ASU FIN 300 EXAM 1 (CH 1-4)
QUESTIONS WITH COMPLETE
ANSWERS
Limited Partnership - ANSWER-Same as general except:
*liability = only up to amount* capital invested in
-*capital = less limited*
-owner/manager *conflict = some*
-harder to sell shares
*limited partners* are owners but *cannot be managing* -limited in decision making
Limited Liability Partnership / Company (LLP / LCC) - ANSWER--for
professional/licensed
hybrid business organizations that combine some of the advantages of corporations
and partnerships
-income to the partners *taxed only as personal income*
-*partners have limited liability*
capital = less limited
conflict = some
life = flexible can be transferred
Corporation - ANSWER-*A legal entity ("person")* chartered by a state or the federal
government that is *distinct and separate* *from owners*
liability of owners/stockholders = limited b/c corp takes action in its own name
-costly to start
-capital = good/less limited
*life = indefinite*
*conflict = high*
-shares = easy to sell
C Corporation - ANSWER-The *most common* type of corporation, which is a legal
entity, *public* that offers
*limited liability to owners*
*taxed = doubled*
at corporate and personal (on income earned and dividends)
*capital = excellent* access
S Corporation - ANSWER-*private* corporation
-*restrictions = less than 100 stockholders
-only one class of stock
, taxed = as partnership
capital= less limited
Public markets - ANSWER-markets *regulated by the SEC* in which securities
(stocks and bonds) are *traded publicly*
Privately held corporations - ANSWER-*small # of investors*
shares not traded publicly
Capital structure - ANSWER-the mix of debt and equity that is used to finance a firm
Net working capital - ANSWER-the dollar difference between total current assets and
total current liabilities
Capital Markets - ANSWER-financial markets where equity and debt instruments
with maturities greater than one year are traded
Residual Cash Flow - ANSWER-cash remaining after a firm has paid operating
expenses and what it owes creditors and taxes, can be distributed to owners as cash
dividend or by repurchasing shares or reinvested into business
Cash flows between firms and stake/stockholders - ANSWER-A. Cash flows
generated by productive assets through sale of goods/services → management
invests in current and productive long term assets → cash paid as wages, to
suppliers, as interest, as taxes → to employees, suppliers, creditors and government
(stockholders)
B. Residual Cash Flow
→ cash reinvested in business
→ cash used to pay dividends/repurchase shares
Forms of Business Organization - ANSWER-1. *Sole proprietorship*- one person
2. *General Partnership*
3. *Limited Partnership*
4. *Limited Liability* Partnership or Company (LLP / LCC)
5. *Corporation*
a) C corp
b) *S Corp*
c. Corporation- separate legal status and ability to recruit professional management,
corporate income taxed twice, conflicting goals between owners and management
d. LLC- owners not personally responsible, combine corporation with sole
proprietorship
Sole proprietorship - ANSWER--owner = *1 person*
-*taxes*= as *personal* income, paid once
-*liability= all to owner*
-life = limited to owner, no stock to sell
-*capital = very limited / difficult* to raise
QUESTIONS WITH COMPLETE
ANSWERS
Limited Partnership - ANSWER-Same as general except:
*liability = only up to amount* capital invested in
-*capital = less limited*
-owner/manager *conflict = some*
-harder to sell shares
*limited partners* are owners but *cannot be managing* -limited in decision making
Limited Liability Partnership / Company (LLP / LCC) - ANSWER--for
professional/licensed
hybrid business organizations that combine some of the advantages of corporations
and partnerships
-income to the partners *taxed only as personal income*
-*partners have limited liability*
capital = less limited
conflict = some
life = flexible can be transferred
Corporation - ANSWER-*A legal entity ("person")* chartered by a state or the federal
government that is *distinct and separate* *from owners*
liability of owners/stockholders = limited b/c corp takes action in its own name
-costly to start
-capital = good/less limited
*life = indefinite*
*conflict = high*
-shares = easy to sell
C Corporation - ANSWER-The *most common* type of corporation, which is a legal
entity, *public* that offers
*limited liability to owners*
*taxed = doubled*
at corporate and personal (on income earned and dividends)
*capital = excellent* access
S Corporation - ANSWER-*private* corporation
-*restrictions = less than 100 stockholders
-only one class of stock
, taxed = as partnership
capital= less limited
Public markets - ANSWER-markets *regulated by the SEC* in which securities
(stocks and bonds) are *traded publicly*
Privately held corporations - ANSWER-*small # of investors*
shares not traded publicly
Capital structure - ANSWER-the mix of debt and equity that is used to finance a firm
Net working capital - ANSWER-the dollar difference between total current assets and
total current liabilities
Capital Markets - ANSWER-financial markets where equity and debt instruments
with maturities greater than one year are traded
Residual Cash Flow - ANSWER-cash remaining after a firm has paid operating
expenses and what it owes creditors and taxes, can be distributed to owners as cash
dividend or by repurchasing shares or reinvested into business
Cash flows between firms and stake/stockholders - ANSWER-A. Cash flows
generated by productive assets through sale of goods/services → management
invests in current and productive long term assets → cash paid as wages, to
suppliers, as interest, as taxes → to employees, suppliers, creditors and government
(stockholders)
B. Residual Cash Flow
→ cash reinvested in business
→ cash used to pay dividends/repurchase shares
Forms of Business Organization - ANSWER-1. *Sole proprietorship*- one person
2. *General Partnership*
3. *Limited Partnership*
4. *Limited Liability* Partnership or Company (LLP / LCC)
5. *Corporation*
a) C corp
b) *S Corp*
c. Corporation- separate legal status and ability to recruit professional management,
corporate income taxed twice, conflicting goals between owners and management
d. LLC- owners not personally responsible, combine corporation with sole
proprietorship
Sole proprietorship - ANSWER--owner = *1 person*
-*taxes*= as *personal* income, paid once
-*liability= all to owner*
-life = limited to owner, no stock to sell
-*capital = very limited / difficult* to raise
