Answer Choices:
a. True
b. False
Answer:
a. True
Question: If you decide to buy 100 shares of Google, you would probably do so by calling your broker and asking him or her to execute the trade for you. This would be defined as a secondary market transaction, not a primary market transaction.
Answer Choices:
a. True
b. False
Answer:
a. True
Question: Which of the following statements is CORRECT?
Answer Choices:
a. The term “IPO” stands for Introductory Price Offered, and it is the price at which shares of a new company are offered to the public.
b. IPO prices are generally established by the market, and buyers of the new stock must pay the price that prevails at the close of trading on the day the stock is offered to the public.
c. In a “Dutch auction,” investors who want to buy shares in an IPO submit bids indicating how many shares they want to buy and the price they are willing to pay. The company determines how many shares it wants to sell. The highest price that enables the company to sell the desired number of shares is the price that all buyers must pay.
d. It is possible that the price set in an IPO is so high that investors will refuse to buy the number of shares that the company wants to sell. In this situation, the IPO is said to be oversubscribed.
e. It is possible that the price set in an IPO is so low that investors will want to buy more shares than the company wants to sell. In that case, the company will have to issue more shares than it wants to sell.
Answer:
c. In a “Dutch auction,” investors who want to buy shares in an IPO submit bids indicating how many shares they want to buy and the price they are willing to pay. The company determines how many shares it wants to sell. The highest price that enables the company to sell the desired number of shares is the price that all buyers must pay.
Question: Which of the following statements is CORRECT?
Answer Choices:
a. One of the disadvantages of incorporating your business is that you could be exposed to more liabilities in the event of bankruptcy.
b. Proprietorships are subject to more regulations than corporations.
c. In any partnership, every partner has the same rights, privileges, and liability exposure as every other partner.
d. Corporations of all types are subject to the corporate income tax.
e. Proprietorships and partnerships generally have a tax advantage over corporations.
Answer:
e
Question: A financial intermediary is a corporation that takes funds from investors and then provides those funds to those who need capital. A bank that takes in demand deposits and then uses that money to make long-term mortgage loans is one example of a financial intermediary.
Answer Choices:
a. True
b. False
Answer:
a. True
Question: Which of the following could explain why a business might choose to operate as a corporation rather than as a proprietorship or a partnership?
Answer Choices:
a. Corporations generally face fewer regulations.
b. Less of a corporation’s income is generally subject to federal taxes.
c. Corporate shareholders are exposed to unlimited liability, but this factor is offset by the tax advantages of incorporation.
d. Corporate investors are exposed to unlimited liability.
e. Corporations generally find it easier to raise large amounts of capital.
Answer:
e
Question: A loss incurred by a corporation
Answer:
Options:
Question: Which of the following statements is CORRECT?
Answer Choices:
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.
Answer:
a
Question: Organizing as a corporation makes it easier for the firm to raise capital. This is because corporations’ stockholders are not subject to personal liabilities if the firm goes bankrupt and also because it is easier to transfer shares of stock than partnership interests.
Answer Choices:
a. True
b. False
Answer:
a. True
Question: Which of the following statements is CORRECT?
Answer Choices:
a. One advantage of forming a corporation is that equity investors are usually exposed to less liability than they would be in a partnership.
b. Corporations face fewer regulations than proprietorships.
c. One disadvantage of operating a business as a proprietor is that the firm is subject to double taxation, because taxes are levied at both the firm level and the owner level.
d. It is generally less expensive to form a corporation than a proprietorship because, with a proprietorship, extensive legal documents are required.
e. If a partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business.
Answer:
a
Question: Which of the following statements is CORRECT?
Answer Choices:
a. Due to limited liability, unlimited lives, and ease of ownership transfer, the vast majority of U.S. businesses (in terms of number of businesses) are organized as corporations.
b. Most businesses (by number and total dollar sales) are organized as proprietorships or partnerships because it is easier to set up and operate one of these forms rather than as a corporation. However, if the business gets very large, it becomes advantageous to convert to a corporation, primarily because corporations have important tax advantages over proprietorships and partnerships.
c. Due to legal considerations related to ownership transfers and limited liability, which affect the ability to attract capital, most business (measured by dollar sales) is conducted by corporations in spite of large corporations’ less favorable tax treatment.
d. Large corporations are taxed more favorably than proprietorships.
e. Corporate stockholders are exposed to unlimited liability.
Answer:
c
Question: There are many types of unethical business behavior. One example is where executives provide information that they know is incorrect to banks and to stockholders. It is illegal to provide such information to banks, but it is not illegal to provide it to stockholders because they are the owners of the firm, not outsiders.
Answer Choices:
a. True
b. False
Answer:
b. False
Question: Which of the following statements is CORRECT?
Answer Choices:
a. If a corporation elects to be taxed as an S corporation, then both it and its stockholders can avoid all Federal taxes. This provision was put into the Federal Tax Code in order to encourage the formation of small businesses.
b. The more capital a firm is likely to require, the smaller the probability that it will be organized as a corporation.
c. It is generally easier to transfer one’s ownership interest in a corporation than in a partnership.
d. One danger of starting a proprietorship is that you may be exposed to personal liability if the business goes bankrupt. This problem would be avoided if you formed a corporation to operate the business.
e. Corporate shareholders are exposed to unlimited liability, but this factor is offset by the tax advantages of incorporation.
Answer:
d