Quiz1_Solution - Introduction to Finance, Summer 2010, Quiz...

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Page Introduction to Finance, Summer 2010, Quiz 1 Name: _____________________________________________ QUIZ 1 Introduction to Finance [This quiz is worth one half of 15% of your overall grade] Please choose the correct answer. 1. Relaxant Inc. operates as a partnership. Now the partners have decided to convert the business into a corporation. Which of the following statements is CORRECT? a. Relaxant’s shareholders (the ex-partners) will now be exposed to less liability. b. The company will probably be subject to fewer regulations and required disclosures. c. Assuming the firm is profitable, none of its income will be subject to federal income taxes. d. The firm's investors will be exposed to less liability, but they will find it more difficult to transfer their ownership. e. The firm will find it more difficult to raise additional capital to support its growth. 2. Which of the following statements is CORRECT? 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 sole proprietorships. c. One disadvantage of operating a business as a sole proprietor is that the firm is subject to double taxation, because taxes are levied at both the firm level and the owner level. d.
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Quiz1_Solution - Introduction to Finance, Summer 2010, Quiz...

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