Question

Which are advantages of focusing on shareholder wealth maximization as the goal of financial management?

Check all that apply:

It can be measured objectively.

It's an unambiguous goal.

It avoids conflicts with other goals.

It takes into account both short-term and long-term effects and expectations.

What are examples of a possible result of the conflict of interest between shareholders and corporate managers?

Check all that apply:

Managers paying themselves excessive salaries.

Managers faking earnings to temporarily boost the stock price.

Managers using company resources for personal benefit.

Managers funding risky projects that could lose money.

Which statements are true?

Check all that apply:

C-corporations are subject to double taxation.

Corporations and LLCs limit the owners' liability.

LLCs are best for taking venture capital.

A general partnership can have many owners.

Which statements are true?

Check all that apply:

It is impossible to sell a part of your ownership stake in a sole proprietorship.

A sole proprietorship is subject to few government regulations.

A sole proprietorship is easy to set up.

All profits from a sole proprietorship are passed through to the owner for paying taxes.

A sole proprietorship offers limited liability.

A limited liability company is taxed like a _____ and its owners have _____ liability.

partnership; limited

partnership; unlimited

corporation; unlimited

corporation; limited

Which statements are true about partnerships?

Check all that apply:

Partnerships make it easy to raise large amounts of capital.

A partnership is easy to set up.

All profits from a partnership are passed through to the partners for paying taxes.

Partners have unlimited liability.

What are advantages of a corporation over a partnership?

Check all that apply:

Easier fundraising

Lower taxes

Limited liability

Unlimited life

Answer 1

1. It can be measured objectively,

It avoids conflicts with other goals.

2. Managers paying themselves excessive salary,

Managers using company resources for personal benefits.

3. C-Corporations are double taxed,

Corporations and LLC's limits the owner's liability,

A general partnership can have many owners.

4. It is impossible to sell part of the stake in a sole proprietorship,

A sole proprietor is subject to few government regulations,

A sole proprietorship is easy to set up,

All profits from a sole proprietorship are passed through to the owner for paying taxes.

5. A limited liability company is taxed like a Corporation and its owners have Limited liability.

6. A partnership is easy to set up. ,

All profits from a partnership are passed through to the partners for paying taxes,

Partners have unlimited liability.

7. Easier fundraising,

   Limited liability,

   Unlimited life