------------------------------------------------- CHAPTER 1
AN OVERVIEW OF FINANCIAL MANAGEMENT AND THE FINANCIAL ENVIRONMENT

Please see the preface for information on the AACSB letter indicators (F, M, etc.) on the subject lines.

True/False Easy: | (1.2) Firm organization F M | Answer: b | EASY | . | The form of organization for a business is not an important issue, as this decision has very little effect on the income and wealth of the firm's owners. | | | | | | | | | | | | a. | True | | | | | | | | | b. | False | | | | | | | | | | | | | | | | | | | (1.2) Firm organization F M | Answer: b | EASY | . | The …show more content…

| | d. | Sole proprietorships and partnerships generally have a tax advantage over many corporations, especially large ones. | | e. | Corporations of all types are subject to the corporate income tax. | | | | | | | | | | | | (1.2) Firm organization C M | Answer: a | EASY | . | Which of the following statements is CORRECT? | | | | | | | | | | | | a. | One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. | | b. | It is generally easier to transfer one’s ownership interest in a partnership than in a corporation. | | c. | One of the advantages of the corporate form of organization is that it avoids double taxation. | | d. | One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., “one person, one vote.” | | e. | Corporations of all types are subject to the corporate income tax. | | (1.2) Firm organization C M | Answer: d | EASY | . | Which of the following statements is CORRECT? | | | | | | | | | | | | a. | It is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required. | | b. | Corporations face fewer regulations than sole proprietorships. | | c. | One disadvantage of operating a business as a sole