, TESTBANK FOR FOR
CFIN 8th Edition Besley
Important Notes
The file includes the complete test bank, organized chapter by chapter.
A sample of selected pages has been provided for preview.
All available appendices and Excel files (if included in the original resources) are
provided.
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Chapter 01: An Overview of Managerial Finance
1. Which of the following statements is correct? Assume everything else equal.
a. Riskier assets always have higher market values.
b. Riskier assets are more valuable than (preferred to) less risky assets.
c. The sooner cash is received, the more valuable it is.
d. Investors generally prefer short-term, high-risk assets investments.
e. Investors generally receive higher returns on investments with low risk than investments with high risk.
ANSWER: c
2. The success of financial institutions depends on the _____.
a. understanding of the factors that cause interest rates and other returns in the financial markets to rise and fall
b. environmentally responsible behavior of the shareholders of corporations
c. expectations of long-term investors in the company
d. awareness of the shareholders regarding the regulations that affect public corporations
e. prior knowledge of the decisions that public corporations make concerning their cash flows
ANSWER: a
3. Which of the following is true of the investment function of finance?
a. The investment function focuses on socially responsible actions taken by corporations.
b. The investment function focuses on the values, risks, and returns associated with financial assets such as
stocks and bonds.
c. The investment function focuses on the optimal mix of securities based on the environment-friendly behavior
of the corporations.
d. The investment function focuses on regulations applicable to a public corporation.
e. The investment function focuses on additional information about the procedures used to construct and report
financial statements.
ANSWER: b
4. Identify a true statement about the financial services provided by organizations.
a. Financial services organizations invest only in environmentally responsible public corporations.
b. Financial services include services provided by banks and insurance companies only.
c. Financial services organizations make investment decisions based solely on the socially responsible behavior of
corporates.
d. Financial services organizations provide comparative cash flow positions of competing corporations to
investors to help them with investment decisions.
e. Financial services organizations help individuals and companies determine how to invest money to achieve
their financial goals.
ANSWER: e
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Chapter 01: An Overview of Managerial Finance
5. Financial services refer to functions provided by organizations that _____.
a. deal with the most efficient management of the human resources
b. ensure that regulations of the Sarbanes-Oxley Act are followed by public corporations
c. recommend the most environment-friendly method of operations to a corporation
d. recommend the types of securities to be issued to finance plant expansions
e. deal with the management of money
ANSWER: e
6. Which of the following functions deals with the management of money?
a. Marketing
b. Human resources
c. Financial services
d. Information systems
e. Research and development
ANSWER: c
7. Which of the following is true of financial services provided by persons working in banks, insurance companies, and
brokerage firms?
a. Persons working in banks, insurance companies, and brokerage firms help corporations to decide the types of
securities to be issued to finance plant expansion.
b. Persons working in banks, insurance companies, and brokerage firms help individuals and companies
determine how to invest money to achieve their financial goals.
c. Persons working in banks, insurance companies, and brokerage firms help corporations fulfill the regulations
required by the Sarbanes-Oxley Act.
d. Persons working in banks, insurance companies, and brokerage firms help public corporations follow
environment-friendly practices.
e. Persons working in banks, insurance companies, and brokerage firms help corporations in framing their
bylaws.
ANSWER: b
8. Which of the following is true of financial institutions?
a. Financial institutions are the regulators of interest rates and other returns in financial markets.
b. Managers of financial institutions should have an understanding of factors that cause interest rates and other
returns in the financial markets to rise and fall.
c. Financial institutions are accountable and responsible in reporting financial information for publicly-traded
corporations.
d. Financial institutions are required by the Sarbanes-Oxley Act to disclose the environment-friendly measures
taken by investment corporations.
e. Financial institutions require public corporations to adopt socially responsible work practices.
