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Chapter 6 ASREB Review Questions and Answers 100% Accurate
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Chapter 6 ASREB Review
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Chapter 6 ASREB ReviewLeverage - answer using borrowed funds to purchase assets
What would indicate the highest degree of leverage?
A. 120,000 paid in cash
B. 165,000 sales price with 10% down payment
C. 193,000 sales price with 1st and 2nd mortgage of 125,500
D. 155,000 sales price with 20% down payment – answer B. 165,000 sales price with
10% down payment
Sole Proprietorship - answer-A business owned by one person
-complete ownership over business operation
-personal income tax
-100% liable for losses
-creditors could claim business & personal property
Partnerships - answer2 or more individuals as co-owners
General Partnership - answer partnership in which partners share equally in both
responsibility and liability
-trustee holds title in organizations name
-each pay individual taxes
-unlimited liability for acts of partnership
Limited partnership - answerpassive investors/limited partners; they have no voting
rights or management control
-debt is limited to the amt you invested
-general partner runs the org. receives compensation but is liable for excess losses
S Corporation - answer-no more than 100 shareholders
-treated as a partnership
-pays no corporate taxes
-shareholders are taxed individually based on % of ownership
Limited Liability Company - answer-most like a partnership
-allows pass through income taxation
-taxed at an individual level
Real Estate Investment Trust (REIT) - answer-an organization that purchases, owns,
and manages real estate for its investors
-a trust with beneficiaries
-100 investors
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