Corporate Finance – 6th Canadian Edition
UV
TEST BANK
IA
_A
Jonathan Berk
Peter DeMarzo
PP
David Stangeland
RO
Comprehensive Test Bank for Instructors and
VE
Students
D?
© Jonathan Berk, Peter DeMarzo & David Stangeland
All rights reserved. Reproduction or distribution without permission is prohibited
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©Medexcellence ✅��
, Corporate Finance, 6e (Berk/DeMarzo)
Chapter 1 The Corporation
1.1 The Four Types of Firms
UV
1) A sole proprietorship is owned by:
A) one person.
B) two or more persons.
C) shareholders.
D) bankers
IA
Answer: A
Diff: 1
Section: 1.1 The Four Types of Firms
Skill: Definition
_A
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
PP
Answer: B
Diff: 1
Section: 1.1 The Four Types of Firms
Skill: Conceptual
RO
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
VE
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?
D?
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
??
1
Copyright © 2024 Pearson Education, Inc.
, 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
UV
Answer: C
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
IA
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.
_A
Answer: B
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
PP
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
RO
Answer: D
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
8) Which of the following statements is most correct?
VE
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 it has limited liability.
D) Corporations face more regulations when compared to partnerships.
Answer: D
D?
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
??
??
2
Copyright © 2024 Pearson Education, Inc.
, 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 with a general partner.
D) just another name for a corporation.
UV
Answer: B
Diff: 1
Section: 1.1 The Four Types of Firms
Skill: Conceptual
IA
10) The distinguishing feature of a corporation is that:
A) there 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) it provides limited liability only to small shareholders.
_A
Answer: B
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
PP
11) Which of the following are subject to double taxation?
A) Corporation
B) Partnership
C) Sole proprietorship
D) Both A and B
RO
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
VE
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 21% 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) $276.50
D?
B) $300.00
C) $350.00
D) $500.00
Answer: A
Explanation: EPS × number of shares × (1 - Corporate Tax Rate) × (1 - Individual Tax Rate)
??
$5.00 per share × 100 shares × (1 - .21) × (1 - .30) = $276.50
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Analytical
??
3
Copyright © 2024 Pearson Education, Inc.
UV
TEST BANK
IA
_A
Jonathan Berk
Peter DeMarzo
PP
David Stangeland
RO
Comprehensive Test Bank for Instructors and
VE
Students
D?
© Jonathan Berk, Peter DeMarzo & David Stangeland
All rights reserved. Reproduction or distribution without permission is prohibited
??
??
©Medexcellence ✅��
, Corporate Finance, 6e (Berk/DeMarzo)
Chapter 1 The Corporation
1.1 The Four Types of Firms
UV
1) A sole proprietorship is owned by:
A) one person.
B) two or more persons.
C) shareholders.
D) bankers
IA
Answer: A
Diff: 1
Section: 1.1 The Four Types of Firms
Skill: Definition
_A
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
PP
Answer: B
Diff: 1
Section: 1.1 The Four Types of Firms
Skill: Conceptual
RO
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
VE
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?
D?
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
??
1
Copyright © 2024 Pearson Education, Inc.
, 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
UV
Answer: C
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
IA
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.
_A
Answer: B
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
PP
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
RO
Answer: D
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
8) Which of the following statements is most correct?
VE
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 it has limited liability.
D) Corporations face more regulations when compared to partnerships.
Answer: D
D?
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
??
??
2
Copyright © 2024 Pearson Education, Inc.
, 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 with a general partner.
D) just another name for a corporation.
UV
Answer: B
Diff: 1
Section: 1.1 The Four Types of Firms
Skill: Conceptual
IA
10) The distinguishing feature of a corporation is that:
A) there 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) it provides limited liability only to small shareholders.
_A
Answer: B
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
PP
11) Which of the following are subject to double taxation?
A) Corporation
B) Partnership
C) Sole proprietorship
D) Both A and B
RO
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
VE
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 21% 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) $276.50
D?
B) $300.00
C) $350.00
D) $500.00
Answer: A
Explanation: EPS × number of shares × (1 - Corporate Tax Rate) × (1 - Individual Tax Rate)
??
$5.00 per share × 100 shares × (1 - .21) × (1 - .30) = $276.50
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Analytical
??
3
Copyright © 2024 Pearson Education, Inc.
