Which of the following stages of equity financing comes last in the traditional order of progression?

A) Investment by friends and family of the founders.

B) Investment by the founders of the business.

C) Initial public offering (IPO).

D) Outside investment by "angel" investors and venture capital firms.

Answer: C

Which of the following is a reason that a corporation would prefer to issue stock instead of bonds?

A) Dividend payments can be deducted for income tax purposes but interest payments cannot.

B) Expansion is accomplished without surrendering ownership control.

C) The risk of going bankrupt is less.

D) All of the other answer choices are correct.

Answer: C

Which of the following is a disadvantage of an S Corporation?

A) Double Taxation

B) Liability

C) Restrictions on number of stockholders

D) Inability to transfer ownership

Answer: C

How many of the following transactions increase a company's liquidity?

• Provide services on account.

• Pay workers' salaries in the current period.

• Purchase office supplies with cash.

• Pay dividends to stockholders.

A) 0.

B) 1.

C) 2.

D) 3.

Answer: B

Which of the following is the primary source of corporate equity financing?

A) Bonds Payable.

B) Common Stock.

C) Leases.

D) Notes Payable.

Answer: B

Which of the following is not a primary source of corporate debt financing?

A) Bonds Payable.

B) Common Stock.

C) Leases.

D) Notes Payable.

Answer: B