Quiz no.

2
QUESTIONS

Direction: Answer the following questions comprehensively. You can make

research in the Internet to help you answer the questions concisely.

1. How important are Business Firms to the economy?

-One of the three essential components of the economy's going to revolve flow of funds is the
firms. In exchange for taking money, they give skilled workers a salary and allow them to purchase
goods and services. They contribute to the government's cash reserves through taxes as well, and
gain from its expenditures in important areas.

2. What is a Manufacturing Firm?

-Any enterprise that uses parts, components, or raw materials to create finished goods is
categorized as a manufacturing firm. These finished products may be offered for direct sale to
customers or may be purchased by other manufacturing companies for use in the production of
other goods.

3. What competitive advantage is enjoyed by Sole Proprietorship?

-A sole proprietorship has many advantages, including little paperwork and inexpensive setup.
There is also how simple it is to maintain. An unregistered business is more difficult to start and
run than a sole proprietorship. You can simply operate your business with no ongoing state
requirements and minimal legal costs.

4. What does the term “Limited Liability” mean? Who enjoys it?
-In order to protect shareholders and business owners from being held personally liable for the
debts or losses of their company, limited liability was created. Corporations have limited liability
unless they have management responsibilities within the company because they are legally and
morally distinct from their owners (shareholders). Limited liability Company (LLC): In an LLC,
the owners, or members, are typically not responsible for the debts, obligations, or liabilities of
the business.

5. Why is income derived from Corporations said to be taxed twice?

- In the case of corporations, the company is taxed as a business entity, and the personal income
of each shareholder is also taxed. Due to the fact that corporations and their shareholders are
regarded as separate legal entities, there's a possibility of double taxation. Businesses must pay
taxes on their annual earnings.

6. What is a Joint Stock Company?

-The joint stock company is a type of business in which the capital is divided into small units,
allowing a number of investors to contribute varying sums to the total profits, which are divided
among stockholders in proportion to the number of shares they own.
7. What role does the Trustee assume?
-A trustee manages a trust in accordance with the grantor's instructions. This can involve
speaking with beneficiaries, allocating money to investments, distributing payments in accordance
with rules, and many other things.

8. What is Mutual Company?

-Mutual companies are financial service companies that are owned by their policyholders or
depositors, such as insurance companies or savings and loan associations.

9. What sources of Financing are tapped by Corporations?

-Sales of stock, borrowing through the issuance of debt instruments like bonds and promissory
notes, and borrowing from banks are all examples of debt financing.

10. What is a Promissory Note?

-A promissory note is written documentation of a debt a borrower owes to a lender. It provides
specific legal information about the loan's size, interest rate, and repayment schedule. The lender
issues the promissory note, which is then witnessed and initialed by the borrower.