Which of the following forms of organization blends elements of partnerships and corporations?

 Which of the following is a characteristic of a limited partnership?

A) It allows one or more partners to have limited liability.

B) It requires one or more of the partners to be a general partner to whom the privilege of limited liability does not apply.

C) It prohibits the limited partners from participating in the management of the partnership.

D) All of the above.

Which of the following forms of organization blends elements of partnerships and corporations?

A) D.B.A.'s

B) Sole proprietorships

C) Limited liability companies (LLC's)

D) General partnership

Which of the following types of business forms is least risky to investors?

A) Sole proprietorship

B) Limited partnership

C) General partnership

D) A public corporation

Which forms of organization are free of initial legal requirements?

A) Sole proprietorship

B) General partnership

C) Corporation

D) Both A and B

For these types of organization, no distinction is made between business and personal assets.

A) Sole proprietorship

B) General partnership

C) Limited partnership

D) Both A and B

Which of the following is a significant disadvantage of a general partnership?

A) The cost of forming it is high.

B) Each partner is fully responsible for the liabilities incurred by the partnership.

C) There is a risk associated with the industry in which it operates.

D) Forming the business is very complex.

What is the chief disadvantage of the sole proprietorship as a form of business organization

 1) Which of the following is NOT an advantage of the sole proprietorship?

A) Limited liability

B) No time limit imposed on its existence

C) No legal requirements for starting the business

D) None of the above

2) What is the chief disadvantage of the sole proprietorship as a form of business organization when compared to the corporate form?

A) Sole proprietorships are subject to double taxation of profits.

B) The cost of formation.

C) Inadequate profit sharing.

D) Owners have unlimited liability.

3) Which of the following is NOT true for limited partnerships?

A) Limited partners can only manage the business.

B) One general partner must exist who has unlimited liability.

C) Only the name of general partners can appear in the name of the firm.

D) Limited partners may sell their interest in the company.

4) The true owners of the corporation are the

A) holders of debt issues of the firm.

B) preferred stockholders.

C) board of directors of the firm.

D) common stockholders.

5) In terms of organizational costs, which of the following sequences is generally correct, moving from lowest to highest cost?

A) General partnership, sole proprietorship, limited partnership, corporation

B) Sole proprietorship, general partnership, limited partnership, corporation

C) Corporation, limited partnership, general partnership, sole proprietorship

D) Sole proprietorship, general partnership, corporation, limited partnership

6) Assume that you are starting a business. Further assume that the business is expected to grow very quickly and a great deal of capital will be needed soon. What type of business organization would you choose?

A) Corporation

B) General Partnership

C) Sole proprietorship

D) Limited partnership

7) Which one of the following categories of owners enjoys limited liability?

A) General partners in a limited partnership or limited liability company

B) Shareholders (common stock) of a corporation

C) Sole proprietors

D) Both A and B

What are the three basic questions addressed by the study of investments?

1) Which of the following statements best represents what finance is about?

A) How political, social, and economic forces affect corporations

B) Maximizing profits

C) The study of how people and businesses make investment decisions and how to finance those decisions

D) Reducing risk

2) From a financial point of view, a company that decides to develop new product is making

A) a financing decision.

B) an investment decision.

C) a capital structure decision.

D) a cash flow decision.

3) Working capital management refers to

A) long-term financing decisions.

B) the management of cash flows.

C) investing in product development.

D) capital structure.

4) Finance managers need to interact constantly with

A) marketing managers.

B) accounting staff.

C) management information systems staff.

D) all of the above.

5) The personal decision to obtain a college degree in business is primarily a(n) ________ decision.

A) social 

B) investment

C) ethical

D) financing

6) The area of finance that deals with long-term investment decisions is known as

A) capital structure.

B) working capital management.

C) financial strategy.

D) capital budgeting.

7) Capital structure refers to the financing of long-term investments.

Answer:  TRUE

8) Business financial decisions are fundamentally different from personal financial decisions.

Answer:  FALSE

9) What are the three basic questions addressed by the study of investments?

Answer: 

1.  What investments should the firm undertake?

2.  How should the firm fund these investments?

3.  How can the firm best manage cash flows in its day-to-day operations?

A company currently has 200,000 shares issued and 190,000 shares outstanding. If the company purchases 20,000 shares

A company currently has 200,000 shares issued and 190,000 shares outstanding. If the company purchases 20,000 shares of treasury stock, what amount of shares will be outstanding?

A) 170,000.

B) 220,000.

C) 210,000.

D) 180,000.

Answer: A

When treasury stock is sold for more than the company originally paid to purchase the shares, the difference:

A) Increases net income.

B) Increases stockholders' equity.

C) Has no effect on net income or stockholders' equity.

D) Decreases net income and decreases stockholders' equity.

Answer: B

The corporation's own stock that has been issued and then bought back by the company is referred to as:

A) Preferred Stock.

B) Authorized Stock.

C) Treasury Stock.

D) Common Stock.

Answer: C

The purchase of treasury stock can boost earnings per share by:

A) Increasing the number of shares outstanding.

B) Increasing profits.

C) Reducing the number of shares outstanding.

D) Decreasing the company's obligation to pay dividends.

Answer: C

Why would a corporation purchase its own stock?

A) To distribute surplus cash without paying dividends.

B) To boost earnings per share.

C) To satisfy employee stock ownership plans.

D) All of the other answer choices are correct.

Answer: D

Which of the following statements about treasury stock transactions is true?

A) Treasury stock is recorded as an asset by the acquiring company.

B) Only losses on the sale of treasury stock are recorded in the income statement.

C) Stockholders' equity is reduced when treasury stock is acquired.

D) Gains and losses on the sale of treasury stock are recorded in the income statement.

Answer: C

What would be the impact on the accounting equation when a company acquires treasury stock?

A) Increase assets and increase stockholders' equity.

B) Decrease assets and increase stockholders' equity.

C) Decrease assets and decrease stockholders' equity.

D) No effect on the accounting equation.

Answer: C

When treasury stock is resold at a price above cost:

A) A gain account is credited.

B) A loss is reported.

C) A revenue account is credited.

D) Additional Paid-in Capital is increased.

Answer: D

Which of the following is TRUE regarding the accounting for treasury stock?

A) Treasury stock is reported on the balance sheet in the equity section.

B) The purchase and sale of treasury stock has no impact on the income statement.

C) Treasury stock represents a negative equity account.

D) All of the other answer choices are correct.

Answer: D

When an investment is made in another corporation's common stock, what is the effect on total stockholders' equity?

A) Decrease.

B) Increase.

C) No effect.

D) Cannot determine from the given information.

Answer: C

Which of the following financing alternatives has the highest preference for dividends/interest payments?

A) Common Stock.

B) Preferred Stock.

C) Bonds.

D) The other answer choices have equal preference.

Answer: C

When treasury stock is acquired, what is the effect on total stockholders' equity?

A) Decrease.

B) Increase.

C) No effect.

D) Cannot determine from the given information.

Answer: A