fundamentals of corporate finance 11th canadian edition By Stephen A. Ross Test bank
D) A creditor to whom the firm currently owes money and who consequently has a claim on the cash flows of the firm.
E) Any person or entity who potentially has a claim on the cash flows of the firm.
37) An agency problem is said to exist when there is a conflict of interest between _____ and _____.
A) An agent; his or her representative.
B) A broker; a dealer.
C) A principal; his or her agent.
D) A manager; his/her superior.
E) A shareholder; his/her heir.
38) Which one of the following statements concerning a proprietorship is true?
A) A proprietorship can be a business jointly owned by two family members.
B) Income from a proprietorship is taxed as a separate entity.
C) A proprietor is personally responsible for 100% of the firm's liabilities.
D) A partial transfer of ownership is easier with a proprietorship than with a corporation.
E) Income from a proprietorship is taxed at a lower rate than other personal income.
39) You are interested in purchasing 100 shares of stock in one of the largest corporations in Canada. You would most likely purchase the shares in ___________.
A) A secondary market operated as an auction market.
B) A primary market operated as an auction market.
C) A secondary market operated as a dealer market.
D) A primary market operated as a dealer market.
E) A secondary market operated as a money market.
40) Which one of the following is a correct statement concerning a sole proprietorship?
A) A sole proprietorship is relatively difficult to form.
B) The profits earned by a sole proprietorship are subject to double taxation.
C) A sole proprietorship is more highly regulated than a corporation.
D) The losses incurred by a sole proprietor are limited to the amount invested in the firm.
E) It may be difficult to transfer the ownership of a sole proprietorship.
41) What is the difference between third and fourth markets?
A) A third market involves trading exchange-listed securities in OTC markets, while a fourth market trading involves institution-to-institution trading without using the services of brokers or dealers.
B) A third market involves trading institution-to-institution trading without using the services of brokers or dealers, while a fourth market involves trading exchange-listed securities in OTC markets.
C) A third market involves trading in corporate equities, while a fourth market involves trading in corporate debt.
D) A third market involves trading in corporate debt, while a fourth market involves trading in corporate equities.
E) A third market involves trading in call options, while a fourth market involves trading in warrants.
42) The best definition of capital structure is:
A) The possibility of conflicts between shareholders and management in a large corporation.