TEST BANK FOR
ss ss
Corporate ssFinance, ssCanadian ssEdition, ss5th ssedition ssBerk
ssChapter ss1-31
Chapter ss 1 The s s Corporation
1.1 The ssThree s s Types s s of s s Firms
1) A sssole s s proprietorship s s is ssowned s s by:
A) one ssperson
B) two s s or s s more s s people
C) shareholders
D) bankers
ssAnswer:
A
Diff: ss1 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
2) In ssCanada, sswhich ssof ssthe ssfollowing ssorganization ssforms ssaccounts ssfor ssthe ssgreatest
ssnumber ssof ssfirms?
A) Limited s s Liability ssPartnership
B) Limited ssPartnership
C) Sole s s Proprietorship
D) PubliclyssTradedssCorporation
ssAnswer: s s C
Diff: ss1 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
3) Which ssof ssthe s s following ssorganization s s forms s s earns s s the ss most s s revenue?
A) Privately ssOwned s s Corporation
B) Limited ssPartnership
C) Publicly ssOwned s s Corporation
D) Limited LiabilitysCompany
bb
ssAnswer: s s C
Diff: ss 1 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
4) Which ssof ssthe s s following ssis s s NOT s s an s s advantage s s of s s a sssole s s proprietorship?
A) Single sstaxation
B) Ease s s of s s setup
C) Limited ssliability
D) No ssseparation ssof ssownership ssand
sscontrol ssAnswer: s s C
Diff: ss2 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
1
© ss 2022 ss Pearson ss Canada
Inc.
,5) Which ss of ssthe s s following ssstatements s s regarding sslimited s s partnerships s s is s s TRUE?
A) There ssis s s no sslimit s s on s s a ss limited s s partner's s s liability.
B) A sslimited s s partner's s s liability ssis s s limited s s by ssthe s s amount s s of s s his s s investment.
C) A sslimited sspartner ssis ssnot ssliable ssuntil ssall ssof ssthe ssassets ssof ssthe ssgeneral sspartners
sshave ssbeen ssexhausted.
D) A ssgeneral sspartner's ssliabilityssis sslimited ssbyssthe ssamount ssof
sshis ssinvestment. ssAnswer: s s B
Diff: ss2 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
6) Which s s of s s the ssfollowing ssis/are s s an s s advantage(s) ss of s s incorporation?
A) Access ss to sscapital s s markets
B) Limited ssliability
C) Unlimited ss life
D) Allssofssthessabove
ssAnswer: s s D
Diff: ss2 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
7) In ssCanada, s s a ss limited ssliability sspartnership, s s LLP, s s is s s essentially:
A) a sslimited s s partnership s s without s s limited s s partners
B) a sslimited s s partnership s s without s s a ssgeneral s s partner
C) just s s another s s name s s for s s a sslimited s s partnership
D) just ssanother ssname ssfor ssa
sscorporation ssAnswer: s s B
Diff: ss1 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
8) In ssCanada, s s which s s of ss the ss following ssbusiness s s organization s s forms s s cannot ss avoid s s double
ss taxation?
A) Limited ssPartnership
B) Publicly ssTraded s s Corporation
C) Privately ssOwned s s Corporation
D) Limited LiabilitysCompany
bb
ssAnswer: s s B
Diff: ss 1 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
9) In ss Canada, s s the ssdividend sstax s s credit s s gives sssome s s relief s s by:
A) effectively ssgiving ssa sslower s s tax s s rate s s on s s dividend s s income ssthan s s on s s other s s sources s s of
s s income
B) effectively ssgiving ssa s s higher s s tax s s rate s s on s s dividend s s income s s than s s on s s other s s sources s s of
s s income
C) effectively ssgiving ssthe s s same s s tax s s rate s s on s s dividend ssincome ss as s s on s s other s s sources s s of s s income
D) effectively ssgiving ssa sstax ssrate ssof sszero sson ssdividend ssincome sscompared ssto ssother
sssources ssof ssincome ssAnswer: s s A
Diff: ss1 Type: ssMC
2
© ss 2022 ss Pearson ss Canada
Inc.
,Topic: 1.1 The ssThree s s Types s s of s s Firms
3
© ss 2022 ss Pearson ss Canada
Inc.
, 10) Which s s of ssthe s s following ssstatements s s is s s most s s correct?
