TESTBANK FOR CORPORATE FINANCE, 3RD
EDITION BY JONATHAN BERK AND PETER
DEMARZO
,Corporate Finance, 3e (Berk/Demarzo)
Chapter 1 The Corporation
1.1 The Four Types Of Firms
1) A Sole Proprietorship Is Owned By:
A) One Person.
B) Two Of More Persons.
C) Shareholders.
D) Bankers
. 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 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 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
C) Sole Proprietorship
D) "C"
Corporation
Answer: C
,Diff: 1
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 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. 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 Answer: D
Diff: 2
Section: 1.1 The Four Types Of Firms
Skill: Conceptual
8) Which Of The Following Statements Is Most Correct?
A) An Advantage To Incorporation Is That It Allows For Less Regulation Of The Business.
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 Has Limited Liability.
D) Corporations Face More Regulations When Compared To
Partnerships. 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. 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. 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
C) Sole Proprietorship
D) A And
B Answer:
A Diff: 1
Section: 1.1 The Four Types Of Firms
Skill: Conceptual
12) You Own 100 Shares Of A "C" Corporation. The Corporation Earns $5.00 Per Share Before
Taxes. Once The Corporation Has Paid Any Corporate Taxes That Are Due, It Will Distribute
The Rest Of Its Earnings To Its Shareholders In The Form Of A Dividend. If The Corporate
Tax Rate Is 40% And Your Personal Tax Rate On (Both Dividend And Non-Dividend) Income
Is 30%, Then How Much Money Is Left For You After All Taxes Have Been Paid?
A) $210
B) $300
C) $350
D) $500
Answer: A
Explanation: A) Eps × Number Of Shares × (1 - Corporate Tax Rate) × (1 - Individual Tax Rate)
$5.00 Per Share × 100 Shares × (1 - .40) × (1 - .30) = $210
Diff: 2
Section: 1.1 The Four Types Of Firms
Skill: Analytical
EDITION BY JONATHAN BERK AND PETER
DEMARZO
,Corporate Finance, 3e (Berk/Demarzo)
Chapter 1 The Corporation
1.1 The Four Types Of Firms
1) A Sole Proprietorship Is Owned By:
A) One Person.
B) Two Of More Persons.
C) Shareholders.
D) Bankers
. 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 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 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
C) Sole Proprietorship
D) "C"
Corporation
Answer: C
,Diff: 1
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 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. 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 Answer: D
Diff: 2
Section: 1.1 The Four Types Of Firms
Skill: Conceptual
8) Which Of The Following Statements Is Most Correct?
A) An Advantage To Incorporation Is That It Allows For Less Regulation Of The Business.
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 Has Limited Liability.
D) Corporations Face More Regulations When Compared To
Partnerships. 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. 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. 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
C) Sole Proprietorship
D) A And
B Answer:
A Diff: 1
Section: 1.1 The Four Types Of Firms
Skill: Conceptual
12) You Own 100 Shares Of A "C" Corporation. The Corporation Earns $5.00 Per Share Before
Taxes. Once The Corporation Has Paid Any Corporate Taxes That Are Due, It Will Distribute
The Rest Of Its Earnings To Its Shareholders In The Form Of A Dividend. If The Corporate
Tax Rate Is 40% And Your Personal Tax Rate On (Both Dividend And Non-Dividend) Income
Is 30%, Then How Much Money Is Left For You After All Taxes Have Been Paid?
A) $210
B) $300
C) $350
D) $500
Answer: A
Explanation: A) Eps × Number Of Shares × (1 - Corporate Tax Rate) × (1 - Individual Tax Rate)
$5.00 Per Share × 100 Shares × (1 - .40) × (1 - .30) = $210
Diff: 2
Section: 1.1 The Four Types Of Firms
Skill: Analytical