ANSWER: b
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,Name: Class: Date:
Chapter 01: An Overview of Managerial Finance
9. The treasurer of a company is a key subordinate of the _____.
a. controller
b. financial vice president
c. chief executive officer
d. credit manager
e. director of capital budgeting
ANSWER: b
10. The credit manager is supervised by the _____.
a. treasurer
b. inventory manager
c. director of capital budgeting
d. vice president of finance
e. controller
ANSWER: a
11. The accounting and tax departments are the responsibility of the _____.
a. treasurer
b. inventory manager
c. director of capital budgeting
d. vice president of finance
e. controller
ANSWER: e
12. Everything else equal, including firm size, dollar sales, type of product sold, and so forth, the primary difference
between proprietorship and partnership business forms is that _____.
a. a partnership has more owners than a proprietorship
b. the combined personal liability associated with a partnership is significantly less than the combined personal
liability associated with a proprietorship
c. a partnership is generally easier to form than a proprietorship
d. the annual growth rate of a proprietorship is limited by law, whereas the growth rate of a partnership is always
potentially unlimited
e. many more businesses are formed as partnerships than proprietorships
ANSWER: a
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,Name: Class: Date:
Chapter 01: An Overview of Managerial Finance
13. Which of the following represents a difference between an S corporation and a limited liability company (LLC)?
a. An S corporation can have more than one type of stock outstanding, whereas an LLC can have only one type
of stock outstanding.
b. An S corporation can choose to be taxed as a corporation or as a partnership, whereas an LLC is taxed as a
corporation only.
c. An S corporation is subject to unlimited personal liability of the owners, whereas an LLC is subject to limited
personal liability.
d. An S corporation has no more than 100 stockholders, whereas an LLC can have more than 100
stockholders (members).
e. An S corporation's business income is subject to double taxation, whereas an LLC's business income is taxed
only once.
ANSWER: d
14. Which of the following statements is true of corporate bylaws?
a. Corporate bylaws are a set of rules drawn up by the state to enable managers to run the firm in accordance
with state laws.
b. Procedures for electing corporate directors are contained in corporate bylaws.
c. Procedures that govern changes in corporate bylaws are contained in the corporate charter.
d. To open their doors and start their operations, corporations are legally required only to file their bylaws with
the appropriate agency in the state where they incorporate.
e. The declaration of the activities that a firm will pursue and the number of directors are included in the
corporate bylaws.
ANSWER: b
15. Which of the following statements is correct?
a. A hostile takeover is the primary method of transferring ownership interest in a corporation.
b. The corporation is a legal entity created by the state and is a direct extension of the legal status of its owners
and managers, that is, the owners and managers are the corporation.
c. Unlimited liability and limited life are two key advantages of the corporate form over other forms of business
organization.
d. In part due to limited liability and ease of ownership transfer, corporations have less trouble raising money in
financial markets than other organizational forms.
e. Although stockholders of the corporation are insulated by limited legal liability, the legal status of the
corporation does not protect the firm's managers in the same way.
ANSWER: d
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,Name: Class: Date:
Chapter 01: An Overview of Managerial Finance
16. Which of the following statements is correct?
a. In a partnership, liability for other partners' misdeeds includes but is limited to the amount a particular partner
has invested in the business.
b. Partnerships must be formed according to specific rules, which include the filing of a formal written
agreement with state authorities where the partnership does business.
c. A fast-growth company would be more likely to set up a partnership for its business organization than would a
slow-growth company.
d. Under partnership law, if any partner is unable to meet their pro rata claim in the event the partnership goes
bankrupt, the remaining partners must make good on the unsatisfied claims.
e. A major disadvantage of a partnership as a form of business organization is the high cost and practical
difficulty of its formation.
ANSWER: d
17. Which of the following statements is correct?
a. A major disadvantage of a regular partnership or a corporation as a form of business is the fact that they do
not offer their owners limited liability, whereas proprietorships do.
b. An advantage of the corporate form for many businesses is the fact that the corporate tax rate always
exceeds the personal tax rate, which is the rate at which proprietorships and partnerships are taxed.
c. There are more partnerships and proprietorships than corporations in the United States, but corporations
produce more goods and services than do other forms of business.
d. Because partnerships and proprietorships enjoy the benefits of limited liability, low transferability of ownership
interest, unlimited life, and favorable tax status relative to the situation for corporations, most large businesses
choose to be set up as partnerships and proprietorships.
e. Because lawyers have the incorporation process so automated (e.g., word processors for drawing up the
necessary papers), it is less expensive to form a corporation than to form a proprietorship or partnership.
