partnership.
faces double taxation whereas a limited partner does not.
has a maximum loss equal to his or her equity investment.
receives a salary in lieu of a portion of the profits.
References
Multiple Choice Learning Objective:
01-03 Articulate the
financial implications
of the different forms
of business
organization.
Difficulty: 1 Basic Section: 1.2
Corporate Finance
and the Financial
Manager
24.
Award: 10.00 points
A limited partnership:
has a limited tax liability.
can opt to be taxed as a corporation.
is the newest form of business organization.
must have an equal number of limited and general partners.
consists solely of limited partners.
References
Multiple Choice Learning Objective:
01-03 Articulate the
financial implications
of the different forms
of business
organization.
Difficulty: 1 Basic Section: 1.2
Corporate Finance
and the Financial
Manager
25.
Award: 10.00 points
A partnership with four general partners:
distributes profits based on percentage of ownership.
has an unlimited life.
limits the active involvement in the firm to a single partner.
limits each partner's personal liability to 25 percent of the partnership's total debt.
must distribute 25 percent of the profits to each partner.
References
Multiple Choice Learning Objective:
01-03 Articulate the
financial implications
of the different forms
of business
organization.
Difficulty: 2
Intermediate
Section: 1.2
Corporate Finance
and the Financial
Manager
26.
Award: 10.00 points
Which one of the following is a disadvantage of the corporate form of business?
Shareholders may experience limited liability.
Distributed profits may experience double taxation.
Raising capital may be more difficult than for other forms of business.
The firm may have unlimited life.
The firm may issue additional shares of stock.
References
Multiple Choice Learning Objective:
01-03 Articulate the
financial implications
of the different forms
of business
organization.
Difficulty: 2
Intermediate
Section: 1.2
Corporate Finance
and the Financial
Manager
27.
Award: 10.00 points
Which one of the following statements regarding corporations is correct?
The majority of firms in the U.S. are structured as corporations.
Undistributed corporate profits are taxable income to the shareholders.
Corporations can have an unlimited life.
Shareholders are protected from all potential losses.
Shareholders directly elect the chief financial officer.
References
Multiple Choice Learning Objective:
01-03 Articulate the
financial implications
of the different forms
of business
organization.
Difficulty: 1 Basic Section: 1.2
Corporate Finance
and the Financial
Manager
28.
Award: 10.00 points
Which one of the following statements is correct?
A general partnership is a legal person.
Taxable income earned by a partnership is treated as individual income.
Partnerships are the most complicated type of business to form.
All partnerships are required to have at least one limited partner.
Only firms organized as partnerships have limited lives.
References
Multiple Choice Learning Objective:
01-03 Articulate the
financial implications
of the different forms
of business
organization.
Difficulty: 1 Basic Section: 1.2
Corporate Finance
and the Financial
Manager
29.
Award: 10.00 points
The articles of incorporation:
describe the purpose of the firm and set forth the number of shares of stock that can be
issued.
are amended periodically especially prior to corporate elections.
explain how corporate directors are to be elected and the length of their terms.
set forth the procedures by which a firm regulates itself.
include only the corporation’s name and intended life.
References
Multiple Choice Learning Objective:
01-03 Articulate the
financial implications
of the different forms
of business
organization.
Difficulty: 1 Basic Section: 1.2
Corporate Finance
and the Financial
Manager
30.
Award: 10.00 points
Corporate bylaws:
must be amended should a firm decide to increase the number of shares authorized.