Test Bank for Corporate Finance, Canadian Edition 5th Edition by Jonathan Berk, David Stangeland, Peter DeMarzo

TEST BANK FOR CORPORATE ff ff ff




ff FINANCE,CANADIAN EDITION, 5TH ff ff




EDITION BERK ff ff




Chapter 1-31 ff




Chapter 1 ff The Corporation ff




1.1 The Three Types of Firms
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1) A sole proprietorship is owned by:
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A) one person ff


B) two or more people
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C) shareholders
D) bankers
Answer:
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A
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2) In Canada, which of the following organization forms accounts for the greatest
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number of firms?
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A) Limited Liability Partnership ff ff


B) Limited Partnership ff


C) Sole Proprietorshipff


D) PubliclyTraded Corporation f f


Answer: C
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3) Which of the following organization forms earns the most revenue?
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A) Privately Owned Corporation ff ff


B) Limited Partnership ff


C) Publicly Owned Corporation ff ff


D) Limited LiabilityCompany bb f


Answer: C
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4) Which of the following is NOT an advantage of a sole proprietorship?
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A) Single taxation ff



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,B) Ease of setup
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C) Limited liability ff


D) No separation of ownership and control
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Answer: C
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,5) Which of the following statements regarding limited partnerships is TRUE?
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A) There is no limit on a limited partner's liability.
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B) A limited partner's liability is limited by the amount of his investment.
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C) A limited partner is not liable until all of the assets of the general partners
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have been exhausted.
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D) A general partner's liabilityis limited by the amount of his
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investment. Answer: B
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6) Which of the following is/are an advantage(s) of incorporation?
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A) Access to capital markets ff ff ff


B) Limited liability ff


C) Unlimited life ff


D) All ofthe above f f f


Answer: D
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7) In Canada, a limited liability partnership, LLP, is essentially:
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A) a limited partnership without limited partners
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B) a limited partnership without a general partner
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C) just another name for a limited partnership
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D) just another name for a corporation
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Answer: B
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8) In Canada, which of the following business organization forms cannot avoid double
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taxation?
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A) Limited Partnership ff


B) Publicly Traded Corporation ff ff


C) Privately Owned Corporation ff ff


D) Limited LiabilityCompany bb f


Answer: B
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9) In Canada, the dividend tax credit gives some relief by:
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A) effectively giving a lower tax rate on dividend income than on other sources of income
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B) effectively giving a higher tax rate on dividend income than on other sources of income
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C) effectively giving the same tax rate on dividend income as on other sources of income
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D) effectively giving a tax rate of zero on dividend income compared to other sources
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of income Answer: A
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, 10) Which of the following statements is most correct?
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A) An advantage to incorporation is that it allows for less regulation of the business.
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B) An advantage of a corporation is that it is subject to double taxation.
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C) Unlike a partnership, a disadvantage of a corporation is that it has limited liability.
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D) Corporations face more regulations when compared to partnerships. ff ff ff ff ff ff ff


Answer: D
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11) In Canada, the distinguishing feature of a corporation is that:
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A) there is no legal difference between the corporation and its owners
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B) it is a legally defined, artificial being, separate from its owners
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C) it spreads liability for its corporate obligations to all shareholders
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D) it provides limited liability only to small shareholders
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Answer: B
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12) Which of the following is/are subject to double taxation in Canada?
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A) Corporation
B) Partnership
C) Sole proprietorship
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D) Both AandB f f f


Answer: A
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13) Canada Revenue Agency, CRA, allows an exemption from double taxation for certain
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f flow through entities where all income produced by the business flows to the investors
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and virtually no earnings are retained within the business. These entities are called:
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A) Canadian Federal Crown Corporations ff ff ff


B) Canadian Controlled Corporations ff ff


C) Income Trust Corporations ff ff


D) Foreign Controlled Corporations ff ff


Answer: C
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