1|Page
MBA 601 EXAM 1 INCLUDES ACCURATE AND
VERIFIED QUESTIONS WITH BEST
SOLUTIONS
The primary advantages of investing in bonds are
......answer.....-
Easier to value than stock
-Known payment amount
-Know when you are going to get paid
-Less risk than investing in stock
-Priority over stockholders in bankruptcy
If you are an investor in a corporation, limited liability
means
......answer.....You are only liable for your investment in the
company
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What are the disadvantages of a corporate entity
......answer.....-
Double taxation
-Increased regulation
-Less control
If a corporation had earnings of $40,000 and paid all of this
out as a dividend to the owners, how much tax would the
federal government collect? Assume a 20% federal income
tax rate and a 15% dividend tax rate. ......answer.....12,800
Pre-tax Earnings=40,000
Federal Tax 20%= 8000 [20%CORPORATE LEVEL]
Net Income=32,000 Dividend=32,000
Dividend Tax 15%=4800 [15%OWNER LEVEL]'
Net Income= 27,200
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Total Tax = 12800
If a corporation had earnings of $40,000 and paid all of this
out as a dividend to the owners, how much tax would the
corporate entity pay the federal government? Assume a 20%
federal income tax rate and a 15% dividend tax rate.
......answer.....8,000
Pre-tax Earnings=40,000
Federal Tax 20%=8000
[20% CORPORATE LEVEL]
Net Income= 32,000
The primary advantages of investing in stock are
......answer.....unlimited upside
, 4|Page
-voting rights
When companies issue stock they give up
......answer.....ownership and the right to future earnings
-Control
The advantages of issuing bonds are ......answer.....-Limited
upside
-Financial leverage
A share of stock entitles you to: ......answer.....A percentage of
the earnings of the company
The cost of providing goods and services to customers is
called ......answer.....Expenses
Benefits (i.e. money) that a company receives from its
customers is called ......answer.....Revenue
MBA 601 EXAM 1 INCLUDES ACCURATE AND
VERIFIED QUESTIONS WITH BEST
SOLUTIONS
The primary advantages of investing in bonds are
......answer.....-
Easier to value than stock
-Known payment amount
-Know when you are going to get paid
-Less risk than investing in stock
-Priority over stockholders in bankruptcy
If you are an investor in a corporation, limited liability
means
......answer.....You are only liable for your investment in the
company
,2|Page
What are the disadvantages of a corporate entity
......answer.....-
Double taxation
-Increased regulation
-Less control
If a corporation had earnings of $40,000 and paid all of this
out as a dividend to the owners, how much tax would the
federal government collect? Assume a 20% federal income
tax rate and a 15% dividend tax rate. ......answer.....12,800
Pre-tax Earnings=40,000
Federal Tax 20%= 8000 [20%CORPORATE LEVEL]
Net Income=32,000 Dividend=32,000
Dividend Tax 15%=4800 [15%OWNER LEVEL]'
Net Income= 27,200
,3|Page
Total Tax = 12800
If a corporation had earnings of $40,000 and paid all of this
out as a dividend to the owners, how much tax would the
corporate entity pay the federal government? Assume a 20%
federal income tax rate and a 15% dividend tax rate.
......answer.....8,000
Pre-tax Earnings=40,000
Federal Tax 20%=8000
[20% CORPORATE LEVEL]
Net Income= 32,000
The primary advantages of investing in stock are
......answer.....unlimited upside
, 4|Page
-voting rights
When companies issue stock they give up
......answer.....ownership and the right to future earnings
-Control
The advantages of issuing bonds are ......answer.....-Limited
upside
-Financial leverage
A share of stock entitles you to: ......answer.....A percentage of
the earnings of the company
The cost of providing goods and services to customers is
called ......answer.....Expenses
Benefits (i.e. money) that a company receives from its
customers is called ......answer.....Revenue