A) An ssadvantage ss to s s incorporation s s is s s that s s it ss allows s s for ssless s s regulation s s of s s the s s business.
B) An s s advantage s s of s s a s s corporation s s is ss that s s it s s is s s subject s s to s s double s s taxation.
C) Unlike ssa sspartnership, s s a ssdisadvantage ssof s s a s s corporation s s is s s that s s it ss has ss limited s s liability.
D) Corporations ssface ssmore ssregulations sswhen sscompared ssto
sspartnerships. ssAnswer: s s D
Diff: ss2 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
11) In s s Canada, s s the ss distinguishing ssfeature ssof s s a sscorporation ss is s s that:
A) there ssis s s no s s legal s s difference s s between s s the ss corporation s s and s s its s s owners
B) it ss is s s a ss legally ssdefined, s s artificial s s being, s s separate s s from s s its s s owners
C) it ssspreads ssliability ssfor s s its sscorporate s s obligations s s to ss all s s shareholders
D) it ssprovides sslimited ssliabilityssonlyssto sssmall
ssshareholders ssAnswer: s s B
Diff: ss2 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
12) Which ssof ssthe ss following ssis/are s s subject s s to s s double s s taxation s s in s s Canada?
A) Corporation
B) Partnership
C) Sole s s proprietorship
D) BothssAssandssB
ssAnswer: s s A
Diff: ss1 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
13) Canada ssRevenue ssAgency, ssCRA, ssallows ssan ssexemption ssfrom ssdouble sstaxation ssfor sscertain
s s flow ssthrough ssentities sswhere ssall ssincome ssproduced ssby ssthe ssbusiness ssflows ssto ssthe
ssinvestors ssand ssvirtually ssno ssearnings ssare ssretained sswithin ssthe ssbusiness. ssThese ssentities ssare
sscalled:
A) Canadian s s Federal ssCrown s s Corporations
B) Canadian s s Controlled s s Corporations
C) Income ssTrust ssCorporations
D) Foreign ssControlled ssCorporations
ssAnswer: s s C
Diff: ss1 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
4
© ss 2022 ss Pearson ss Canada
Inc.
ss ss
Corporate ssFinance, ssCanadian ssEdition, ss5th ssedition ssBerk
ssChapter ss1-31
Chapter ss 1 The s s Corporation
1.1 The ssThree s s Types s s of s s Firms
1) A sssole s s proprietorship s s is ssowned s s by:
A) one ssperson
B) two s s or s s more s s people
C) shareholders
D) bankers
ssAnswer:
A
Diff: ss1 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
2) In ssCanada, sswhich ssof ssthe ssfollowing ssorganization ssforms ssaccounts ssfor ssthe ssgreatest
ssnumber ssof ssfirms?
A) Limited s s Liability ssPartnership
B) Limited ssPartnership
C) Sole s s Proprietorship
D) PubliclyssTradedssCorporation
ssAnswer: s s C
Diff: ss1 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
3) Which ssof ssthe s s following ssorganization s s forms s s earns s s the ss most s s revenue?
A) Privately ssOwned s s Corporation
B) Limited ssPartnership
C) Publicly ssOwned s s Corporation
D) Limited LiabilitysCompany
bb
ssAnswer: s s C
Diff: ss 1 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
4) Which ssof ssthe s s following ssis s s NOT s s an s s advantage s s of s s a sssole s s proprietorship?
A) Single sstaxation
B) Ease s s of s s setup
C) Limited ssliability
D) No ssseparation ssof ssownership ssand
sscontrol ssAnswer: s s C
Diff: ss2 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
1
© ss 2022 ss Pearson ss Canada
Inc.
,5) Which ss of ssthe s s following ssstatements s s regarding sslimited s s partnerships s s is s s TRUE?
A) There ssis s s no sslimit s s on s s a ss limited s s partner's s s liability.
B) A sslimited s s partner's s s liability ssis s s limited s s by ssthe s s amount s s of s s his s s investment.
C) A sslimited sspartner ssis ssnot ssliable ssuntil ssall ssof ssthe ssassets ssof ssthe ssgeneral sspartners
sshave ssbeen ssexhausted.
D) A ssgeneral sspartner's ssliabilityssis sslimited ssbyssthe ssamount ssof
sshis ssinvestment. ssAnswer: s s B
Diff: ss2 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
6) Which s s of s s the ssfollowing ssis/are s s an s s advantage(s) ss of s s incorporation?
