Reading 16: Organizing Production LOS e习题精选 following, business, different, 2010

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LOS e, (Part 1): Describe the different types of business organization.

For which of the following organizational structures is (are) the entire wealth of the owner(s) at risk?

A) Proprietorships only.

B) Partnerships and proprietorships.

C) Corporations.

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The owners (shareholders) of a corporation have only the amount of their investment at risk. This is referred to as limited liability.

 

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Consider the following two business firms:

Firm 1 has more than one owner. Each owner’s legal liability for the debts and obligations of the firm can exceed the amount they have invested in the firm.

Firm 2 is a legal entity that pays income taxes.

Which choice most accurately describes the type of business organization characterized by Firm 1 and Firm 2?

Firm 1

Firm 2

A) Corporation Corporation

B) Partnership Proprietorship

C) Partnership Corporation

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Firm 1 is a partnership. If it were a corporation, the owners’ liability would be limited to the amount they have invested. Firm 2 is a corporation, the only type of business organization that pays income taxes. Proprietorship or partnership income flows through to the individual owners, who pay personal income taxes on it.

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Of the indicated type of business organization which of the following potential disadvantages are most likely to be associated with it?

A) Proprietorship; double taxation.

B) Corporation; principal-agent problem.

C) Proprietorship; principal-agent problem.

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The principal-agent problem arises when the incentives and motivations of managers and workers (agents) are not the same as the incentives and motivations of their firm’s owners (principals). The principal-agent problem is associated with the corporate form of business organization, where the owners of the firm are its shareholders.

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LOS e, (Part 2): Describe the advantages and disadvantages of the different types of business organization.

The advantages of a proprietorship are least likely to include:

A) single taxation of profits.

B) ease of formation.

C) limited liability.

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The advantages of a proprietorship is that it’s easy to establish, it has a simple decision making process, and profits are only taxed once. A disadvantage is that the owner has unlimited liability for the firm’s debt.

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Which of the following organizational structures usually has the lowest cost of raising external capital?

A) Corporations.

B) Partnerships and proprietorship

C) Proprietorships.

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Relative to proprietorships and partnerships, external capital is more readily available to and less expensive for corporations.

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Which of the following organizational structures is (are) subject to double taxation?

A) Corporations.

B) Proprietorships.

C) Partnerships and proprietorships.

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Corporations must pay taxes on the firm’s profits and the shareholders must pay on profits distributed as dividends.

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Which of the following types of business firms exposes its owners to the greatest legal liability in the U.S. and which type of firm is most likely to face a principal-agent conflict, respectively?

A) Proprietorship; partnership.

B) Proprietorship; corporation.

C) Corporation; corporation.

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The owner of a proprietorship is subject to unlimited liability. Shareholders of corporations have limited liability, only up to the amount invested.

In many corporations, the agent (management) may be working for different objectives than those of the principal (shareholders).