Chap. 1 questions - Rynah Young 25 August 2009 Corporate...

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25 August 2009 Corporate Finance Professor Drabier Chapter 1 Questions Quiz 1. Financial Decisions. Give several examples of (a) investment decisions and (b) financing decisions. (LO1) Investment decisions : investment in research and development (R&D), advertising and marketing of new products, or acquisition of patents and trademarks. Financing decisions : Boeing increased its dividend per share by 17%, BP returned $15 billion of cash to its stockholders by buying back their shares, LVMH issued a 7-year bond in 2005, raising 600 million Euros. 2. Corporations. What are the key differences between a corporation and a sole proprietorship? What is the difference between a public and a private corporation? (LO3) A corporation is a distinct, permanent legal entity that is owned by stockholders. A corporation confers limited liability. Separation gives corporations permanence. It is taxed separately. Corporations pay tax on their profits, and shareholders are taxed again when they receive dividends from the company or sell their shares at a profit. A sole proprietor is both owner and manager. A public corporation means that the corporation’s shares are traded in a securities market, such as the New York Stock Exchange, and therefore are available for purchase by any investor. Private corporations’ shares are closely held by small groups of managers and investors. You can’t purchase the shares of these private companies, except by negotiation with existing share owners. 3.
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This note was uploaded on 03/28/2010 for the course CF 4389 taught by Professor Drabier during the Spring '10 term at Saint Mary's University Texas.

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Chap. 1 questions - Rynah Young 25 August 2009 Corporate...

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