FINN 3120 Chapter 1 - Essentials of Corporate Finance

Partnership

A business without separate legal authority formed by two or more people is known as a __________________________.

1. All the partners share in gains or losses of the partnership. 2. Each owner has unlimited liability for all firm debts.

A general partnership has which of the following characteristics?

General partnership

A partnership in which partners share in gains or losses, and carry unlimited liability for all partnership debts, is called a: __________________

Two

A partnership must have at least _______ owners.

The amount the shareholder invested in the corporation.

A shareholder's liability is limited to which of these?

Unlimited

A sole proprietor has _________________ personal liability for all business debts and obligations.

Is owned by one person

A sole proprietorship is a business that _______________________.

Articles of incorporation

An organization must prepare _________________ and bylaws when forming a corporation.

Limited

Businesses are motivated to organize as corporations because stockholders in a corporation have ______________ liability for corporate debts.

Ownership is transferred by gifting or selling shares of stock.

How is ownership transferred in a corporation?

Limited to their cash contribution to the partnership.

In a limited partnership, a limited partner's liability for business debts is ________________________.

Financial

One of the important questions in the area of investments includes the potential risks and reward associated with investing in ____________________ assets.

Management

Since ________________ and ownership are separated, a corporation's life is unlimited.

Corporate

The four basic areas of finance include investments, financial institutions, international finance, and ____________________ finance.

Shareholders

The owners of a corporation are called ________________.

True

True or False: A corporation borrows money in its own name.

True

True or false: In a large corporation, stockholders and managers are usually separate groups.

Limited partnership

What type of partnership involves both general and limited partners to run the business?

1. Legal powers to sue. 2. The ability to issue stock.

When a corporation is formed, it is granted which of the following rights?

1. What are the risks and rewards associated with investing? 2. What is the best mixture of financial assets to hold? 3. What determines the price of a financial asset?

Which of the following are key questions for investments?

Personal finance

Which of the following is NOT one of the basic areas of finance?

Difficulty of transferring ownership

Which of the following is a disadvantage of sole proprietorships and partnerships?

It can be difficult to raise cash for investment in these forms, and that limits the ability of the business to grow.

Why don't large businesses organize as sole proprietorships or partnerships?