Test Bank for Corporate Finance (Canadian Edition, Kindle Format) – Berk, DeMarzo & Stangeland – Chapter 1–31 Complete Exam Prep & Finance Practice Questions

TEST BANK FOR
Corporate Finance, Canadian Edition, 5th edition Berk
Chapter 1-31


Chapter 1 ss The Corporationss




1.1 The Three Types of Firms
ss ss ss ss




1) A sole proprietorship is owned by:
ss ss ss ss ss



A) one person ss



B) two or more people
ss ss ss



C) shareholders
D) bankers
Answer:
ss



A
Diff: 1 Type: MC
ss ss



Topic: 1.1 The Three Types of Firms ss ss ss ss




2) In Canada, which of the following organization forms accounts for the greatest number
ss ss ss ss ss ss ss ss ss ss ss ss



of firms?
ss ss



A) Limited Liability Partnership ss ss



B) Limited Partnership ss



C) Sole Proprietorship
ss



D) PubliclyTraded Corporation s s



Answer: C
ss s s



Diff: 1 Type: MC
ss ss



Topic: 1.1 The Three Types of Firms ss ss ss ss




3) Which of the following organization forms earns the most revenue?
ss ss ss ss ss ss ss ss ss



A) Privately Owned Corporation ss ss



B) Limited Partnership ss



C) Publicly Owned Corporation ss ss



D) Limited LiabilityCompany bb s



Answer: C
ss s s



Diff: 1 Type: MC
ss ss



Topic: 1.1 The Three Types of Firms ss ss ss ss




4) Which of the following is NOT an advantage of a sole proprietorship?
ss ss ss ss ss ss ss ss ss ss ss



A) Single taxation ss



B) Ease of setup ss ss



C) Limited liability ss




1
© 2022 Pearson Canada
ss ss ss


Inc.

,D) No separation of ownership and control
ss ss ss ss ss



Answer: C
ss s s



Diff: 2 Type: MC
ss ss



Topic: 1.1 The Three Types of Firms
ss ss ss ss




2
© 2022 Pearson Canada
ss ss ss


Inc.

,5) Which of the following statements regarding limited partnerships is TRUE?
ss ss ss ss ss ss ss ss ss



A) There is no limit on a limited partner's liability.
ss ss ss ss ss ss ss ss



B) A limited partner's liability is limited by the amount of his investment.
ss ss ss ss ss ss ss ss ss ss ss



C) A limited partner is not liable until all of the assets of the general partners have
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss



been exhausted.
ss ss



D) A general partner's liabilityis limited by the amount of his
ss ss ss s ss ss ss ss ss ss



investment. Answer: B
ss ss s s



Diff: 2 Type: MC
ss ss



Topic: 1.1 The Three Types of Firms ss ss ss ss




6) Which of the following is/are an advantage(s) of incorporation?
ss ss ss ss ss ss ss ss



A) Access to capital markets ss ss ss



B) Limited liability ss



C) Unlimited life ss



D) All oftheaboves s s



Answer: D
ss s s



Diff: 2 Type: MC
ss ss



Topic: 1.1 The Three Types of Firms ss ss ss ss




7) In Canada, a limited liability partnership, LLP, is essentially:
ss ss ss ss ss ss ss ss



A) a limited partnership without limited partners
ss ss ss ss ss



B) a limited partnership without a general partner
ss ss ss ss ss ss



C) just another name for a limited partnership
ss ss ss ss ss ss



D) just another name for a corporation
ss ss ss ss ss



Answer: B
ss s s



Diff: 1 Type: MC
ss ss



Topic: 1.1 The Three Types of Firms ss ss ss ss




8) In Canada, which of the following business organization forms cannot avoid double taxation?
ss ss ss ss ss ss ss ss ss ss ss ss



A) Limited Partnership ss



B) Publicly Traded Corporation ss s s



C) Privately Owned Corporation ss ss



D) Limited LiabilityCompany bb s



Answer: B
ss s s



Diff: 1 Type: MC
ss ss



Topic: 1.1 The Three Types of Firms ss ss ss ss




9) In Canada, the dividend tax credit gives some relief by:
ss ss ss ss ss ss ss ss ss



A) effectively giving a lower tax rate on dividend income than on other sources of income
ss ss ss ss ss ss ss ss ss ss ss ss ss ss



B) effectively giving a higher tax rate on dividend income than on other sources of income
ss ss ss ss ss ss ss ss ss ss ss ss ss ss



C) effectively giving the same tax rate on dividend income as on other sources of income
ss ss ss ss ss ss ss ss ss ss ss ss ss ss



D) effectively giving a tax rate of zero on dividend income compared to other sources of
ss ss ss ss ss ss ss ss ss ss ss ss ss ss



income Answer: A
ss ss s s



Diff: 1 Type: MC
ss ss



Topic: 1.1 The Three Types of Firms ss ss ss ss




3
© 2022 Pearson Canada
ss ss ss


Inc.

, 10) Which of the following statements is most correct?
ss ss ss ss ss ss ss



A) An advantage to incorporation is that it allows for less regulation of the business.
ss ss ss ss ss ss ss ss ss ss ss ss ss



B) An advantage of a corporation is that it is subject to double taxation.
ss ss ss ss ss ss ss ss ss ss ss ss



C) Unlike a partnership, a disadvantage of a corporation is that it has limited liability.
ss ss ss ss ss ss ss ss ss ss ss ss ss



D) Corporations face more regulations when compared to partnerships. ss ss ss ss ss ss ss



Answer: D
ss s s



Diff: 2 Type: MC
ss ss



Topic: 1.1 The Three Types of Firms ss ss ss ss




11) In Canada, the distinguishing feature of a corporation is that:
ss ss ss ss ss ss ss ss ss



A) there is no legal difference between the corporation and its owners
ss ss ss ss ss ss ss ss ss ss



B) it is a legally defined, artificial being, separate from its owners
ss ss ss ss ss ss ss ss ss ss



C) it spreads liability for its corporate obligations to all shareholders
ss ss ss ss ss ss ss ss ss



D) it provides limited liabilityonly to small shareholders
ss ss ss s ss ss ss



Answer: B
ss s s



Diff: 2 Type: MC
ss ss



Topic: 1.1 The Three Types of Firms ss ss ss ss




12) Which of the following is/are subject to double taxation in Canada?
ss ss ss ss ss ss ss ss ss ss



A) Corporation
B) Partnership
C) Sole proprietorship
ss



D) BothAandB s s s



Answer: A
ss s s



Diff: 1 Type: MC
ss ss



Topic: 1.1 The Three Types of Firms ss ss ss ss




13) Canada Revenue Agency, CRA, allows an exemption from double taxation for certain
ss ss ss ss ss ss ss ss ss ss ss



s flow through entities where all income produced by the business flows to the investors and
s ss ss ss ss ss ss ss ss ss ss ss ss ss ss



virtually no earnings are retained within the business. These entities are called:
ss ss ss ss ss ss ss ss ss ss ss ss



A) Canadian Federal Crown Corporations ss ss ss



B) Canadian Controlled Corporations ss ss



C) Income Trust Corporations ss ss



D) Foreign Controlled Corporations ss ss



Answer: C
ss s s



Diff: 1 Type: MC
ss ss



Topic: 1.1 The Three Types of Firms ss ss ss ss




4
© 2022 Pearson Canada
ss ss ss


Inc.