Created mBy:mAmSolutio
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Test Bank for Corporate Finance, 6th Canadian Edition by
m m m m m m m m m
Jonathan Berk, Peter DeMarzo -
m m m m
m Complete Chapters Included (Chap 1 to 31) A+
m m m m m m m
Chapterm1 ThemCorporationmandmFinancialmMarkets
1.1 ThemThreemTypesmof mFirms
1) A msolemproprietorshipmismowned mby:
A) onemperson.
B) twomormmorempeople.
C) shareholders.
D) bankers.mAnswer:m
AmDiff:m1m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
2) Whichmof mthemfollowingmorganizationmformsmismthemmost mcommonminmthemeconomy?
A) Limited mLiabilitymPartnership
B) Limited mPartnership
C) SolemProprietorship
D) PubliclymTraded mCorporationmAnswer:m
CmDiff:m1m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
3) Whichmof mthemfollowingmorganizationmformsmearnsmthemmost mrevenue?
A) PrivatelymOwned mCorporation
B) Limited mPartnership
C) PubliclymOwned mCorporation
D) Limited mLiabilitymCompanymAnswer:m
CmDiff:m1m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
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4) Whichmof mthemfollowingmismNOTmanmadvantagemof mamsolemproprietorship?
A) Singlemtaxation
B) Easemof msetup
C) Limited mliability
D) Nomseparationmof mownershipmand mcontrolmAnswer:m
CmDiff:m2m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
5) Whichmof mthemfollowingmstatementsmregardingmlimited mpartnershipsmismtrue?
A) Theremismnomlimit monmamlimited mpartner'smliability.
B) A mlimited mpartner'smliabilitymismlimited mbymthemamount mof mhisminvestment.
C) A mlimited mpartnermismnot mliablemuntilmallmof mthemassetsmof mthemgeneralmpartnersmhavemb
eenmexhausted.
D) A mgeneralmpartner'smliabilitymismlimited mbymthemamount mof mhisminvestment.mAnswer:
BmDiff:m2m Type:mMC
m
Topicm:m1.1m m ThemThreem Typesmof mFirms
6) Whichmof mthemfollowingmaremadvantagesmof mincorporation?
A) Accessmtomcapitalmmarkets
B) Limited mliability
C) Unlimited mlife
D) Allmof mthemabovemAnswer:m
DmDiff:m2m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
7) InmCanada,mamlimited mliabilitympartnership,mLLP,mismessentially:
A) amlimited mpartnershipmwithout mlimited mpartners.
B) amlimited mpartnershipmwithout mamgeneralmpartner.
C) just manothermnamemformamlimited mpartnership.
D) just manothermnamemformamcorporation.mAnswer:mB
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Diff:m1m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
8) InmCanada,mwhichmof mthemfollowingmbusinessmorganizationmformsmcannot mavoid mdoub
lemtaxation?
A) Limited mPartnership
B) PubliclymTraded mCorporation
C) PrivatelymOwned mCorporation
D) Limited mLiabilitymCompanymAnswer:m
BmDiff:m1m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
9) InmCanada,mthemdividend mtaxmcredit mgivesmsomemrelief mbymeffectivelymgiving:
A) amlowermtaxmratemonmdividend mincomemthanmonmothermsourcesmof mincome.
B) amhighermtaxmratemonmdividend mincomemthanmonmothermsourcesmof mincome.
C) themsamemtaxmratemonmdividend mincomemasmonmothermsourcesmof mincome.
D) amtaxmratemof mzeromonmdividend mincomemcompared mtomothermsourcesmof mincome.mAnswer:
AmDiff:m1m Type:mMC
m
Topicm:m1.1m m ThemThreem Typesmof mFirms
10) Whichmof mthemfollowingmstatementsmismmost mcorrect?
A) Anmadvantagemtomincorporationmismthat mit mallowsmformlessmbusinessmregulation.
B) Anmadvantagemof mamcorporationmismthat mit mismsubject mtomdoublemtaxation.
C) Unlikemampartnership,mamdisadvantagemof mamcorporationmismthat mit mhasmlimited mliability.