ANSWER: c
18. Which of the following statements about the corporate form of business organization is correct?
a. A corporation has the legal authority to act like a person when conducting business.
b. In the United States, corporations generate a lower percentage of total annual sales than either partnerships or
proprietorships.
c. Corporations generally are smaller than either partnerships or proprietorships.
d. One of the most important features of the corporate form of business organization is that stockholders have
unlimited liability.
e. Corporations can operate under different degrees of formality, ranging from informal, oral understandings to
formal agreements filed with the secretary of the state in which the corporations do business.
ANSWER: a
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,Name: Class: Date:
Chapter 01: An Overview of Managerial Finance
19. In the United States, the most common form of business is the _____, and the form of business that generates most
of the sales and profits is the _____.
a. corporation; corporation
b. corporation; proprietorship
c. proprietorship; partnership
d. proprietorship; corporation
e. corporation; partnership
ANSWER: d
20. Which of the following is a disadvantage of the corporate form of business?
a. A corporation faces difficulty in attracting substantial amounts of funds.
b. The owners of a corporation are subject to unlimited personal liability for the business' debts.
c. Setting up a corporation is more complex and time-consuming than setting up a proprietorship or a partnership.
d. A corporation is said to have limited life.
e. Ownership interests cannot be transferred as easily as proprietorship or partnership interests.
ANSWER: c
21. Compared to corporations, what is the primary disadvantage of partnerships as a form of business organization?
a. The tax rates applied to partnerships are higher than the tax rates applied to corporations.
b. Any dividends paid to the owners of a partnership business are taxed twice, once at the partnership level and
once at the personal or individual level.
c. Partnerships generally are more complex to form (start up) than corporations.
d. Partnerships have unlimited lives, whereas corporations do not.
e. The owners of a partnership, that is, the partners, have unlimited liability when it comes to business obligations,
whereas the owners of a corporation have limited liability.
ANSWER: e
22. Which of the following forms of business offers limited personal liability to owners as well as the choice to be taxed
as either a corporation or as a partnership?
a. Limited liability partnership
b. Limited liability company
c. Corporation
d. Proprietorship
e. Partnership
ANSWER: b
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,Name: Class: Date:
Chapter 01: An Overview of Managerial Finance
23. Identify a true statement about a limited liability company (LLC).
a. A limited liability company can be taxed as a corporation only.
b. One of the owners of a limited liability company must be designated as a general partner with unlimited
personal financial liability.
c. A limited liability company can have no more than 100 stockholders.
d. Only one of the owners of a limited liability company can participate in the management of the business.
e. A limited liability company can have more than one type of stock (ownership interest) outstanding.
ANSWER: e
24. If a limited liability company (LLC) is taxed like a partnership, _____.
a. income passes through to the owners
b. income is taxed twice
c. the owners have unlimited tax liability
d. the shareholders pay taxes on dividends they receive after the company pays taxes on the money that is
distributed
e. dividends are taxed at the capital gain rate
ANSWER: a
25. Identify a true statement about a limited liability company (LLC).
a. A limited liability company (LLC) has a maximum of 100 stockholders (owners).
b. A limited liability company (LLC) offers the limited personal liability associated with a corporation.
c. A limited liability company (LLC) has only one type of stock (membership interest).
d. A limited liability company (LLC) is taxed as a partnership, which means the stockholders are subject to
double taxation.
e. A limited liability company (LLC) is liable for the negligence, irresponsibility, or similar acts committed by any
partner.