A) Access ss to sscapital s s markets
B) Limited ssliability
C) Unlimited ss life
D) Allssofssthessabove
ssAnswer: s s D
Diff: ss2 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
7) In ssCanada, s s a ss limited ssliability sspartnership, s s LLP, s s is s s essentially:
A) a sslimited s s partnership s s without s s limited s s partners
B) a sslimited s s partnership s s without s s a ssgeneral s s partner
C) just s s another s s name s s for s s a sslimited s s partnership
D) just ssanother ssname ssfor ssa
sscorporation ssAnswer: s s B
Diff: ss1 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
8) In ssCanada, s s which s s of ss the ss following ssbusiness s s organization s s forms s s cannot ss avoid s s double
ss taxation?
A) Limited ssPartnership
B) Publicly ssTraded s s Corporation
C) Privately ssOwned s s Corporation
D) Limited LiabilitysCompany
bb
ssAnswer: s s B
Diff: ss 1 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
9) In ss Canada, s s the ssdividend sstax s s credit s s gives sssome s s relief s s by:
A) effectively ssgiving ssa sslower s s tax s s rate s s on s s dividend s s income ssthan s s on s s other s s sources s s of
s s income
B) effectively ssgiving ssa s s higher s s tax s s rate s s on s s dividend s s income s s than s s on s s other s s sources s s of
s s income
C) effectively ssgiving ssthe s s same s s tax s s rate s s on s s dividend ssincome ss as s s on s s other s s sources s s of s s income
D) effectively ssgiving ssa sstax ssrate ssof sszero sson ssdividend ssincome sscompared ssto ssother
sssources ssof ssincome ssAnswer: s s A
Diff: ss1 Type: ssMC
2
© ss 2022 ss Pearson ss Canada
Inc.
,Topic: 1.1 The ssThree s s Types s s of s s Firms
3
© ss 2022 ss Pearson ss Canada
Inc.
, 10) Which s s of ssthe s s following ssstatements s s is s s most s s correct?
A) An ssadvantage ss to s s incorporation s s is s s that s s it ss allows s s for ssless s s regulation s s of s s the s s business.
B) An s s advantage s s of s s a s s corporation s s is ss that s s it s s is s s subject s s to s s double s s taxation.
C) Unlike ssa sspartnership, s s a ssdisadvantage ssof s s a s s corporation s s is s s that s s it ss has ss limited s s liability.
D) Corporations ssface ssmore ssregulations sswhen sscompared ssto
sspartnerships. ssAnswer: s s D
Diff: ss2 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
11) In s s Canada, s s the ss distinguishing ssfeature ssof s s a sscorporation ss is s s that:
A) there ssis s s no s s legal s s difference s s between s s the ss corporation s s and s s its s s owners
B) it ss is s s a ss legally ssdefined, s s artificial s s being, s s separate s s from s s its s s owners
C) it ssspreads ssliability ssfor s s its sscorporate s s obligations s s to ss all s s shareholders
D) it ssprovides sslimited ssliabilityssonlyssto sssmall
ssshareholders ssAnswer: s s B
Diff: ss2 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
12) Which ssof ssthe ss following ssis/are s s subject s s to s s double s s taxation s s in s s Canada?
A) Corporation
B) Partnership
C) Sole s s proprietorship
D) BothssAssandssB
ssAnswer: s s A
Diff: ss1 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
13) Canada ssRevenue ssAgency, ssCRA, ssallows ssan ssexemption ssfrom ssdouble sstaxation ssfor sscertain
s s flow ssthrough ssentities sswhere ssall ssincome ssproduced ssby ssthe ssbusiness ssflows ssto ssthe
ssinvestors ssand ssvirtually ssno ssearnings ssare ssretained sswithin ssthe ssbusiness. ssThese ssentities ssare
sscalled:
A) Canadian s s Federal ssCrown s s Corporations
B) Canadian s s Controlled s s Corporations
C) Income ssTrust ssCorporations
D) Foreign ssControlled ssCorporations
ssAnswer: s s C
Diff: ss1 Type: ssMC
Topic: 1.1 The ssThree s s Types s s of s s Firms
4
© ss 2022 ss Pearson ss Canada
Inc.
