Question 1

A corporation whose shares are held by a small number of individuals is referred to as a
A)proprietorship.
B)publicly traded corporation.
C)small business corporation.
D)privately held corporation.

Accepted Answer

A corporation whose shares are held by a small number of individuals is called a privately held corporation. In contrast, a publicly traded corporation is one whose shares are available for purchase by anyone on a stock exchange. A proprietorship is a business owned and operated by one individual, while a small business corporation is a type of corporation that has met certain requirements for size and ownership.

Question 2

Which of the following statements best describes a corporation?
A)can be single or multiple owners
B)taxed separately
C)most expensive to establish
D)all of the above

Accepted Answer

Corporations can have one or multiple owners (shareholders), are taxed separately from their owners, and are generally the most expensive type of business structure to establish due to legal and filing fees, making "all of the above" the correct choice.

Question 3

An example of an investing activity is
A)purchase of inventory.
B)collections of amounts owed by customers.
C)purchase of shares of other companies.
D)payment of taxes.

Accepted Answer

The purchase of shares of other companies is an investing activity. It involves the acquisition of assets with the intent of generating a return on investment through dividends, capital gains, or other means. Purchasing inventory, collecting amounts owed by customers, and paying taxes are all examples of operating or financing activities, not investing activities.

Question 4

Which of the following is a typical financing activity?
A)payment of dividends
B)payment of interest expense
C)payment of wages
D)purchases of inventory

Accepted Answer

Payment of dividends is a typical financing activity as it involves distributing profits to the company's shareholders. Financing activities involve raising capital through equity or debt issuances, and distributing profits to shareholders falls under equity financing. The other options listed (B, C, and D) are all operational activities.

Question 5

What is the initial investment by the shareholders in a company called?
A)owners' capital
B)shareholders' capital
C)retained earnings
D)shareholders' equity

Accepted Answer

The answer of What is the initial investment by the...

Question 6

The form of business ownership that most effectively limits the risk of ownership is
A)sole proprietorship.
B)general partnership.
C)corporation.
D)none of the above,all forms of business ownership are equally risky.

Accepted Answer

Corporation is the best choice because it is an independent legal entity, which means that the corporation's liabilities are its own and not its owner's. This limits the risk of ownership to the amount of investment made in the corporation. The other forms of business ownership, such as sole proprietorship and general partnership, expose the owners to unlimited liability, meaning that their personal assets may be used to pay off any business debts or obligations.

Question 7

Which of the following is an example of an operating activity?
A)paying dividends
B)sale of investment in other companies' shares
C)purchase of property,plant,and equipment
D)payment of interest expense

Accepted Answer

Paying dividends (A) is a financing activity, as it involves distributing profits to the company's owners/shareholders. Sale of investment in other companies' shares (B) is an investing activity, as it involves buying and selling assets outside the company's normal operations. Purchase of property, plant, and equipment (C) is also an investing activity, as it involves acquiring long-term assets necessary for the business's operations. Payment of interest expense (D) is an operating activity, as it is a normal and necessary expense incurred in the course of the company's operations.

Question 8

Jennifer is a university student looking to earn some cash for tuition over the summer months (April-August).She has decided to start a lawn care business,what business structure would best suit her needs?
A)private corporation
B)public corporation
C)general partnership
D)sole proprietorship

Accepted Answer

A sole proprietorship is the simplest form of business structure, suitable for Jennifer's small-scale lawn care business. It is inexpensive to set up and maintain, and allows Jennifer to have complete control over her business. This structure also allows her to report business income and expenses on her personal income tax return. The other options (private corporation, public corporation, general partnership) may be too complicated, unnecessary, or expensive for Jennifer's needs.

Question 9

Which of the following statements best describes a partnership?
A)separate legal entity
B)single owner
C)most expensive to establish
D)owners are responsible for debt of the company

Accepted Answer

In a partnership, the owners (or partners) are jointly and individually responsible for the debts and obligations of the company. Therefore, option D is the correct answer. Option A is false because a partnership is not a separate legal entity, unlike a corporation. Option B is false because a partnership has two or more owners. Option C is false because a partnership is generally less expensive to establish compared to a corporation.

Question 10

An example of a financing activity is
A)purchase of property.
B)issuing shares.
C)sales to customers.
D)payment of taxes.

Accepted Answer

Issuing shares is a financing activity as it involves raising capital by selling ownership interests in the company to investors. This activity directly affects the company's equity financing, which is a source of financing categorized under financing activities in the statement of cash flows. The other options (A, C, and D) are categorized under investing activities, operating activities, and taxes, respectively.

Question 11

All of the following are investing activities except
A)earning interest income.
B)purchasing property,plant,and equipment.
C)purchasing other companies' shares.
D)selling property,plant,and equipment.

Accepted Answer

Earning interest income is a financial activity, but it is not considered an investing activity because it does not involve the purchasing or selling of long-term assets. The other options, purchasing property, plant, and equipment, purchasing other companies' shares, and selling property, plant, and equipment, all involve investing in long-term assets and are therefore considered investing activities.