ANSWER: b
26. Which of the following is true of a general partner of a limited liability partnership (LLP)?
a. A general partner of a limited liability partnership (LLP) is fully personally liable for all business debts.
b. A general partner of a limited liability partnership (LLP) cannot participate in the management of the business.
c. A general partner of a limited liability partnership (LLP) is considered as an investor only.
d. A general partner of a limited liability partnership (LLP) is liable only to the extent of their investment in the
partnership.
e. A general partner of a limited liability partnership (LLP) is taxed for the limited partners' share of the
partnership's income.
ANSWER: a
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, Name: Class: Date:
Chapter 01: An Overview of Managerial Finance
27. A limited partner in a limited liability partnership (LLP) is _____.
a. responsible for the general management of the business
b. liable for only the amount invested in the partnership
c. responsible for negligence, irresponsibility, or similar acts committed by any other partner
d. liable to pay tax on the general partner's share of partnership income
e. personally liable for the partnership debts
ANSWER: b
28. It is possible to limit the liability faced by some of the partners in a partnership form of business by establishing a
_____.
a. limited liability partnership (LLP)
b. general partnership
c. proprietorship
d. concentrated partnership
e. limited accumulation partnership
ANSWER: a
29. Identify a true statement about an S corporation.
a. An S corporation is required to have more than 100 stockholders.
b. An S corporation is required to have more than one type of stock outstanding.
c. The income of an S corporation passes through the company to the owners.
d. The income of an S corporation is taxed twice, at the corporate level and the owner level.
e. The income of an S corporation is taxed as capital gains to the owners.
ANSWER: c
30. Which of the following is a feature of an S corporation?
a. An S corporation is required to have more than 100 stockholders.
b. An S corporation is required to have more than one type of stock outstanding.
c. The income of an S corporation is taxed as capital gains to the owners.
d. The income of an S corporation is taxed twice, at the corporate level and the owner level.
e. The income of an S corporation is taxed the same as income earned by proprietorships and partnerships.
ANSWER: e
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CFIN 8th Edition Besley
Important Notes
The file includes the complete test bank, organized chapter by chapter.
A sample of selected pages has been provided for preview.
All available appendices and Excel files (if included in the original resources) are
provided.
We continuously update our files to ensure you receive the latest and most accurate
editions.
New editions are added regularly – stay connected for updates!
Purchase Guarantee
If you believe you have purchased the wrong file, don’t worry. Contact us anytime and we
will gladly replace it with the correct version.
Contact Email:
,Name: Class: Date:
Chapter 01: An Overview of Managerial Finance
1. Which of the following statements is correct? Assume everything else equal.
a. Riskier assets always have higher market values.
b. Riskier assets are more valuable than (preferred to) less risky assets.
c. The sooner cash is received, the more valuable it is.
d. Investors generally prefer short-term, high-risk assets investments.
e. Investors generally receive higher returns on investments with low risk than investments with high risk.
ANSWER: c
2. The success of financial institutions depends on the _____.
a. understanding of the factors that cause interest rates and other returns in the financial markets to rise and fall
b. environmentally responsible behavior of the shareholders of corporations
c. expectations of long-term investors in the company
d. awareness of the shareholders regarding the regulations that affect public corporations
e. prior knowledge of the decisions that public corporations make concerning their cash flows
ANSWER: a
3. Which of the following is true of the investment function of finance?
a. The investment function focuses on socially responsible actions taken by corporations.
b. The investment function focuses on the values, risks, and returns associated with financial assets such as
stocks and bonds.
c. The investment function focuses on the optimal mix of securities based on the environment-friendly behavior
of the corporations.
d. The investment function focuses on regulations applicable to a public corporation.
e. The investment function focuses on additional information about the procedures used to construct and report
financial statements.
ANSWER: b
4. Identify a true statement about the financial services provided by organizations.
a. Financial services organizations invest only in environmentally responsible public corporations.
b. Financial services include services provided by banks and insurance companies only.
c. Financial services organizations make investment decisions based solely on the socially responsible behavior of
corporates.
d. Financial services organizations provide comparative cash flow positions of competing corporations to
investors to help them with investment decisions.
e. Financial services organizations help individuals and companies determine how to invest money to achieve
their financial goals.
