single taxation


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,B) Ease of setup

C) Limited liability

D) No separation of ownership and control Answer: C

Diff: 2 Type: MC

Topic : 1.1 The Three Types of Firms



5) 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 his investment.

C) A limited partner is not liable until all of the assets of the general partners have been exhausted.

D) A general partner's liability is limited by the amount of his investment. Answer: B

Diff: 2 Type: MC

Topic : 1.1 The Three Types of Firms
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6) Which of the following are advantages of incorporation?
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A) Access to capital markets

B) Limited liability
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C) Unlimited life

D) All of the above Answer: D

Diff: 2 Type: MC

Topic : 1.1 The Three Types of Firms



7) In Canada, a limited liability partnership, LLP, 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. Answer: B

Diff: 1 Type: MC

Topic : 1.1 The Three Types of Firms


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, 8) In Canada, which of the following business organization forms cannot avoid double taxation?

A) Limited Partnership

B) Publicly Traded Corporation

C) Privately Owned Corporation

D) Limited Liability Company Answer: B

Diff: 1 Type: MC

Topic : 1.1 The Three Types of Firms



9) In Canada, the dividend tax credit gives some relief by effectively giving:

A) a lower tax rate on dividend income than on other sources of income.

B) a higher tax rate on dividend income than on other sources of income.

C) the same tax rate on dividend income as on other sources of income.

D) a tax rate of zero on dividend income compared to other sources of income. Answer: A
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Diff: 1 Type: MC

Topic : 1.1 The Three Types of Firms
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10) Which of the following statements is most correct?
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A) An advantage to incorporation is that it allows for less business regulation.

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 it has limited liability.

D) Corporations face more regulations when compared to partnerships. Answer: D

Diff: 2 Type: MC

Topic : 1.1 The Three Types of Firms



11) In Canada, the distinguishing feature of a corporation is that:

A) there 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.

D) it provides limited liability only to small shareholders. Answer: B


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