FIN 305 WEEK 5 EXAM 3 REQUIRES
RESPONDUS LOCKDOWN BROWSER AND
WEBCAM 2026 FINAL STUDY GUIDE KEY
CONCEPTS AND ANSWERS A+
◉ What are the four business organizations? Answer: 1. Sole
proprietorship
2. Partnership
3. Corporation
4. Hybrid
◉ What is important about a sole proprietorship? (4) Answer: 1. The
most common type of business in the US
2. Owned by one human
3. Receives all profits
4. Unlimited liability
◉ What is important about a partnership? (3) Answer: 1. Multiple
owners/partners
2. Control is determined by partners' ownership
3. Unlimited liability
,◉ What is important about a corporation? (5) Answer: 1. Legally
independent from it's owners
2. Owned by shareholders
3. Shareholders have limited liability
4. Subject to double-taxation
5. Controlled by managers
◉ What is important about a hybrid company? (3) Answer: 1. To get
of unlimited liability, you can form this
2. LLC, LLP, S Corp, etc
3. All the advantages of sole proprietorship/partnership but with
limited liability
◉ Which business organization is relatively easy to start and is
subject to much lighter regulatory and paperwork burden than
other business forms? Answer: Sole proprietorship
◉ Which of the following is NOT considered a hybrid organization?
1. S corp
2. LLP
3. LLC
4. LP
,5. All of these are considered hybrid orgs Answer: 5. All of these are
considered hybrid orgs
◉ The practice generally known as double taxation is due to:
Answer: Corporate incomes being taxed at the corporate level, then
again at the shareholder level with dividends
◉ Which of the following statements is incorrect?
1. Sole proprietorships are subject to less regulation.
2. Both angel investors and venture capitalists exchange capital for
ownership.
3. Shareholders are responsible for paying off the corporate bonds in
the event of a bankruptcy
4. All of these statements are correct Answer: 3. Shareholders are
responsible for paying off the corporate bonds in the event of a
bankruptcy
◉ As individual legal entities, corporations assume liability for their
own debts, so the shareholders hold:
1. only limited liability.
2. unlimited liability.
3. shared liability.
, 4. joint liability. Answer: 1. Only limited liability
◉ In the financial crisis that started in 2006, a significant indicator
of the U.S. economic decline was:
1. a significant drop in interest rates.
2. a sharp increase in unregulated Ponzi-type security sales.
3. rising defaults by subprime mortgage borrowers.
4. a large increase in loan default due to unemployment. Answer: 3.
rising defaults by subprime mortgage borrowers
◉ Who is a company's highest level financial manager? Answer:
Chief Financial Officer (CFO)
◉ What is the agency problem? Answer: The conflict of interest
when CEO's put their personal interests before the interests of the
shareholders
◉ What is an agency relationship? Answer: It is created when one
party (principal) hires someone else (agent) to work on their behalf.
◉ How do we combat the agency problem? Answer: 1. Make CEO's
owners through stock options
2. Link CEO compensation with the shareholder value
RESPONDUS LOCKDOWN BROWSER AND
WEBCAM 2026 FINAL STUDY GUIDE KEY
CONCEPTS AND ANSWERS A+
◉ What are the four business organizations? Answer: 1. Sole
proprietorship
2. Partnership
3. Corporation
4. Hybrid
◉ What is important about a sole proprietorship? (4) Answer: 1. The
most common type of business in the US
2. Owned by one human
3. Receives all profits
4. Unlimited liability
◉ What is important about a partnership? (3) Answer: 1. Multiple
owners/partners
2. Control is determined by partners' ownership
3. Unlimited liability
,◉ What is important about a corporation? (5) Answer: 1. Legally
independent from it's owners
2. Owned by shareholders
3. Shareholders have limited liability
4. Subject to double-taxation
5. Controlled by managers
◉ What is important about a hybrid company? (3) Answer: 1. To get
of unlimited liability, you can form this
2. LLC, LLP, S Corp, etc
3. All the advantages of sole proprietorship/partnership but with
limited liability
◉ Which business organization is relatively easy to start and is
subject to much lighter regulatory and paperwork burden than
other business forms? Answer: Sole proprietorship
◉ Which of the following is NOT considered a hybrid organization?
1. S corp
2. LLP
3. LLC
4. LP
,5. All of these are considered hybrid orgs Answer: 5. All of these are
considered hybrid orgs
◉ The practice generally known as double taxation is due to:
Answer: Corporate incomes being taxed at the corporate level, then
again at the shareholder level with dividends
◉ Which of the following statements is incorrect?
1. Sole proprietorships are subject to less regulation.
2. Both angel investors and venture capitalists exchange capital for
ownership.
3. Shareholders are responsible for paying off the corporate bonds in
the event of a bankruptcy
4. All of these statements are correct Answer: 3. Shareholders are
responsible for paying off the corporate bonds in the event of a
bankruptcy
◉ As individual legal entities, corporations assume liability for their
own debts, so the shareholders hold:
1. only limited liability.
2. unlimited liability.
3. shared liability.
, 4. joint liability. Answer: 1. Only limited liability
◉ In the financial crisis that started in 2006, a significant indicator
of the U.S. economic decline was:
1. a significant drop in interest rates.
2. a sharp increase in unregulated Ponzi-type security sales.
3. rising defaults by subprime mortgage borrowers.
4. a large increase in loan default due to unemployment. Answer: 3.
rising defaults by subprime mortgage borrowers
◉ Who is a company's highest level financial manager? Answer:
Chief Financial Officer (CFO)
◉ What is the agency problem? Answer: The conflict of interest
when CEO's put their personal interests before the interests of the
shareholders
◉ What is an agency relationship? Answer: It is created when one
party (principal) hires someone else (agent) to work on their behalf.
◉ How do we combat the agency problem? Answer: 1. Make CEO's
owners through stock options
2. Link CEO compensation with the shareholder value