ANSWER: e
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Chapter 01: An Overview of Managerial Finance
5. Financial services refer to functions provided by organizations that _____.
a. deal with the most efficient management of the human resources
b. ensure that regulations of the Sarbanes-Oxley Act are followed by public corporations
c. recommend the most environment-friendly method of operations to a corporation
d. recommend the types of securities to be issued to finance plant expansions
e. deal with the management of money
ANSWER: e
6. Which of the following functions deals with the management of money?
a. Marketing
b. Human resources
c. Financial services
d. Information systems
e. Research and development
ANSWER: c
7. Which of the following is true of financial services provided by persons working in banks, insurance companies, and
brokerage firms?
a. Persons working in banks, insurance companies, and brokerage firms help corporations to decide the types of
securities to be issued to finance plant expansion.
b. Persons working in banks, insurance companies, and brokerage firms help individuals and companies
determine how to invest money to achieve their financial goals.
c. Persons working in banks, insurance companies, and brokerage firms help corporations fulfill the regulations
required by the Sarbanes-Oxley Act.
d. Persons working in banks, insurance companies, and brokerage firms help public corporations follow
environment-friendly practices.
e. Persons working in banks, insurance companies, and brokerage firms help corporations in framing their
bylaws.
ANSWER: b
8. Which of the following is true of financial institutions?
a. Financial institutions are the regulators of interest rates and other returns in financial markets.
b. Managers of financial institutions should have an understanding of factors that cause interest rates and other
returns in the financial markets to rise and fall.
c. Financial institutions are accountable and responsible in reporting financial information for publicly-traded
corporations.
d. Financial institutions are required by the Sarbanes-Oxley Act to disclose the environment-friendly measures
taken by investment corporations.
e. Financial institutions require public corporations to adopt socially responsible work practices.
ANSWER: b
Copyright Cengage Learning. Powered by Cognero. Page 2
,Name: Class: Date:
Chapter 01: An Overview of Managerial Finance
9. The treasurer of a company is a key subordinate of the _____.
a. controller
b. financial vice president
c. chief executive officer
d. credit manager
e. director of capital budgeting
ANSWER: b
10. The credit manager is supervised by the _____.
a. treasurer
b. inventory manager
c. director of capital budgeting
d. vice president of finance
e. controller
ANSWER: a
11. The accounting and tax departments are the responsibility of the _____.
a. treasurer
b. inventory manager
c. director of capital budgeting
d. vice president of finance
e. controller
ANSWER: e
12. Everything else equal, including firm size, dollar sales, type of product sold, and so forth, the primary difference
between proprietorship and partnership business forms is that _____.
a. a partnership has more owners than a proprietorship
b. the combined personal liability associated with a partnership is significantly less than the combined personal
liability associated with a proprietorship
c. a partnership is generally easier to form than a proprietorship
d. the annual growth rate of a proprietorship is limited by law, whereas the growth rate of a partnership is always
potentially unlimited
e. many more businesses are formed as partnerships than proprietorships
ANSWER: a
Copyright Cengage Learning. Powered by Cognero. Page 3
,Name: Class: Date:
Chapter 01: An Overview of Managerial Finance
13. Which of the following represents a difference between an S corporation and a limited liability company (LLC)?
a. An S corporation can have more than one type of stock outstanding, whereas an LLC can have only one type
of stock outstanding.
b. An S corporation can choose to be taxed as a corporation or as a partnership, whereas an LLC is taxed as a
corporation only.
c. An S corporation is subject to unlimited personal liability of the owners, whereas an LLC is subject to limited
personal liability.
d. An S corporation has no more than 100 stockholders, whereas an LLC can have more than 100
stockholders (members).
e. An S corporation's business income is subject to double taxation, whereas an LLC's business income is taxed
only once.
