The final exam consists of 60 multiple choice and/or true false questions worth 2.5 points each. The 60 assessment items may include, but are not limited to the following:
1. The goal of the financial manager Chapter 1 Maximize stockholder’s wealth
2. Legal forms of business organization, with specific emphasis on the advantages/disadvantages of corporations Sole Proprietorship: a business owned by one individual (greatest in number of the forms) Advantages: Easiest to start, least regulated, single owner gets all profits, taxed as personal income Disadvantages: Limited to life of owner, equity capital limited to owner’s personal wealth, unlimited liability, difficult to sell ownership interest Partnership: Similar to sole proprietorship, except the business has more than one owner. Advantages: more capital available and relatively easy to start, taxation is simple (each owner reports their percentage of income Disadvantages: unlimited liability extends to both partners (joint and severally liable), difficult to raise capital, difficult to transfer ownership NOTE: A limited partnership limits the partners to their investment, but one partner has to be unlimitedly liable Corporation: a separate legal entity that exists apart from its owners (shareholders or stockholders). Most important in total sales, assets, profits, and contributions to national income. Advantages: limited liability, unlimited life, separation of owners/management, transfer of ownership is easy, easier to raise capital Disadvantages: separation of owners/management, double taxation (corporate income and dividends paid are both taxed) S Corporation: The stockholders of the form maintain the limited liability of a corporation but are taxed as a partnership. Limited
