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Corporate Finance 4th Edition by Jonathan Berk &
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Peter DeMarzo| TEST BANK
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Chapter 1-16| All Chapters Consisting of Verified
r
Questions & 100% Correct Answers for the Study
Page | 1
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Chapter 1 The Corporation
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1.1The Four Types of Firms
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1) A sole proprietorship is owned by:
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A) one person.
B) two of more persons.
C) shareholders.
D) bankers. Right 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 Right 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 Right Answer: C
Diff: 1
Section: 1.1 The Four Types of Firms Skill: Conceptual
4) Which of the following organization forms accounts for the greatest number of firms?
A) "S" corporation
B) Limited partnership
Page | 2
, TB
C) Sole proprietorship
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D) "C" corporation Right Answer: C
e
Diff: 1
r
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 Right 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. Right 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
B) Limited liability
C) Unlimited life
D) All of the above Right Answer: D
Diff: 2
Section: 1.1 The Four Types of Firms Skill: Conceptual
Page | 3
, TB
8) Which of the following statements is most correct?
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A) An advantage to incorporation is that it allows for less regulation of the business.
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B) An advantage of a corporation is that it is subject to double taxation.
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C) Unlike a partnership, a disadvantage of a corporation is that has limited liability.
D) Corporations face more regulations when compared to partnerships. Right 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. Right 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.
D) provides limited liability only to small shareholders. Right Answer: B
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
11) Which of the following are subject to double taxation?
A) Corporation
B) Partnership
Page | 4
Corporate Finance 4th Edition by Jonathan Berk &
Ac
Peter DeMarzo| TEST BANK
e
Chapter 1-16| All Chapters Consisting of Verified
r
Questions & 100% Correct Answers for the Study
Page | 1
, TB
Chapter 1 The Corporation
Ac
1.1The Four Types of Firms
e
1) A sole proprietorship is owned by:
r
A) one person.
B) two of more persons.
C) shareholders.
D) bankers. Right 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 Right 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 Right Answer: C
Diff: 1
Section: 1.1 The Four Types of Firms Skill: Conceptual
4) Which of the following organization forms accounts for the greatest number of firms?
A) "S" corporation
B) Limited partnership
Page | 2
, TB
C) Sole proprietorship
Ac
D) "C" corporation Right Answer: C
e
Diff: 1
r
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 Right 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. Right 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
B) Limited liability
C) Unlimited life
D) All of the above Right Answer: D
Diff: 2
Section: 1.1 The Four Types of Firms Skill: Conceptual
Page | 3
, TB
8) Which of the following statements is most correct?
Ac
A) An advantage to incorporation is that it allows for less regulation of the business.
e
B) An advantage of a corporation is that it is subject to double taxation.
r
C) Unlike a partnership, a disadvantage of a corporation is that has limited liability.
D) Corporations face more regulations when compared to partnerships. Right 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. Right 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.
D) provides limited liability only to small shareholders. Right Answer: B
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
11) Which of the following are subject to double taxation?
A) Corporation
B) Partnership
Page | 4
