A) This is an example of an exchange of physical assets.
B) This is an example of a primary market transaction.
C) This is an example of a direct transfer of capital.
D) This is an example of a money market transaction.
F) All of the above
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A) A good goal for a firm's management is maximization of expected EPS.
B) Like corporations, the board of directors for an income trust supervises the operating entity on behalf of unitholders.
C) There is legal obligation to pay cash distributions for income trusts.
D) Agency conflicts easily arise between shareholders and managers.
F) A) and C)
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A) In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business.
B) Partnerships have trouble attracting large capital due to such facts as unlimited liability, and the illiquidity of partnership interests.
C) A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster-growing company.
D) A major disadvantage of all partnerships relative to all corporations is the fact that taxes must be paid by the partners rather than by the firm itself.
F) None of the above
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B) False
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A) Due to limited liability, unlimited lives, and ease of ownership transfer, the vast majority of businesses are organized as corporations.
B) Due to legal considerations related to ownership transfers and limited liability, most business is conducted by corporations in spite of large corporations' often less favourable tax treatment.
C) Large corporations are taxed more favourably than sole proprietorships.
D) Corporate stockholders are exposed to unlimited liability.
F) A) and C)
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B) False
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A) Income trust investors do not need to pay personal taxes on cash distribution received.
B) Income trusts face the same issue of double taxation as corporations.
C) Up to 2011, existing income trusts are allowed to treat their equity as debt for tax purposes.
D) Income trusts usually require significant capital reinvestment in the businesses.
F) None of the above
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A) Less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership.
B) Corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization.
C) Corporate investors are exposed to limited growth potential.
D) Corporations generally face relatively few regulations.
F) A) and C)
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A) maximize the stock price per share over the long run, which is the stock's intrinsic value
B) maximize the firm's expected EPS
C) maximize the firm's expected total income
D) maximize the stock price on a specific target date
F) None of the above
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A) Decrease the size of expected cash flow of the company.
B) Slow down the cash receipt of the organization.
C) Increase the risk level of the firm.
D) Raise the free cash flows of the business.
F) B) and D)
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A) One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability.
B) It is generally easier to transfer one's ownership interest in a partnership than in a corporation.
C) One of the advantages of the corporate form of organization is that it avoids double taxation.
D) One of the advantages of a corporation from a social standpoint is that every shareholder has equal voting rights, i.e., "one person, one vote."
F) C) and D)
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