Question

1.	An IOU ("I owe you") from your brother-in-law is a financial asset. True    False

2.	The separation of ownership and management is one distinctive feature of both corporations and sole proprietors. True    False

3.	Shareholders welcome higher short-term profits even when they damage long-term profits. True    False

4.	A well-designed compensation package can help a firm achieve its goal of maximizing market value. True    False

5.	While control of large public companies in the United States is exercised through the board of directors and pressure from the stock market, in many other countries the stock market is less important and control shifts to major stockholders, typically banks and other companies. True    False

6.	Established firms can create value by developing long-term relationships and maintaining a good reputation. True    False

7.

Which one of these is a disadvantage of the corporate form of business?  

A.	Access to capital

B.	Unlimited personal liability for owners

C.	Limited firm life

D.	Legal requirements

8.

Which one of the following gives a corporation its permanence?  

A.	Multiple owners

B.	Limited liability

C.	Corporation taxation

D.	Separation of ownership and control

9.

In a partnership form of organization, income tax liability, if any, is incurred by:

A.	the partnership itself.

B.	the partners individually.

C.	both the partnership and the partners.

D.	neither the partnership nor the partners.

10.

Which one of the following would correctly differentiate general partners from limited partners in a limited partnership?  

A.	General partners have more job experience.

B.	General partners have an ownership interest.

C.	General partners are subject to double taxation.

D.	General partners have unlimited personal liability.

11.	Which form of organization provides limited liability for the firm but yet allows the professionals working within that firm to be sued personally?

Answer 1

1: True

(IOU is a financial assets since it gets its value from a contractual claim.)

2: False

(While ownership and management are separate in case of corporations, it is not so in case of sole proprietor)

3: False

(Shareholders also require return in the form of capital gain and appreciation in terms of future prices)

4: True

(If the compensation package is good, the employees stay motivated to add value to the busness.This maximizes the wealth of the shareholders)