Question 1

Which of the following statements is CORRECT?

Accepted Answer

A)  One drawback of forming a corporation is that it generally subjects the firm to additional regulations. 
B)  One drawback of forming a corporation is that it subjects the firm's investors to increased personal liabilities. 
C)  One drawback of forming a corporation is that it makes it more difficult for the firm to raise capital. 
D)  One advantage of forming a corporation is that it subjects the firm's investors to fewer taxes. 
E)  One disadvantage of forming a corporation is that it is more difficult for the firm's investors to transfer their ownership interests. 
A)  One drawback of forming a corporation is that it generally subjects the firm to additional regulations. 
B)  One drawback of forming a corporation is that it subjects the firm's investors to increased personal liabilities. 
C)  One drawback of forming a corporation is that it makes it more difficult for the firm to raise capital. 
D)  One advantage of forming a corporation is that it subjects the firm's investors to fewer taxes. 
E)  One disadvantage of forming a corporation is that it is more difficult for the firm's investors to transfer their ownership interests.

Question 2

New Business is just being formed by 10 investors,each of whom will own 10% of the business.The firm is expected to earn $500,000 before taxes each year.The corporate tax rate is 34% and the personal tax rate for the firm's investors is 35%.The firm does not need to retain any earnings,so all of its after-tax income will be paid out as dividends to its investors.The investors will have to pay personal taxes on whatever they receive.How much additional spendable income will each investor have if the business is organized as a partnership rather than as a corporation?

Accepted Answer

A)  $11,050 
B)  $12,266 
C)  $10,056 
D)  $9,282 
E)  $11,713 
A)  $11,050 
B)  $12,266 
C)  $10,056 
D)  $9,282 
E)  $11,713

Question 3

Partnerships and proprietorships generally have a tax advantage over corporations.

Accepted Answer

A) True 
 B)False

Question 4

Some partners in a partnership may have different rights,privileges,and responsibilities than other partners.

Accepted Answer

A) True 
 B)False

Question 5

Relaxant Inc.operates as a partnership.Now the partners have decided to convert the business into a corporation.Which of the following statements is CORRECT?

Accepted Answer

A)  Relaxant's shareholders (the ex-partners)will now be exposed to less liability. 
B)  The company will probably be subject to fewer regulations and required disclosures. 
C)  Assuming the firm is profitable,none of its income will be subject to federal income taxes. 
D)  The firm's investors will be exposed to less liability,but they will find it more difficult to transfer their ownership. 
E)  The firm will find it more difficult to raise additional capital to support its growth. 
A)  Relaxant's shareholders (the ex-partners)will now be exposed to less liability. 
B)  The company will probably be subject to fewer regulations and required disclosures. 
C)  Assuming the firm is profitable,none of its income will be subject to federal income taxes. 
D)  The firm's investors will be exposed to less liability,but they will find it more difficult to transfer their ownership. 
E)  The firm will find it more difficult to raise additional capital to support its growth.

Which of the following statements is CORRECT?

Partnerships and proprietorships generally have a tax advantage over corporations.

Some partners in a partnership may have different rights,privileges,and responsibilities than other partners.

Relaxant Inc.operates as a partnership.Now the partners have decided to convert the business into a corporation.Which of the following statements is CORRECT?

Financial Markets and Institutions

Financial Statements,cash Flow and Taxes

Analysis of Financial Statements

Time Value of Money

Interest Rates

Bonds and Their Valuation

Risk and Rates of Return

Stocks and Their Valuation

The Cost of Capital

The Basics of Capital Budgeting

Cash Flow Estimation and Risk Analysis

Real Options and Other Topics in Capital Budgeting

Capital Structure and Leverage

Distributions to Shareholders: Dividends and Share Repurchases

Working Capital Management

Financial Planning and Forecasting

Derivatives and Risk Management

Multinational Financial Management

Hybrid Financing: Preferred Stock,leasing,warrants,and Convertibles

Mergers and Acquisitions

Filters

Exam 1: An Overview of Financial Management

Which of the following statements is CORRECT?

Partnerships and proprietorships generally have a tax advantage over corporations.

Some partners in a partnership may have different rights,privileges,and responsibilities than other partners.

Relaxant Inc.operates as a partnership.Now the partners have decided to convert the business into a corporation.Which of the following statements is CORRECT?

Financial Markets and Institutions

Financial Statements,cash Flow and Taxes

Analysis of Financial Statements

Time Value of Money

Interest Rates

Bonds and Their Valuation

Risk and Rates of Return

Stocks and Their Valuation

The Cost of Capital

The Basics of Capital Budgeting

Cash Flow Estimation and Risk Analysis

Real Options and Other Topics in Capital Budgeting

Capital Structure and Leverage

Distributions to Shareholders: Dividends and Share Repurchases

Working Capital Management

Financial Planning and Forecasting

Derivatives and Risk Management

Multinational Financial Management

Hybrid Financing: Preferred Stock,leasing,warrants,and Convertibles

Mergers and Acquisitions

Filters