FHCE 3200 LATEST 2026 TEST PAPER QUESTIONS AND
SOLUTIONS RATED A+
✔✔Self-Employed - ✔✔Not working for an employer but finding work for yourself or
having your own business
Set your own hours of work
Charge for your products or services
Pay your own taxes
Tend to do well financially
Have some tax advantages, such as the ability to deduct a variety of expenses from
annual taxes
Often have the option to later sell their businesses for a sizable profit
✔✔Independent Contractor - ✔✔Enter into agreements (contracts) with businesses or
individuals for specific tasks or functions
✔✔Sole Prioprietorship - ✔✔A business operated by one person with no formal entity
separate from the operator
Unlimited liability
Easy to start up and requires no legal registration or paperwork
You are the owner and are in charge of the decisions
Losses from your business can lower your tax liability
✔✔Unlimited Liability - ✔✔The owner is personally and fully responsible for all losses
and debts of the business
✔✔General Partnership - ✔✔Decision making is typically by majority
Capital (money used to start or expand the business) can be raised through the
collective assets of the partners
Taxes are calculated on each partner's share of income
Each partner has unlimited liability for the entire partnership
✔✔Limited Partnership - ✔✔A general partner manages the business and one or more
limited partners invest money in the business
✔✔Limited Liability Partnership - ✔✔Partners are not liable for actions of other partners,
but are liable for the general obligations of the business
✔✔Limited Liability Company (LLC) - ✔✔Shields the personal assets of the owner(s)
from the liabilities of the business
Similar to partnerships in structure but limit liability much better
There are higher legal costs, but the added liability protection generally outweighs the
additional costs
✔✔Corporation - ✔✔A legal structure that is separate from the owner(s) of the business
, Very effective at limiting liability, but also expensive to form and maintain
✔✔Earned Income - ✔✔Any income (wages/salary) that is generated by working
✔✔Unearned Income - ✔✔Income received from sources other than employment
✔✔Objective Risk - ✔✔Can be measured using probabilities
✔✔Subjective Risk - ✔✔Refers to personally developed probabilities based on
expectations, fear, or worry
✔✔Capital Asset - ✔✔An asset you own, except for certain business assets, including
stocks, bonds, real estate, or collectibles
✔✔Basis - ✔✔Price you pay when buy a capital asset
✔✔Capital Gain - ✔✔The difference between the selling price and purchase price that
results in a financial gain for the seller
✔✔Capital Loss - ✔✔The difference between a lower selling price and a higher
purchase price resulting in a financial loss to the seller
✔✔Government Transfers - ✔✔Payments that the government makes to individuals
without expecting a good or service in return
Unemployment Benefits
Medicaid
SNAP and TANF
Grants
✔✔Unemployment Benefits - ✔✔Cash transfers to those who lose their jobs and
actively seek employment
✔✔Medicaid - ✔✔Federal program that provides medical benefits for low-income
persons.
✔✔Medicare - ✔✔A federal program of health insurance for persons 65 years of age
and older
✔✔Supplemental Nutrition Assistance Program (SNAP) - ✔✔Provides money to low-
income households to purchase food (also called food stamps)
✔✔Temporary Assistance for Needy Families (TANF) - ✔✔Provides supplemental
income to very low-income, unemployed households, typically with children
SOLUTIONS RATED A+
✔✔Self-Employed - ✔✔Not working for an employer but finding work for yourself or
having your own business
Set your own hours of work
Charge for your products or services
Pay your own taxes
Tend to do well financially
Have some tax advantages, such as the ability to deduct a variety of expenses from
annual taxes
Often have the option to later sell their businesses for a sizable profit
✔✔Independent Contractor - ✔✔Enter into agreements (contracts) with businesses or
individuals for specific tasks or functions
✔✔Sole Prioprietorship - ✔✔A business operated by one person with no formal entity
separate from the operator
Unlimited liability
Easy to start up and requires no legal registration or paperwork
You are the owner and are in charge of the decisions
Losses from your business can lower your tax liability
✔✔Unlimited Liability - ✔✔The owner is personally and fully responsible for all losses
and debts of the business
✔✔General Partnership - ✔✔Decision making is typically by majority
Capital (money used to start or expand the business) can be raised through the
collective assets of the partners
Taxes are calculated on each partner's share of income
Each partner has unlimited liability for the entire partnership
✔✔Limited Partnership - ✔✔A general partner manages the business and one or more
limited partners invest money in the business
✔✔Limited Liability Partnership - ✔✔Partners are not liable for actions of other partners,
but are liable for the general obligations of the business
✔✔Limited Liability Company (LLC) - ✔✔Shields the personal assets of the owner(s)
from the liabilities of the business
Similar to partnerships in structure but limit liability much better
There are higher legal costs, but the added liability protection generally outweighs the
additional costs
✔✔Corporation - ✔✔A legal structure that is separate from the owner(s) of the business
, Very effective at limiting liability, but also expensive to form and maintain
✔✔Earned Income - ✔✔Any income (wages/salary) that is generated by working
✔✔Unearned Income - ✔✔Income received from sources other than employment
✔✔Objective Risk - ✔✔Can be measured using probabilities
✔✔Subjective Risk - ✔✔Refers to personally developed probabilities based on
expectations, fear, or worry
✔✔Capital Asset - ✔✔An asset you own, except for certain business assets, including
stocks, bonds, real estate, or collectibles
✔✔Basis - ✔✔Price you pay when buy a capital asset
✔✔Capital Gain - ✔✔The difference between the selling price and purchase price that
results in a financial gain for the seller
✔✔Capital Loss - ✔✔The difference between a lower selling price and a higher
purchase price resulting in a financial loss to the seller
✔✔Government Transfers - ✔✔Payments that the government makes to individuals
without expecting a good or service in return
Unemployment Benefits
Medicaid
SNAP and TANF
Grants
✔✔Unemployment Benefits - ✔✔Cash transfers to those who lose their jobs and
actively seek employment
✔✔Medicaid - ✔✔Federal program that provides medical benefits for low-income
persons.
✔✔Medicare - ✔✔A federal program of health insurance for persons 65 years of age
and older
✔✔Supplemental Nutrition Assistance Program (SNAP) - ✔✔Provides money to low-
income households to purchase food (also called food stamps)
✔✔Temporary Assistance for Needy Families (TANF) - ✔✔Provides supplemental
income to very low-income, unemployed households, typically with children