ANSWER: d
14. Which of the following statements is true of corporate bylaws?
a. Corporate bylaws are a set of rules drawn up by the state to enable managers to run the firm in accordance
with state laws.
b. Procedures for electing corporate directors are contained in corporate bylaws.
c. Procedures that govern changes in corporate bylaws are contained in the corporate charter.
d. To open their doors and start their operations, corporations are legally required only to file their bylaws with
the appropriate agency in the state where they incorporate.
e. The declaration of the activities that a firm will pursue and the number of directors are included in the
corporate bylaws.
ANSWER: b
15. Which of the following statements is correct?
a. A hostile takeover is the primary method of transferring ownership interest in a corporation.
b. The corporation is a legal entity created by the state and is a direct extension of the legal status of its owners
and managers, that is, the owners and managers are the corporation.
c. Unlimited liability and limited life are two key advantages of the corporate form over other forms of business
organization.
d. In part due to limited liability and ease of ownership transfer, corporations have less trouble raising money in
financial markets than other organizational forms.
e. Although stockholders of the corporation are insulated by limited legal liability, the legal status of the
corporation does not protect the firm's managers in the same way.
ANSWER: d
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,Name: Class: Date:
Chapter 01: An Overview of Managerial Finance
16. Which of the following statements is correct?
a. In a partnership, liability for other partners' misdeeds includes but is limited to the amount a particular partner
has invested in the business.
b. Partnerships must be formed according to specific rules, which include the filing of a formal written
agreement with state authorities where the partnership does business.
c. A fast-growth company would be more likely to set up a partnership for its business organization than would a
slow-growth company.
d. Under partnership law, if any partner is unable to meet their pro rata claim in the event the partnership goes
bankrupt, the remaining partners must make good on the unsatisfied claims.
e. A major disadvantage of a partnership as a form of business organization is the high cost and practical
difficulty of its formation.
ANSWER: d
17. Which of the following statements is correct?
a. A major disadvantage of a regular partnership or a corporation as a form of business is the fact that they do
not offer their owners limited liability, whereas proprietorships do.
b. An advantage of the corporate form for many businesses is the fact that the corporate tax rate always
exceeds the personal tax rate, which is the rate at which proprietorships and partnerships are taxed.
c. There are more partnerships and proprietorships than corporations in the United States, but corporations
produce more goods and services than do other forms of business.
d. Because partnerships and proprietorships enjoy the benefits of limited liability, low transferability of ownership
interest, unlimited life, and favorable tax status relative to the situation for corporations, most large businesses
choose to be set up as partnerships and proprietorships.
e. Because lawyers have the incorporation process so automated (e.g., word processors for drawing up the
necessary papers), it is less expensive to form a corporation than to form a proprietorship or partnership.
ANSWER: c
18. Which of the following statements about the corporate form of business organization is correct?
a. A corporation has the legal authority to act like a person when conducting business.
b. In the United States, corporations generate a lower percentage of total annual sales than either partnerships or
proprietorships.
c. Corporations generally are smaller than either partnerships or proprietorships.
d. One of the most important features of the corporate form of business organization is that stockholders have
unlimited liability.
e. Corporations can operate under different degrees of formality, ranging from informal, oral understandings to
formal agreements filed with the secretary of the state in which the corporations do business.
ANSWER: a
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,Name: Class: Date:
Chapter 01: An Overview of Managerial Finance
19. In the United States, the most common form of business is the _____, and the form of business that generates most
of the sales and profits is the _____.
a. corporation; corporation
b. corporation; proprietorship
c. proprietorship; partnership
d. proprietorship; corporation
e. corporation; partnership
ANSWER: d
20. Which of the following is a disadvantage of the corporate form of business?
a. A corporation faces difficulty in attracting substantial amounts of funds.
b. The owners of a corporation are subject to unlimited personal liability for the business' debts.
c. Setting up a corporation is more complex and time-consuming than setting up a proprietorship or a partnership.
d. A corporation is said to have limited life.
e. Ownership interests cannot be transferred as easily as proprietorship or partnership interests.
