FIN 300 EXAM 1 CSU Stein questions with
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correct answers |
4 |basic |areas |of |finance |- |✔✔💯-corporate |finance=business |finance
-investments
-financial |institutions
-international |finance |(exchange |rates, |country |customs)
sole |proprietorship |- |✔✔💯owned |by |one |person
-pros: |easiest |to |start, |least |regulated, |single |owner |keeps |all |of |the |profits, |taxed |once |as |personal |
income
-cons: |limited |to |life |of |owner, |equity |capital |limited |to |owner's |personal |wealth, |unlimited |liability, |
difficult |to |sell |ownership |interest
partnership |- |✔✔💯two |or |more |owners
-pros: |2+ |owners, |more |capital |available, |relatively |easy |to |start, |income |taxed |once |as |personal |
income
-cons: |unlimited |liability, |partnership |dissolves |when |one |partner |dies |or |wishes |to |sell, |difficult |to |
transfer |ownership
coporation |- |✔✔💯a |legal |person |distinct |from |owners |and |resident |of |the |state
-pros: |limited |liability, |unlimited |life, |separation |of |ownership |and |management, |easy |transfer |of |
ownership, |easiest |to |raise |capital
-cons: |separation |of |ownership |and |management |(agency |problem), |double |taxation |(income |taxed |at
|the |corporate |rate |and |then |dividends |taxed |at |personal |rate, |while |dividends |paid |are |not |tax |
deductible)
the |agency |problem |- |✔✔💯agency |relationship: |principle |hires |agent |to |represent |its |interests, |
stockholders |hire |managers |to |run |company
problem: |conflict |of |interest |between |principle |and |agent
| | | | | | | |
correct answers |
4 |basic |areas |of |finance |- |✔✔💯-corporate |finance=business |finance
-investments
-financial |institutions
-international |finance |(exchange |rates, |country |customs)
sole |proprietorship |- |✔✔💯owned |by |one |person
-pros: |easiest |to |start, |least |regulated, |single |owner |keeps |all |of |the |profits, |taxed |once |as |personal |
income
-cons: |limited |to |life |of |owner, |equity |capital |limited |to |owner's |personal |wealth, |unlimited |liability, |
difficult |to |sell |ownership |interest
partnership |- |✔✔💯two |or |more |owners
-pros: |2+ |owners, |more |capital |available, |relatively |easy |to |start, |income |taxed |once |as |personal |
income
-cons: |unlimited |liability, |partnership |dissolves |when |one |partner |dies |or |wishes |to |sell, |difficult |to |
transfer |ownership
coporation |- |✔✔💯a |legal |person |distinct |from |owners |and |resident |of |the |state
-pros: |limited |liability, |unlimited |life, |separation |of |ownership |and |management, |easy |transfer |of |
ownership, |easiest |to |raise |capital
-cons: |separation |of |ownership |and |management |(agency |problem), |double |taxation |(income |taxed |at
|the |corporate |rate |and |then |dividends |taxed |at |personal |rate, |while |dividends |paid |are |not |tax |
deductible)
the |agency |problem |- |✔✔💯agency |relationship: |principle |hires |agent |to |represent |its |interests, |
stockholders |hire |managers |to |run |company
problem: |conflict |of |interest |between |principle |and |agent
