Exam (elaborations)

Test Bank for Corporate Finance, 6th Edition by Jonathan Berk, All Chapters Covered 1-31

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Course
Corporate Finance

Institution
Corporate Finance

Test Bank for Corporate Finance, 6th Edition by Jonathan Berk, All Chapters Covered 1-31. Full Chapters Include;....PART 1: INTRODUCTION 1. The Corporation and Financial Markets 2. Introduction to Financial Statement Analysis 3. Financial Decision Making and the Law of One Price PART 2: TIME, MONEY...

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Corporate Finance, 6th edition

TEST BANK
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Corporate Finance, 6th
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edition
IA

Authors: Jonathan Berk, Peter DeMarzo
AP

◊ ALL CHAPTERS
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◊ INSTANT PDF DOWNLOAD💯💯💯

◊ ORIGINAL FROM PUBLISHER
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MEDCONNOISSEUR

,Corporate Finance, 6e (Berk/DeMarzo)
Chapter 1 The Corporation

1.1 The Four Types of Firms

1) A sole proprietorship is owned by:
A) one person.
B) two or more persons.
C) shareholders.
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D) bankers
Answer: A
Diff: 1
Section: 1.1 The Four Types of Firms
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Skill: Definition

2) Which of the following organization forms for a business does NOT avoid double taxation?
A) Limited partnership
B) "C" corporation
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C) "S" corporation
D) Limited liability company
Answer: B
Diff: 1
Section: 1.1 The Four Types of Firms
AP
Skill: Conceptual

3) Which of the following organization forms accounts for the most revenue?
A) "S" corporation
B) Limited partnership
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C) "C" corporation
D) Limited liability company
Answer: C
Diff: 1
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Section: 1.1 The Four Types of Firms
Skill: Conceptual

4) Which of the following organization forms accounts for the greatest number of firms?
A) "S" corporation
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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
Answer: C
Diff: 2
Section: 1.1 The Four Types of Firms
Skill: Conceptual
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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.
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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.
Answer: B
Diff: 2
Section: 1.1 The Four Types of Firms
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Skill: Conceptual

7) Which of the following is/are an advantage of incorporation?
A) Access to capital markets
B) Limited liability
AP
C) Unlimited life
D) All of the above
Answer: D
Diff: 2
Section: 1.1 The Four Types of Firms
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Skill: Conceptual

8) Which of the following statements is most correct?
A) An advantage to incorporation is that it allows for less regulation of the business.
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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
Diff: 2
Section: 1.1 The Four Types of Firms
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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.
Answer: B
Diff: 1
Section: 1.1 The Four Types of Firms
Skill: Conceptual
ST
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.
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C) it spreads liability for its corporate obligations to all shareholders.
D) it provides limited liability only to small shareholders.
Answer: B
Diff: 2
Section: 1.1 The Four Types of Firms
IA
Skill: Conceptual

11) Which of the following are subject to double taxation?
A) Corporation
B) Partnership
AP
C) Sole proprietorship
D) Both A and B
Answer: A
Diff: 1
Section: 1.1 The Four Types of Firms
PR
Skill: Conceptual

12) You own 100 shares of a "C" corporation. The corporation earns $5.00 per share before taxes. Once the
corporation has paid any corporate taxes that are due, it will distribute the rest of its earnings to its
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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
B) $300.00
C) $350.00
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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.

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Exam (elaborations)

Test Bank for Corporate Finance, 6th Edition by Jonathan Berk, All Chapters Covered 1-31

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