ANSWER: c
21. Compared to corporations, what is the primary disadvantage of partnerships as a form of business organization?
a. The tax rates applied to partnerships are higher than the tax rates applied to corporations.
b. Any dividends paid to the owners of a partnership business are taxed twice, once at the partnership level and
once at the personal or individual level.
c. Partnerships generally are more complex to form (start up) than corporations.
d. Partnerships have unlimited lives, whereas corporations do not.
e. The owners of a partnership, that is, the partners, have unlimited liability when it comes to business obligations,
whereas the owners of a corporation have limited liability.
ANSWER: e
22. Which of the following forms of business offers limited personal liability to owners as well as the choice to be taxed
as either a corporation or as a partnership?
a. Limited liability partnership
b. Limited liability company
c. Corporation
d. Proprietorship
e. Partnership
ANSWER: b
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,Name: Class: Date:
Chapter 01: An Overview of Managerial Finance
23. Identify a true statement about a limited liability company (LLC).
a. A limited liability company can be taxed as a corporation only.
b. One of the owners of a limited liability company must be designated as a general partner with unlimited
personal financial liability.
c. A limited liability company can have no more than 100 stockholders.
d. Only one of the owners of a limited liability company can participate in the management of the business.
e. A limited liability company can have more than one type of stock (ownership interest) outstanding.
ANSWER: e
24. If a limited liability company (LLC) is taxed like a partnership, _____.
a. income passes through to the owners
b. income is taxed twice
c. the owners have unlimited tax liability
d. the shareholders pay taxes on dividends they receive after the company pays taxes on the money that is
distributed
e. dividends are taxed at the capital gain rate
ANSWER: a
25. Identify a true statement about a limited liability company (LLC).
a. A limited liability company (LLC) has a maximum of 100 stockholders (owners).
b. A limited liability company (LLC) offers the limited personal liability associated with a corporation.
c. A limited liability company (LLC) has only one type of stock (membership interest).
d. A limited liability company (LLC) is taxed as a partnership, which means the stockholders are subject to
double taxation.
e. A limited liability company (LLC) is liable for the negligence, irresponsibility, or similar acts committed by any
partner.
ANSWER: b
26. Which of the following is true of a general partner of a limited liability partnership (LLP)?
a. A general partner of a limited liability partnership (LLP) is fully personally liable for all business debts.
b. A general partner of a limited liability partnership (LLP) cannot participate in the management of the business.
c. A general partner of a limited liability partnership (LLP) is considered as an investor only.
d. A general partner of a limited liability partnership (LLP) is liable only to the extent of their investment in the
partnership.
e. A general partner of a limited liability partnership (LLP) is taxed for the limited partners' share of the
partnership's income.
ANSWER: a
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, Name: Class: Date:
Chapter 01: An Overview of Managerial Finance
27. A limited partner in a limited liability partnership (LLP) is _____.
a. responsible for the general management of the business
b. liable for only the amount invested in the partnership
c. responsible for negligence, irresponsibility, or similar acts committed by any other partner
d. liable to pay tax on the general partner's share of partnership income
e. personally liable for the partnership debts
ANSWER: b
28. It is possible to limit the liability faced by some of the partners in a partnership form of business by establishing a
_____.
a. limited liability partnership (LLP)
b. general partnership
c. proprietorship
d. concentrated partnership
e. limited accumulation partnership
ANSWER: a
29. Identify a true statement about an S corporation.
a. An S corporation is required to have more than 100 stockholders.
b. An S corporation is required to have more than one type of stock outstanding.
c. The income of an S corporation passes through the company to the owners.
d. The income of an S corporation is taxed twice, at the corporate level and the owner level.
e. The income of an S corporation is taxed as capital gains to the owners.
ANSWER: c
30. Which of the following is a feature of an S corporation?
a. An S corporation is required to have more than 100 stockholders.
b. An S corporation is required to have more than one type of stock outstanding.
c. The income of an S corporation is taxed as capital gains to the owners.
d. The income of an S corporation is taxed twice, at the corporate level and the owner level.
e. The income of an S corporation is taxed the same as income earned by proprietorships and partnerships.
ANSWER: e
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