Multiple Choices

1. Which of the following businesses is the least likely to be operated as a partnership?

a. Accounting firms
b. Doctors offices
c. Lawyers offices
d. Steel foundry
2. Which of the following statements is false?
a. The limited liability partnership (LLP) is one of the two main partnership forms.
b. Limited liability partnerships (LLP) have more tax advantages than income trusts.
c. In the limited and general partnerships form, the limited partners are passive investors.
d. In the limited and general partnerships form, the general partner has unlimited liability.
3. Which statement about sole proprietorships is false?
a. The business has unlimited liability.
b. The business is easy to set up.
c. The business is hard to sell.
d. The income is taxed at a corporate rate.
4. Which statement about trusts is correct?
a. Compared with corporations, trusts provide greater tax advantages.
b. Compared with corporations, trusts provide fewer tax advantages.
c. Income usually passes through trusts, with corporate tax paid by the unit-holders.
d. Unit-holders do not pay tax on the income received.
5. Which statement about corporations is correct?
a. There is double taxation: corporations pay corporate tax and shareholders pay tax on
dividends received.
b. There is no separation of ownership and control.
c. Corporations are taxed at the personal tax rate.
d. Corporations are not as popular as sole proprietorships as a form of business organization.
6. Which of the following is the goal of a corporation?
a. Operate in the legal sense
b. Act in the social interest
c. Maximize the wealth of its shareholders
d. All of the above
7. Which of the following is the main concern from the point of view of a companys
shareholders?
a. IRR of all divisions when investment is analyzed
b. Preservation of the firm where risk is concerned
c. Accounting return on investment when performance is appraised
d. Market prices when performance is appraised
8. What is the most important purpose of share incentive plans?
a. Compensate straight salary
b. Align the interests of managers and shareholders

c. Reward management
d. Boost the share price
9. Which statement about the areas of disagreement between managers and shareholders is
incorrect?
a. Performance appraisal: Managers use market prices while shareholders use accounting
numbers like return on investment or cash.
b. Investment analysis: Managers use the internal rate of return of the best division while
shareholders use weighted average cost of capital.
c. The order of financing: Managers prefer retentions to debt and prefer debt to new equity
while shareholders prefer debt first.
d. Risk concern: Managers main concern is the preservation of the firm while shareholders
main concern is their portfolios.
10. Which of the following is not a concern related to capital budgeting?
a. the percentage of debt financing in the capital structure
b. whether or not to replace old equipment to boost output
c. whether to purchase or lease machinery
d. inventory level
11. Who is the person in charge of the pure finance job (cash and credit management, risk
management, etc.) in a company?
a. Controller
b. Treasurer
c. Chief operating officer
d. Accountant
12. Which of the following responsibilities does not usually belong to the controller?
a. Compliance
b. Credit management
c. Tax management
d. Budgeting