Corporate Structures and Ownership quiz Corporate Finance Quiz On Aug 16, 2024 Share /10 12345678910 Corporate Structures and Ownership 10 questions in 10 minutes Answers at the end of the exam Pass Score 70% 1 / 10 For a company that is financially sound, increasing the company’s rate of growth is most likely to benefit : neither debt holders nor equity holders equity holders, but not debt holders both debt holders and equity holders Assuming a company is repaying interest and principal in full and on time, debt holders have no further claims. Equity holders benefit from company growth . 2 / 10 From the corporate issuer’s perspective, the risk level of bonds compared to stocks is ___________. the same lower higher From the issuer’s perspective, bonds are riskier than stocks for the same reason bonds are safer than stocks for investors. Bonds increase risk to the corporation by increasing leverage. If the company is struggling and cannot meet its promised obligations to bondholders, bondholders have the legal standing to force certain actions upon the corporation, such as bankruptcy and liquidation 3 / 10 The business structure that provides the most operational simplicity and flexibility is a : sole proprietorship general partnership limited partnership (sole proprietorship) is correct because "the simplest business structure is the sole proprietorship, also called the sole trader....key features of sole proprietorships include: Operational simplicity and flexibility". (limited partnership) is incorrect because "key features of limited partnerships include the following: GP operates the business, having unlimited liability, LPs have limited liability but lack control over business operations. " Due to multiple partners and partnership agreement, this structure is not as simple and flexible as a sole proprietorship. "Key features of sole proprietorships include: Operational simplicity and flexibility." (general partnership) is incorrect because "a general partnership...has two or more owners called partners whose roles and responsibilities in the business are outlined in a partnership agreement." As such, this structure is not as simple and flexible as a sole proprietorship. "Key features of sole proprietorships include: Operational simplicity and flexibility". 4 / 10 Which business structure has the largest degree of separation between the owners and operators of a business ? Corporation General partnership Limited partnership In a corporation, owners are most often not directly involved in operating the business. Both general partnerships and limited partnerships have general partners who operate the business . 5 / 10 Which of the following payments are contractual obligations of a corporation ? Interest and principal payments Interest and common stock dividend payments Interest, principal, and preferred stock dividend payments Interest and principal payments to lenders are contractual obligations. A corporation may distribute dividends to owners but is not required to do so . 6 / 10 A corporation that wishes to raise equity capital and have its shares publicly traded is most likely to engage in : an initial public offering a direct listing on an exchange a management buyout An initial public offering is a sale of equity shares to the public. Proceeds from the sale increase the issuer's equity capital. A direct listing does not raise capital. A management buyout is a method to take a public company private. 7 / 10 The owner exposed to the least business liability is a : sole trader general partner in a limited partnership partner in a general partnership (partner in a general partnership) is correct because general partnerships are like sole proprietorships with the important distinction that they allow for additional resources to be brought into the business along with the sharing of business risk among a larger group of individuals. (sole trader) is incorrect because a sole trader "retains all return and assumes all risk ". (general partner in a limited partnership) is incorrect because "a limited partnership must have at least one general partner with unlimited liability who is responsible for the management of the business " . 8 / 10 In a partnership, a general partner's liability for the obligations incurred by the business : depends on whether the partnership is general or limited is unlimited is limited to the amount invested In either a general partnership or a limited partnership, general partners have unlimited liability. 9 / 10 Government regulators typically require periodic disclosure of a company's financial performance for : public companies only both private and public companies private companies only Regulators typically require periodic reporting of financial results for public companies. Private companies are typically not subject to these requirements. 10 / 10 Bondholders can become shareholders through non-market-based means . True False the statement is true. If a company fails to meet its obligation to bondholders and ultimately needs to petition the courts for bankruptcy protection, a potential alternative to asset liquidation to maximize proceeds for debt repayment is business reorganization. Following that path through the legal process as opposed to transactions in private or public markets, the company can be reorganized with shareholders getting wiped out and bondholders becoming its new shareholders. Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback corporate ownershipcorporate ownership chartcorporate ownership structure
