Finance 301 Final Exam UTK Questions with Correct Answers Latest Update 2025/2026
Shareholders - Answers Owners who may receive positive residual cash flows
Stakeholders - Answers Anyone other than owners who has a claim on the cash flows of a firm
Business Organization Firms - Answers Sole Proprietorship, Partnership, General Partnership,
Limited Partnership, Corporations, and S Corps
Sole Proprietorship - Answers Business owned by an individual. Easy to form, light
regulations/paperwork, owner keeps all assets and profits, Single taxation at personal rate, and
Limited life - terminated on owner's choice or death.
Disadvantages: Limited ability to raise capital, and Unlimited Liability
Partnership - Answers Owned by more one or more person, one or more are financially
responsible
General Partnership - Answers All partners of unlimited liability
Limited Partnership - Answers Partners have limited liability but no "say so". Still a General
partner with unlimited liability.
Disadvantages of Partnerships: Shared control and profits. Harder to dissolve
Corporations - Answers More than one owner. Can be public or private.
Advantages: Limited Liability, easy to change ownership, easy to raise capital.
Disadvantages: Expensive to establish, double taxation, corporations pay taxes when dividends
are paid
Limited Liability Companies - Answers Hybrid companies, Limited Liability Corporations and
Limited Liability Partnerships. Similar to Partnership b/c of tax advantages, similar to
Corporations b/c limited liability
Goals of the Firm - Answers 1.) Maximize sales (may ignore expenses)
2.) Maximize Market Share
3.) Maximize Profits
4.) Maximize Stock Price (increase shareholder value)
Agency Theory - Answers Agency Relationships, Agency Conflict, Agency Cost
Agency Cost - Answers Managers control the money, might be more interested in maximizing
market value
Shareholders - Answers Owners who may receive positive residual cash flows
Stakeholders - Answers Anyone other than owners who has a claim on the cash flows of a firm
Business Organization Firms - Answers Sole Proprietorship, Partnership, General Partnership,
Limited Partnership, Corporations, and S Corps
Sole Proprietorship - Answers Business owned by an individual. Easy to form, light
regulations/paperwork, owner keeps all assets and profits, Single taxation at personal rate, and
Limited life - terminated on owner's choice or death.
Disadvantages: Limited ability to raise capital, and Unlimited Liability
Partnership - Answers Owned by more one or more person, one or more are financially
responsible
General Partnership - Answers All partners of unlimited liability
Limited Partnership - Answers Partners have limited liability but no "say so". Still a General
partner with unlimited liability.
Disadvantages of Partnerships: Shared control and profits. Harder to dissolve
Corporations - Answers More than one owner. Can be public or private.
Advantages: Limited Liability, easy to change ownership, easy to raise capital.
Disadvantages: Expensive to establish, double taxation, corporations pay taxes when dividends
are paid
Limited Liability Companies - Answers Hybrid companies, Limited Liability Corporations and
Limited Liability Partnerships. Similar to Partnership b/c of tax advantages, similar to
Corporations b/c limited liability
Goals of the Firm - Answers 1.) Maximize sales (may ignore expenses)
2.) Maximize Market Share
3.) Maximize Profits
4.) Maximize Stock Price (increase shareholder value)
Agency Theory - Answers Agency Relationships, Agency Conflict, Agency Cost
Agency Cost - Answers Managers control the money, might be more interested in maximizing
market value
