Test Bank For Financial Management Theory and Practice 12th Edition By Eugene F. Brigham
CHAPTER 1
AN OVERVIEW OF FINANCIAL MANAGEMENT AND THE FINANCIAL ENVIRONMENT
True/False
Easy:
| (1.2) Firm organization | Answer: b | EASY | |||||||||
| [i]. | The form of organization for a business is not an important issue, as this decision has very little effect on the income and wealth of the firm’s owners. | ||||||||||
| a. | True | ||||||||||
| b. | False | ||||||||||
| (1.2) Firm organization | Answer: b | EASY | |||||||||
| [ii]. | The major advantage of a regular partnership or a corporation as a form of business organization is the fact that both offer their owners limited liability, whereas proprietorships do not. | ||||||||||
| a. | True | ||||||||||
| b. | False | ||||||||||
| (1.2) Partnership | Answer: a | EASY | |||||||||
| [iii]. | There are three primary disadvantages of a regular partnership: (1) unlimited liability, (2) limited life of the organization, and (3) difficulty of transferring ownership. These combine to make it difficult for partnerships to attract large amounts of capital and thus to grow to a very large size. | ||||||||||
| a. | True | ||||||||||
| b. | False | ||||||||||
| (1.2) Proprietorship | Answer: a | EASY | |||||||||
| [iv]. | Two disadvantages of a proprietorship are (1) the relative difficulty of raising new capital and (2) the owner’s unlimited personal liability for the business’ debts. | ||||||||||
| a. | True | ||||||||||
| b. | False | ||||||||||
[i].   (1.2) Firm organization                                 Answer: b EASY
[ii].  (1.2) Firm organization                                 Answer: b EASY
[iii]. (1.2) Partnership                                       Answer: a EASY
[iv].  (1.2) Proprietorship                                     Answer a EASY
