Until this year, Cheers Inc. was organized as a partnership.

This year, the partners have decided to organize the

business as a corporation. As a result of this change in organizational form, which of the following statements
is most correct?

a. Cheers’ shareholders (the ex-partners) will now have limited liability.

b. Cheers will now be subject to fewer regulations.
c. Cheers will now pay less in taxes.
d. Cheers’ investors will now find it more difficult to transfer ownership.

Which of the following could explain why a business might choose to organize as a corporation rather than as a sole
proprietorship or a partnership?

a. Corporations generally face fewer regulations.

b. Corporations generally face lower taxes.
c. Corporations generally find it easier to raise capital.
d. Corporations enjoy unlimited liability.

The primary goal of a publicly-owned firm interested in serving its stockholders should be to

a. Maximize expected total corporate profit.

b. Maximize expected EPS.
c. Minimize the chances of losses.
d. Maximize the stock price per share.
Which of the following statements is most correct?

a. A good goal for a corporate manager is maximization of expected EPS.

b. Most business in the U.S. is conducted by corporations; corporations’ popularity results primarily from
their favorable tax treatment.
c. A good example of an agency relationship is the one between stockholders and managers.
d. Corporations and partnerships have an advantage over proprietorships because a sole proprietor is subject
to unlimited liability, but investors in the other types of businesses are not.
Which of the following statements is most correct?

a. In a partnership, liability for other partners’ misdeeds is limited to the amount a particular
partner has invested in the business.
b. Partnerships must be formed according to specific rules that include the filing of a formal
written agreement with state authorities where the partnership does business.
c. A fast-growth company would be more likely to set up a partnership for its business
organization than would a slow-growth company.
 d. Partnerships have difficulty attracting capital in part because of the other disadvantages of the
partnership form of business, including the impermanence of the organization.
_______________ refers to the study of how money is managed.

A. marketing.
B. finance.
C. taxation.
D. accounting.

The _____________ works out the best way to structure finances and make effective financial decisions.

A. Finance manager.
B. Controller.
C. CEO.
D. Risk manager.

Which of the following business organisational forms subjects the owner(s) to unlimited
liability?

A. Company.
B. Proprietorship.
C. Public company.
D. Limited partnership.

The _______________ organisational form best enables the owners of the business to monitor
the actions of other owners of the same entity.

A. sole trader.
B. partnership.
C. public company.
D. private company.

Which of the following is an appropriate company goal?

A. Tax minimisation.
B. Shareholder wealth maximisation.
C. Profit maximisation.
D. Revenue maximisation.

The business environment that affects share prices excludes:

A. corporate laws.
B. environmental regulations.
C. capital budgeting decisions.
D. procedural and safety regulations.

The decision-making process through which managers choose to finance productive assets is known as:

A. financing decision.
B. investing decision.
C. capital budgeting.
D. operating decision.

A working capital manager’s role is to manage:

A. inventory and accounts receivable only.

B. cash and inventory only.
C. cash, inventory, accounts receivable, accounts payable and risk management.
D. accounts receivable and payable only.

_____________occur(s) when one party in a business transaction has information that is not
available to the other parties.

A. Financial advantage.
B. Information asymmetry.
C. Information efficiency.
D. Profits.