Chapter One

the decision to issue additional shares of stock is an example of

a capital structure decision

which of the following individuals have unlimited liability for a firms debts based on their ownership interest

both general partners and sole proprietors

which one of the following terms is defined as the mixture of a firm's debt and equity financing

capital structure

a _____ has all the respective rights and privileges of a legal person

corporation

which business form is best suited to raising large amounts of capital

corporation

one disadvantage of the corporate form of business ownership is the

double taxation of distributed profits

a business formed by two or more individuals who each have unlimited liability for all of the firms business debts is called a

general partnership

a limited partnership

has at least one partner who has unlimited liability for all of the partnership's debts

which one of the following questions is a working capital management decision

how much inventory should be on hand for immediate sale

a general partner

is personally responsible for all partnership debts

a limited liability company

is taxed similar to a partnership

Sam, Alfredo, and Juan want to start a small U.S. business. Juan will fund the venture but wants to limit his liability to his initial investment and has no interest in the daily operations. Sam will contribute his full efforts on a daily basis but has limited funds to invest in the business. Alfredo will be involved as an active consultant and manager and will also contribute funds. Sam and Alfredo are willing to accept liability for the firm's debts as they feel they have nothing to lose by doing so. All three individuals will share in the firm's profits and wish to keep the initial organizational costs of the business to a minimum. Which form of business entity should these individuals adopt?

limited partnership

which one of the following is a primary market transaction

sale of a new share of stock to an individual investor

financial managers should primarily focus on the interests of

shareholders

which one of the following statements concerning a sole proprietorship is correct

the life of a sole proprietorship is limited

which one of the following statements concerning a sole proprietorship is correct

the owner of a sole proprietorship is personally responsible for all the company's debts

the primary advantage of being a limited partner is

the partners maximum loss is limited to their capital investment

Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This transaction:

was facilitated in the secondary market

an example of a capital budgeting decision is deciding

whether or not to purchase a new machine for the production line