fcan fendeavor fto fhave fthe fboard fvoted fout fand fa fnew fboard fvoted fin fshould fa fconflict farise. fIt fis fpossible ffor fa fperson
fto fsimultaneously fserve fas fCEO fand fchairman fof fthe fboard, fthough fmany fcorporate fcontrol fexperts fbelieve fit fis fbad fto
fvest fboth foffices fin fthe fsame fperson.
a. True
b. False
ANSWER: f True
4. Partnerships fand fproprietorships fgenerally fhave fa ftax fadvantage fover fcorporations.
a. True
b. False
ANSWER: f True
5. A fdisadvantage fof fthe fcorporate fform fof forganization fis fthat fcorporate fstockholders fare fmore fexposed fto
fpersonal fliabilities fin fthe fevent fof fbankruptcy fthan fare finvestors fin fa ftypical fpartnership.
a. True
b. False
ANSWER: f False
6. An fadvantage fof fthe fcorporate fform fof forganization fis fthat fcorporations fare fgenerally fless fhighly fregulated
fthan fproprietorships fand fpartnerships.
a. True
b. False
ANSWER: f False
7. Some fpartners fin fa fpartnership fmay fhave fdifferent frights, fprivileges, fand fresponsibilities fthan fother fpartners.
a. True
Copyright Cengage Learning. Powered by Cognero. Page 1
,1. An Overview of Financial Management.
b. False
ANSWER: f True
8. One fadvantage fof fthe fcorporate fform fof forganization fis fthat fit favoids fdouble ftaxation.
a. True
b. False
ANSWER: f False
9. It fis fgenerally fharder fto ftransfer fone's fownership finterest fin fa fpartnership fthan fin fa fcorporation.
a. True
b. False
ANSWER: f True
11. If fa fcorporation felects fto fbe ftaxed fas fan fS fcorporation, fthen fit fcan favoid fthe fcorporate ftax. fHowever, fits
fstockholders fwill fhave fto fpay fpersonal ftaxes fon fthe ffirm's fnet fincome.
a. True
b. False
ANSWER: f True
12. If fa fcorporation felects fto fbe ftaxed fas fan fS fcorporation, fthen fboth fit fand fits fstockholders fcan favoid fall fFederal
ftaxes. fThis fprovision fwas fput finto fthe fFederal fTax fCode fin forder fto fencourage fthe fformation fof fsmall fbusinesses.
a. True
b. False
ANSWER: f False
13. It fis fgenerally fless fexpensive fto fform fa fcorporation fthan fa fproprietorship fbecause, fwith fa fproprietorship,
fextensive flegal fdocuments fare frequired.
a. True
b. False
ANSWER: f False
14. The fmore fcapital fa ffirm fis flikely fto frequire, fthe fgreater fthe fprobability fthat fit fwill fbe forganized fas fa fcorporation.
a. True
b. False
ANSWER: f True
15. One fdisadvantage fof fforming fa fcorporation frather fthan fa fpartnership fis fthat fthis fmakes fit fmore fdifficult ffor fthe
ffirm's finvestors fto ftransfer ftheir fownership finterests.
a. True
Copyright Cengage Learning. Powered by Cognero. Page 2
, 1. An Overview of Financial Management.
b. False
ANSWER: f False
16. Organizing fas fa fcorporation fmakes fit feasier ffor fthe ffirm fto fraise fcapital. fThis fis fbecause fcorporations' fstockholders
fare fnot fsubject fto fpersonal fliabilities fif fthe ffirm fgoes fbankrupt fand falso fbecause fit fis feasier fto ftransfer fshares fof fstock
fthan fpartnership finterests.
a. True
b. False
ANSWER: f True
17. In forder fto fmaximize fits fshareholders' fvalue, fa ffirm's fmanagement fmust fattempt fto fmaximize fthe fstock fprice fin
fthe flong frun, for fthe fstock's f"intrinsic fvalue."
a. True
b. False
ANSWER: f True
18. If fmanagement foperates fin fa fmanner fdesigned fto fmaximize fthe ffirm's fexpected fprofits ffor fthe fcurrent fyear, fthis
fwill falso fmaximize fthe fstockholders' fwealth fas fof fthe fcurrent fyear.
a. True
b. False
ANSWER: f False
19. In forder fto fmaximize fits fshareholders' fvalue, fa ffirm's fmanagement fmust fattempt fto fmaximize fthe fexpected fEPS.
a. True
b. False
ANSWER: f False
20. In forder fto fmaximize fits fshareholders' fvalue, fa ffirm's fmanagement fmust fattempt fto fmaximize fthe fstock fprice
fon fa fspecific ftarget fdate.
a. True
b. False
ANSWER: f False
21. As fa fresult fof ffinancial fscandals foccurring fduring fthe fpast fdecade, fthere fhas fbeen fa fstrong fpush fto fimprove
fbusiness fethics.
a. True
b. False
ANSWER: f True
22. There fare fmany ftypes fof funethical fbusiness fbehavior. fOne fexample fis fwhere fexecutives fprovide finformation fthat
fthey fknow fis fincorrect fto fbanks fand fto fstockholders. fIt fis fillegal fto fprovide fsuch finformation fto fbanks, fbut fit fis fnot
fillegal fto fprovide fit fto fstockholders fbecause fthey fare fthe fowners fof fthe ffirm, fnot foutsiders.
a. True
b. False
ANSWER: f False
Copyright Cengage Learning. Powered by Cognero. Page 3
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