D) Corporationsmfacemmoremregulationsmwhenmcompared mtompartnerships.mAnswer:m
DmDiff:m2m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
11) InmCanada,mthemdistinguishingmfeaturemof mamcorporationmismthat:
A) theremismnomlegalmdifferencembetweenmthemcorporationmand mitsmowners.
B) it mismamlegallymdefined,martificialmbeing,mseparatemfrommitsmowners.
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C) it mspreadsmliabilitymformitsmcorporatemobligationsmtomallmshareholders.
D) it mprovidesmlimited mliabilitymonlymtomsmallmshareholders.mAnswer:m
BmDiff:m2m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
12) Whichmof mthemfollowingmismsubject mtomdoublemtaxationminmCanada?
A) Corporation
B) Partnership
C) Solemproprietorship
D) BothmAmand mBmAnswer:m
AmDiff:m1m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
13) ThemCanadamRevenuemAgency,mCRA,mallowsmanmexemptionmfrommdoublemtaxationmform
certainmflow-
throughmentitiesmwheremallmincomemproduced mbymthembusinessmflowsmtomtheminvestorsmand mvirtu
m
allymnomearningsmaremretained mwithinmthembusiness.mThesementitiesmaremcalled:
A) CanadianmFederalmCrownmCorporations.
B) CanadianmControlled mCorporations.
C) IncomemTrust mCorporations.
D) ForeignmControlled mCorporations.mAnswer:m
CmDiff:m1m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
14) Inm2006,mthemCanadianmgovernment meffectivelymneutralized mthemtaxmadvantagesmthat mh
ad mexisted mformmost mincomemtrusts,mrelativemtomfirmsmset mupmasmcorporations.mThemadvantages
that mexisted mformincomemtrustsmbeforemthesemchangesmweremthat:
m
A) incomemtrustsmavoided mdoublemtaxationminmthat mthemCanadamRevenuemAgencymdid mnot mcoll
ect mcorporatemtaxesmbut mrathermcollected monlympersonalmtaxesmfrommincomemtrust munit mholders.
B) incomemtrustsmeffectivelymafforded munlimited mliabilitymtomunitholdersmwhilemcorpora
temshareholdersmcould mfacemunlimited mliability.
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Test Bank for Corporate Finance, 6th Canadian Edition by
m m m m m m m m m
Jonathan Berk, Peter DeMarzo -
m m m m
m Complete Chapters Included (Chap 1 to 31) A+
m m m m m m m
Chapterm1 ThemCorporationmandmFinancialmMarkets
1.1 ThemThreemTypesmof mFirms
1) A msolemproprietorshipmismowned mby:
A) onemperson.
B) twomormmorempeople.
C) shareholders.
D) bankers.mAnswer:m
AmDiff:m1m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
2) Whichmof mthemfollowingmorganizationmformsmismthemmost mcommonminmthemeconomy?
A) Limited mLiabilitymPartnership
B) Limited mPartnership
C) SolemProprietorship
D) PubliclymTraded mCorporationmAnswer:m
CmDiff:m1m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
3) Whichmof mthemfollowingmorganizationmformsmearnsmthemmost mrevenue?
A) PrivatelymOwned mCorporation
B) Limited mPartnership
C) PubliclymOwned mCorporation
D) Limited mLiabilitymCompanymAnswer:m
CmDiff:m1m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
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4) Whichmof mthemfollowingmismNOTmanmadvantagemof mamsolemproprietorship?
A) Singlemtaxation
B) Easemof msetup
C) Limited mliability
D) Nomseparationmof mownershipmand mcontrolmAnswer:m
CmDiff:m2m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
5) Whichmof mthemfollowingmstatementsmregardingmlimited mpartnershipsmismtrue?
A) Theremismnomlimit monmamlimited mpartner'smliability.
B) A mlimited mpartner'smliabilitymismlimited mbymthemamount mof mhisminvestment.
C) A mlimited mpartnermismnot mliablemuntilmallmof mthemassetsmof mthemgeneralmpartnersmhavemb
eenmexhausted.
D) A mgeneralmpartner'smliabilitymismlimited mbymthemamount mof mhisminvestment.mAnswer:
BmDiff:m2m Type:mMC
m
Topicm:m1.1m m ThemThreem Typesmof mFirms
6) Whichmof mthemfollowingmaremadvantagesmof mincorporation?