Question 12

The fundamental types of business activities that a firm typically engages in include all of the following except
A)operating.
B)borrowing.
C)investing.
D)financing.

Accepted Answer

The fundamental types of business activities are operating, investing, and financing. Borrowing is a means of financing, so it is included under the category of financing. Therefore, the correct answer is B.

Question 13

Operating activities include all of the following except
A)collections of accounts receivable.
B)payment of tax expense.
C)payment of dividends.
D)payment of interest expense.

Accepted Answer

Collections of accounts receivable, payment of tax expense, and payment of interest expense are all examples of operating activities. However, payment of dividends is considered a financing activity.

Question 14

A friend is looking to purchase shares as an investment,but would like information about whether or not the company has paid dividends in the last year.Where would your friend find this information in the financial statements? A)Income Statement B)Operating Activities on the Cash Flow Statement C)Investing Activities on the Cash Flow Statement D)Financing Activities on the Cash Flow Statement

Accepted Answer

Dividends paid by a company are typically reported in the Financing Activities section of the Cash Flow Statement. This section details the flow of cash between the company and its owners and creditors, including dividend payments.

Question 15

Which of the following statements best describes a proprietorship?
A)can be single or multiple owners
B)taxed separately
C)most expensive to establish
D)owner is responsible for debt of the company

Accepted Answer

Proprietorships are characterized by having a single owner who is personally responsible for the debts and obligations of the business. This means that if the business incurs debt or is sued, the owner's personal assets are at risk.

Question 16

Businesses can be operated in a number of different forms,such as a
A)corporation.
B)partnership.
C)proprietorship.
D)all of the above.

Accepted Answer

All three forms of businesses have their own advantages and disadvantages. A corporation offers limited liability to its shareholders, which means they are not personally liable for the company's debts. Corporations also have the ability to sell stocks to raise capital. A partnership allows two or more people to share the profits and losses of the business. Partnerships are relatively easy and low-cost to set up. A proprietorship is a business owned and operated by a single individual. Proprietorships are easy to start, have fewer legal requirements, and allow for more control for the owner. Therefore, the best choice depends on the specific needs and circumstances of the business.

Question 17

Which statement is incorrect in regards to the characteristics of a corporation? A)It is a separate legal entity. B)It can be sued. C)Shareholders liability is limited to their investment. D)It cannot be publicly accountable.

Accepted Answer

A corporation can be publicly accountable as it is required to make financial disclosures to its shareholders and the public.

Question 18

An example of an operating activity is
A)repaying loan principal.
B)paying dividends.
C)purchase of shares of other companies.
D)payments of taxes owed to the government.

Accepted Answer

Operating activities are the day-to-day activities of a company that generate revenue and incur expenses. One example of an operating activity is payments of taxes owed to the government, which is a normal part of a company's operations. Repaying loan principal and paying dividends are financing activities, while purchasing shares of other companies is an investing activity.

Question 19

Which of the following is a typical financing activity?
A)purchasing property,plant or equipment
B)purchasing another company's shares
C)paying interest expense
D)paying dividends

Accepted Answer

Paying dividends is a typical financing activity as it involves distributing profits to shareholders, which is a form of financing through equity. Purchasing property, plant or equipment (A) is a typical investing activity, purchasing another company's shares (B) could be considered an investing or financing activity depending on the circumstances, and paying interest expense (C) is a typical operating activity.

Question 20

Which of the following is not a typical operating activity? A)payment of accounts payable B)payment of long-term notes payable C)payment of wages D)collection of accounts receivable

Accepted Answer

Payment of long-term notes payable is not a typical operating activity. It is considered a financing activity. The other options listed, payment of accounts payable, payment of wages, and collection of accounts receivable are all typical operating activities.

Quiz 1: Overview of Corporate Financial Reporting

A corporation whose shares are held by a small number of individuals is referred to as a

Which of the following statements best describes a corporation?

An example of an investing activity is

Which of the following is a typical financing activity?

What is the initial investment by the shareholders in a company called?

The form of business ownership that most effectively limits the risk of ownership is

Which of the following is an example of an operating activity?

Jennifer is a university student looking to earn some cash for tuition over the summer months (April-August) .She has decided to start a lawn care business,what business structure would best suit her needs?

Which of the following statements best describes a partnership?

An example of a financing activity is

All of the following are investing activities except

The fundamental types of business activities that a firm typically engages in include all of the following except

Operating activities include all of the following except

A friend is looking to purchase shares as an investment,but would like information about whether or not the company has paid dividends in the last year.Where would your friend find this information in the financial statements?

Which of the following statements best describes a proprietorship?

Businesses can be operated in a number of different forms,such as a

Which statement is incorrect in regards to the characteristics of a corporation?

An example of an operating activity is

Which of the following is a typical financing activity?

Which of the following is not a typical operating activity?