FIN - 320 exam 1

Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm on a 75/25 basis. Which type of entity did they create if they have no personal liability for the firm's debts? Public company Limited partnership Corporation General partnership Sole proprietorship

Corporation

Which one of the following statements about a limited partnership is correct? There must be at least one general partner. Equity financing is easy to obtain and unlimited. All partners have their losses limited to their capital investment in the partnership. Any partner can transfer his or her ownership interest without ending the partnership. All partners are treated equally.

There must be at least one general partner.

Jenna has been promoted and is now in charge of all external financing. In other words, she is in charge of: working capital management. capital structure management. capital budgeting. asset allocation. risk management.

capital structure management.

A limited liability company (LLC): provides limited liability for some, but not all, of its owners. prefers its profits be taxed as personal income to its owners. that meets the IRS criteria to be an LLC will be taxed like a corporation. is a hybrid between a sole proprietorship and a partnership. cannot be created for professional service firms, such as accountants and attorneys.

prefers its profits be taxed as personal income to its owners.

The issuer of a security must be involved in all _____ transactions involving that security. primary market dealer market over-the-counter secondary market exchange-listed

primary market

One example of a primary market transaction would be the: sale of 1,000 shares of newly issued stock by Alt Company to Miquel. purchase by Theo of 5,000 shares of stock from his father. sale of 100 shares of stock by Maria to her best friend. sale by Terry of 50,000 shares of stock to his brother. sale of 5,000 shares of stock owned by a corporate CEO to his son.

sale of 1,000 shares of newly issued stock by Alt Company to Miquel

What is the primary goal of financial management for a sole proprietorship? Decrease long-term debt to reduce the risk to the owner Minimize the reliance on fixed costs Maximize net income given the current resources of the firm Minimize the tax impact on the proprietor Maximize the market value of the equity

to maximize the market value of the equity