A) Accessmtomcapitalmmarkets
B) Limited mliability
C) Unlimited mlife
D) Allmof mthemabovemAnswer:m
DmDiff:m2m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
7) InmCanada,mamlimited mliabilitympartnership,mLLP,mismessentially:
A) amlimited mpartnershipmwithout mlimited mpartners.
B) amlimited mpartnershipmwithout mamgeneralmpartner.
C) just manothermnamemformamlimited mpartnership.
D) just manothermnamemformamcorporation.mAnswer:mB
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Diff:m1m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
8) InmCanada,mwhichmof mthemfollowingmbusinessmorganizationmformsmcannot mavoid mdoub
lemtaxation?
A) Limited mPartnership
B) PubliclymTraded mCorporation
C) PrivatelymOwned mCorporation
D) Limited mLiabilitymCompanymAnswer:m
BmDiff:m1m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
9) InmCanada,mthemdividend mtaxmcredit mgivesmsomemrelief mbymeffectivelymgiving:
A) amlowermtaxmratemonmdividend mincomemthanmonmothermsourcesmof mincome.
B) amhighermtaxmratemonmdividend mincomemthanmonmothermsourcesmof mincome.
C) themsamemtaxmratemonmdividend mincomemasmonmothermsourcesmof mincome.
D) amtaxmratemof mzeromonmdividend mincomemcompared mtomothermsourcesmof mincome.mAnswer:
AmDiff:m1m Type:mMC
m
Topicm:m1.1m m ThemThreem Typesmof mFirms
10) Whichmof mthemfollowingmstatementsmismmost mcorrect?
A) Anmadvantagemtomincorporationmismthat mit mallowsmformlessmbusinessmregulation.
B) Anmadvantagemof mamcorporationmismthat mit mismsubject mtomdoublemtaxation.
C) Unlikemampartnership,mamdisadvantagemof mamcorporationmismthat mit mhasmlimited mliability.
D) Corporationsmfacemmoremregulationsmwhenmcompared mtompartnerships.mAnswer:m
DmDiff:m2m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
11) InmCanada,mthemdistinguishingmfeaturemof mamcorporationmismthat:
A) theremismnomlegalmdifferencembetweenmthemcorporationmand mitsmowners.
B) it mismamlegallymdefined,martificialmbeing,mseparatemfrommitsmowners.
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C) it mspreadsmliabilitymformitsmcorporatemobligationsmtomallmshareholders.
D) it mprovidesmlimited mliabilitymonlymtomsmallmshareholders.mAnswer:m
BmDiff:m2m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
12) Whichmof mthemfollowingmismsubject mtomdoublemtaxationminmCanada?
A) Corporation
B) Partnership
C) Solemproprietorship
D) BothmAmand mBmAnswer:m
AmDiff:m1m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
13) ThemCanadamRevenuemAgency,mCRA,mallowsmanmexemptionmfrommdoublemtaxationmform
certainmflow-
throughmentitiesmwheremallmincomemproduced mbymthembusinessmflowsmtomtheminvestorsmand mvirtu
m
allymnomearningsmaremretained mwithinmthembusiness.mThesementitiesmaremcalled:
A) CanadianmFederalmCrownmCorporations.
B) CanadianmControlled mCorporations.
C) IncomemTrust mCorporations.
D) ForeignmControlled mCorporations.mAnswer:m
CmDiff:m1m Type:mMC
Topicm:m1.1m m ThemThreem Typesmof mFirms
14) Inm2006,mthemCanadianmgovernment meffectivelymneutralized mthemtaxmadvantagesmthat mh
ad mexisted mformmost mincomemtrusts,mrelativemtomfirmsmset mupmasmcorporations.mThemadvantages
that mexisted mformincomemtrustsmbeforemthesemchangesmweremthat:
m
A) incomemtrustsmavoided mdoublemtaxationminmthat mthemCanadamRevenuemAgencymdid mnot mcoll
ect mcorporatemtaxesmbut mrathermcollected monlympersonalmtaxesmfrommincomemtrust munit mholders.
B) incomemtrustsmeffectivelymafforded munlimited mliabilitymtomunitholdersmwhilemcorpora
temshareholdersmcould mfacemunlimited mliability.
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