CHAPTER 1

What are the major types of firms?

• Sole Proprietorships

• Partnerships

• Limited Liability Companies

• Private Limited Company

• Public Limited Company

What is a sole proprietorship?

• A business owned and run by one person.

• A business owned by multiple partners.

• A corporation with limited liability.

• A company that can trade shares publicly.

What are the disadvantages of a sole proprietorship?

• Unlimited personal liability for debts.

• Difficult to raise capital.

• Limited lifespan.

• All of the above.

What is the main difference between partnerships and sole proprietorships?

• Partnerships have more than one owner.

• Partnerships have limited liability.

• Sole proprietorships can have multiple partners.

• Partnerships are easier to set up.

What is a corporation?

• A business owned by one person.

• A legal entity separate from its owners.

• A type of partnership.

• A limited liability company.

What are the features of corporations?

• Legally defined artificial being.

• Can enter into contracts.

• Owners are not liable for obligations.

• All of the above.

What is the role of the financial manager?

• Making investment decisions.

• Managing cash flows.

• Making financial decisions.

• All of the above.

What is the goal of a firm?

• To maximize shareholder value.

• To minimize costs.

• To increase market share.

• To expand globally.

What is an agency problem?

• When managers act in their own interest.

• When shareholders have too much control.

• When a corporation faces bankruptcy.

• When a firm has too many owners.

What is the primary market?

• A market for trading existing shares.

• A market for issuing new shares.

• A market for bonds.

• A market for commodities.