TESTBANK FOR CORPORATE FINANCE, 3RD
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EDITION
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BY JONATHAN BERK AND PETER DEMARZO
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,Corporate Finance, 3e (Berk/DeMarzo)
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Chapter 1 The Corporation
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1.1 The Four Types of Firms
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1) A sole proprietorship is owned by:
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A) one person.
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B) two of more persons.
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C) shareholders.
D) bankers.
Answer: A
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Diff: 1
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Section: 1.1 The Four Types of Firms
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Skill: Definition
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2) Which of the following organization forms for a business does NOT avoid double taxation?
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A) Limited partnership v
B) "C" corporation
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C) "S" corporation
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D) Limited liability company v v
Answer: B
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Diff: 1
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Section: 1.1 The Four Types of
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FirmsSkill: Conceptual
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3) Which of the following organization forms accounts for the most revenue?
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A) "S" corporation
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B) Limited partnership v
C) "C" corporation
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D) Limited liability company v v
Answer: C
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Diff: 1
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Section: 1.1 The Four Types of
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FirmsSkill: Conceptual
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4) Which of the following organization forms accounts for the greatest number of firms?
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A) "S" corporation
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B) Limited partnership v
C) Sole proprietorship
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D) "C" corporation
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Answer: C
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,Diff: 1
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Section: 1.1 The Four Types of
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FirmsSkill: Conceptual
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, 5) Which of the following is NOT an advantage of a sole proprietorship?
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A) Single taxation v
B) Ease of setup v v
C) Limited liability v
D) No separation of ownership and control
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Answer: C
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Diff: 2
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Section: 1.1 The Four Types of
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FirmsSkill: Conceptual
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6) Which of the following statements regarding limited partnerships is TRUE?
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A) There is no limit on a limited partner's liability.
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B) A limited partner's liability is limited by the amount of their investment.
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C) A limited partner is not liable until all the assets of the general partners have been exhausted.
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D) A general partner's liability is limited by the amount of their investment.
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Answer: B
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Diff: 2
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Section: 1.1 The Four Types of
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FirmsSkill: Conceptual
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7) Which of the following is/are an advantage of incorporation?
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A) Access to capital markets v v v
B) Limited liability v
C) Unlimited life v
D) All of the above
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Answer: D
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Diff: 2
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Section: 1.1 The Four Types of
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FirmsSkill: Conceptual
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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.
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D) Corporations face more regulations when compared to partnerships.
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Answer: D
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Diff: 2
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Section: 1.1 The Four Types of
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FirmsSkill: Conceptual
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EDITION
v
BY JONATHAN BERK AND PETER DEMARZO
v v v v v
,Corporate Finance, 3e (Berk/DeMarzo)
v v v
Chapter 1 The Corporation
v v vv v
1.1 The Four Types of Firms
v v v v
1) A sole proprietorship is owned by:
v v v v v
A) one person.
v
B) two of more persons.
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C) shareholders.
D) bankers.
Answer: A
v v
Diff: 1
v v
Section: 1.1 The Four Types of Firms
v v v v v v
Skill: Definition
v v
2) Which of the following organization forms for a business does NOT avoid double taxation?
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A) Limited partnership v
B) "C" corporation
v
C) "S" corporation
v
D) Limited liability company v v
Answer: B
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Diff: 1
v
Section: 1.1 The Four Types of
v v v v v
FirmsSkill: Conceptual
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3) Which of the following organization forms accounts for the most revenue?
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A) "S" corporation
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B) Limited partnership v
C) "C" corporation
v
D) Limited liability company v v
Answer: C
v v
Diff: 1
v
Section: 1.1 The Four Types of
v v v v v
FirmsSkill: Conceptual
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4) Which of the following organization forms accounts for the greatest number of firms?
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A) "S" corporation
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B) Limited partnership v
C) Sole proprietorship
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D) "C" corporation
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Answer: C
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,Diff: 1
v
Section: 1.1 The Four Types of
v v v v v
FirmsSkill: Conceptual
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, 5) Which of the following is NOT an advantage of a sole proprietorship?
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A) Single taxation v
B) Ease of setup v v
C) Limited liability v
D) No separation of ownership and control
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Answer: C
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Diff: 2
v
Section: 1.1 The Four Types of
v v v v v
FirmsSkill: Conceptual
v v v
6) Which of the following statements regarding limited partnerships is TRUE?
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A) There is no limit on a limited partner's liability.
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B) A limited partner's liability is limited by the amount of their investment.
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C) A limited partner is not liable until all the assets of the general partners have been exhausted.
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D) A general partner's liability is limited by the amount of their investment.
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Answer: B
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Diff: 2
v
Section: 1.1 The Four Types of
v v v v v
FirmsSkill: Conceptual
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7) Which of the following is/are an advantage of incorporation?
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A) Access to capital markets v v v
B) Limited liability v
C) Unlimited life v
D) All of the above
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Answer: D
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Diff: 2
v
Section: 1.1 The Four Types of
v v v v v
FirmsSkill: Conceptual
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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.
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D) Corporations face more regulations when compared to partnerships.
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Answer: D
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Diff: 2
v
Section: 1.1 The Four Types of
v v v v v
FirmsSkill: Conceptual
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