Created By: A Solution
Test Bank for Corporate Finance, 5th Edition by
Jonathan Berk, DeMarzo Chapter 1-31 A+
Chapter 1: The Corporation
1.1 The Three Types of Firms
1) A sole proprietorship is owned by:
A) one person
B) two or more people
C) shareholders
D) bankers Answer: A
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
2) In Canada, which of the following organization forms accounts for the greatest number of
firms?
A) Limited Liability Partnership
B) Limited Partnership
C) Sole Proprietorship
D) Publicly Traded Corporation Answer: C
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
A+ Page 1
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3) Which of the following organization forms earns the most revenue?
A) Privately Owned Corporation
B) Limited Partnership
C) Publicly Owned Corporation
D) Limited Liability Company Answer: C
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
4) Which of the following is NOT an advantage of a sole proprietorship?
A) Single taxation
B) Ease of setup
C) Limited liability
D) No separation of ownership and control Answer: C
Diff: 2 Type: MC
Topic: 1.1 The Three Types of Firms
5) Which of the following statements regarding limited partnerships is TRUE?
A) There is no limit on a limited partner's liability.
B) A limited partner's liability is limited by the amount of his investment.
C) A limited partner is not liable until all of the assets of the general partners have been
exhausted.
D) A general partner's liability is limited by the amount of his investment. Answer: B
Diff: 2 Type: MC
A+ Page 2
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Topic: 1.1 The Three Types of Firms
6) Which of the following is/are an advantage(s) of incorporation?
A) Access to capital markets
B) Limited liability
C) Unlimited life
D) All of the above Answer: D
Diff: 2 Type: MC
Topic: 1.1 The Three Types of Firms
7) In Canada, a limited liability partnership, LLP, is essentially:
A) a limited partnership without limited partners
B) a limited partnership without a general partner
C) just another name for a limited partnership
D) just another name for a corporation Answer: B
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
8) In Canada, which of the following business organization forms cannot avoid double
taxation?
A) Limited Partnership
B) Publicly Traded Corporation
C) Privately Owned Corporation
D) Limited Liability Company Answer: B
A+ Page 3
, Created By: A Solution
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
9) In Canada, the dividend tax credit gives some relief by:
A) effectively giving a lower tax rate on dividend income than on other sources of income
B) effectively giving a higher tax rate on dividend income than on other sources of income
C) effectively giving the same tax rate on dividend income as on other sources of income
D) effectively giving a tax rate of zero on dividend income compared to other sources of
income Answer: A
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
10) Which of the following statements is most correct?
A) An advantage to incorporation is that it allows for less regulation of the business.
B) An advantage of a corporation is that it is subject to double taxation.
C) Unlike a partnership, a disadvantage of a corporation is that it has limited liability.
D) Corporations face more regulations when compared to partnerships. Answer: D
Diff: 2 Type: MC
Topic: 1.1 The Three Types of Firms
11) In Canada, the distinguishing feature of a corporation is that:
A) there is no legal difference between the corporation and its owners
B) it is a legally defined, artificial being, separate from its owners
A+ Page 4
Test Bank for Corporate Finance, 5th Edition by
Jonathan Berk, DeMarzo Chapter 1-31 A+
Chapter 1: The Corporation
1.1 The Three Types of Firms
1) A sole proprietorship is owned by:
A) one person
B) two or more people
C) shareholders
D) bankers Answer: A
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
2) In Canada, which of the following organization forms accounts for the greatest number of
firms?
A) Limited Liability Partnership
B) Limited Partnership
C) Sole Proprietorship
D) Publicly Traded Corporation Answer: C
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
A+ Page 1
,Created By: A Solution
3) Which of the following organization forms earns the most revenue?
A) Privately Owned Corporation
B) Limited Partnership
C) Publicly Owned Corporation
D) Limited Liability Company Answer: C
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
4) Which of the following is NOT an advantage of a sole proprietorship?
A) Single taxation
B) Ease of setup
C) Limited liability
D) No separation of ownership and control Answer: C
Diff: 2 Type: MC
Topic: 1.1 The Three Types of Firms
5) Which of the following statements regarding limited partnerships is TRUE?
A) There is no limit on a limited partner's liability.
B) A limited partner's liability is limited by the amount of his investment.
C) A limited partner is not liable until all of the assets of the general partners have been
exhausted.
D) A general partner's liability is limited by the amount of his investment. Answer: B
Diff: 2 Type: MC
A+ Page 2
,Created By: A Solution
Topic: 1.1 The Three Types of Firms
6) Which of the following is/are an advantage(s) of incorporation?
A) Access to capital markets
B) Limited liability
C) Unlimited life
D) All of the above Answer: D
Diff: 2 Type: MC
Topic: 1.1 The Three Types of Firms
7) In Canada, a limited liability partnership, LLP, is essentially:
A) a limited partnership without limited partners
B) a limited partnership without a general partner
C) just another name for a limited partnership
D) just another name for a corporation Answer: B
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
8) In Canada, which of the following business organization forms cannot avoid double
taxation?
A) Limited Partnership
B) Publicly Traded Corporation
C) Privately Owned Corporation
D) Limited Liability Company Answer: B
A+ Page 3
, Created By: A Solution
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
9) In Canada, the dividend tax credit gives some relief by:
A) effectively giving a lower tax rate on dividend income than on other sources of income
B) effectively giving a higher tax rate on dividend income than on other sources of income
C) effectively giving the same tax rate on dividend income as on other sources of income
D) effectively giving a tax rate of zero on dividend income compared to other sources of
income Answer: A
Diff: 1 Type: MC
Topic: 1.1 The Three Types of Firms
10) Which of the following statements is most correct?
A) An advantage to incorporation is that it allows for less regulation of the business.
B) An advantage of a corporation is that it is subject to double taxation.
C) Unlike a partnership, a disadvantage of a corporation is that it has limited liability.
D) Corporations face more regulations when compared to partnerships. Answer: D
Diff: 2 Type: MC
Topic: 1.1 The Three Types of Firms
11) In Canada, the distinguishing feature of a corporation is that:
A) there is no legal difference between the corporation and its owners
B) it is a legally defined, artificial being, separate from its owners
A+ Page 4
