Test Bank for Corporate Finance, Canadian Edition, 5th edition Berk Chapter 1-31

Test Bank for Corporate Finance, Canadian Edition, 5th edition Berk Chapter 1-31
Chapter 1 The Corporation
1.1 The Three Types of Firms
1) A sole proprietorship is owned by:
A) one person
B) two or more people
C) shareholders
D) bankers
Answer: A
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
2) In Canada, which of the following organization forms accounts for the greatest number of
firms?
A) Limited Liability Partnership
B) Limited Partnership
C) Sole Proprietorship
D) Publicly Traded Corporation
Answer: C
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
3) Which of the following organization forms earns the most revenue?
A) Privately Owned Corporation
B) Limited Partnership
C) Publicly Owned Corporation
D) Limited Liability Company
Answer: C
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
4) 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 Type: MC
Topic: 1.1 The Three Types of Firms
2
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5) 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 his investment.
C) A limited partner is not liable until all of the assets of the general partners have been
exhausted.
D) A general partner's liability is limited by the amount of his investment.
Answer: B
Diff: 2 Type: MC
Topic: 1.1 The Three Types of Firms
6) Which of the following is/are an advantage(s) of incorporation?
A) Access to capital markets
B) Limited liability
C) Unlimited life
D) All of the above
Answer: D
Diff: 2 Type: MC
Topic: 1.1 The Three Types of Firms
7) In Canada, a limited liability partnership, LLP, 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
D) just another name for a corporation
Answer: B
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
8) In Canada, which of the following business organization forms cannot avoid double taxation?
A) Limited Partnership
B) Publicly Traded Corporation
C) Privately Owned Corporation
D) Limited Liability Company
Answer: B
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
9) In Canada, the dividend tax credit gives some relief by:
A) effectively giving a lower tax rate on dividend income than on other sources of income
B) effectively giving a higher tax rate on dividend income than on other sources of income
C) effectively giving the same tax rate on dividend income as on other sources of income
D) effectively giving a tax rate of zero on dividend income compared to other sources of income
Answer: A
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms

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