Corporate Structures and Ownership quiz Corporate Finance QuizFinancial Analysis Quiz Share Corporate Structures and Ownership 10 questions in 10 minutes Answers at the end of the exam Pass Score 70% 1 / 10 The business structure that provides the most operational simplicity and flexibility is a : general partnership limited partnership sole proprietorship (sole proprietorship) is correctbecause "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". 2 / 10 Under which business structure are profits potentially subject to double taxation ? Corporation Limited partnership General partnership Double taxation refers to a situation in which a country taxes corporations' gross earnings and then taxes net earnings distributed to owners (dividends) as personal income. Partnership profits are subject to only one level of taxation (they are personal income of the partners) . 3 / 10 For a company that is financially sound, increasing the company’s rate of growth ismost likelyto benefit : equity holders, but not debt holders both debt holders and equity holders neither debt holders nor 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 . 4 / 10 The owner exposed to the least business liability is a : general partner in a limited partnership partner in a general partnership sole trader (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 " . 5 / 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 . 6 / 10 Government regulators typically require periodic disclosure of a company's financial performance for : public companies only private companies only both private and public companies Regulators typically require periodic reporting of financial results for public companies. Private companies are typically not subject to these requirements. 7 / 10 A corporation that wishes to raise equity capital and have its shares publicly traded is most likely to engage in : a management buyout a direct listing on an exchange an initial public offering 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. 8 / 10 Compared to a private company, public company investors have greater : share transferability return potential control over management (share transferability) is correct: because public shares trade on exchange whereas private shares do not. "In most cases, public companies have their shares listed and traded on an exchange. An exchange listing allows ownership to be more easily transferred because buyers and sellers transact directly with one another in the secondary market, on the exchange" . "If an owner of a private company wants to sell shares, he must find a willing buyer". (return potential) is incorrect : because "the potential returns in private companies can be much larger than those earned from investing in public companies." (control over management) is incorrect because "with often smaller numbers of shareholders in private companies, investors have greater control over management." 9 / 10 The owner's liability for the business obligations of a sole proprietorship : may be limited or unlimited is limited to the amount invested is unlimited A sole proprietorship is legally an extension of the individual who owns and operates it. The owner has unlimited liability for obligations the business incurs. 10 / 10 From the corporate issuer’s perspective, the risk level of bonds compared to stocks is ___________. the same higher lower 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 Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback corporate ownershipcorporate ownership chartcorporate ownership structure
