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MGNT3125_Chap 1%262_Review questions

MGNT3125_Chap 1%262_Review questions - MGNT3125 Fall2010...

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MGNT3125 Fall 2010 Dr. Amine Khayati Chapter 1 Review Questions 1-  A sole proprietor: a- earns income which is subject to double taxation b- can generally raise equity on the capital market to finance his or her business activities c- incurs significant legal cost to set-up the business entity d- assumes personal liability for all the debts of the business 2-  Which of the following statements are true for a general partnership? I- Each partner can be responsible for 100 percent of the partnership debts regardless of his ownership. II- Each partner receives only a proportionate share of the profits III- Profits are taxed at the partnership level and at the partners’ level IV- Creditors can go after anyone of the partners to seek payment a- I, and II only b- I, II and IV only c- I, II and III only d- All of them  3-  The major advantage of being a limited partner in a limited partnership is the ability to: a- be taxed on any profits separately from your personal income b- actively manage the firm without having an unlimited liability c- invest in a partnership while limiting your loses to the amount you invested d- dissolve the partnership if you are not satisfied with the management team 4-  Which of the following statements about a limited partnership are correct? I- A limited partner can sell his or her interest without dissolving the partnership II- A general partner can easily transfer his or her partnership interest III- A limited partner is not involved in the day-to-day operations of the partnership IV- A limited partnership continues if a general partner dies a- I and III b- I, II and III c- II and III  d- All of them 1
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5-  Which of the following statements are true for a partnership? I- Income generated is taxed only once at the partners level II- Partners generally have an unlimited liability. III- Partnerships can easily raise money on the capital markets a- I only b- I and II only c- II and III only d- I, II, and III 6-  Which of the following actions best represents the primary goal of a financial manager? a- Increasing sales while decreasing the operating costs. b- Increasing the market value of the equity by improving the efficiency operations. c- Increasing the size of the company by acquiring some of the firm’s competitors. d- Increasing liquidity and reducing the level of long-term debt. 7-  A firm that issues new stocks and sell them to the general public is an example of: a- Initial public offering b- Secondary market offering c- Private placement d- Negotiated sale 8-  The market for trading securities after the initial public offering is known as:
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