Principles of Finance Exam 1 (Cedarville University)
Advantages of Proprietorship - ANSWER-1. they are easy and inexpensive to form
- they are subject to few government regulations
- they are subject to lower income taxes than are corporations
Disadvantages of Proprietorship - ANSWER-Limited to life of owner Equity capital limited to owner's personal wealth Unlimited liability
Partnership - ANSWER-An unincorporated business owned by two or more persons.
Advantages of Partnership - ANSWER-Ease of start-up Availability of capital and credit Personal interest Combined business skills and knowledge Retention of profits No special taxes
Forms of Business Organization - ANSWER-proprietorship, partnership, corporation
Propreitorship - ANSWER-unincorporated business owned by one individual
Disadvantages of Partnership - ANSWER-Unlimited liability Management disagreements Lack of continuity Frozen investment
Corporation - ANSWER-A legal entity created by a state, separate and distinct from its owners and managers, having unlimited life, easy transferability of ownership, and limited liability.
Advantages of a corporation - ANSWER-Limited liability Unlimited life Separation of ownership and management Transfer of ownership is easy Easier to raise capital
Disadvantages of a corporation - ANSWER-double taxation
To create value for the stockholders. - ANSWER-What is the main goal of a corporation?
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