Correct Answer: C

Choice "c" is correct. In a limited partnership, a general partner may be a secured creditor of the limited

partnership.

Choice "a" is incorrect. In a limited partnership, a limited partner may be an unsecured creditor of the

limited partnership.

Choice "b" is incorrect. In a limited partnership, a general partner may also be a limited partner at the same

time.

Choice "d" is incorrect. In a limited partnership, only the limited partners will have limited liability. A limited

partnership must have at least one general partner and general partners have unlimited liability.

(The word "all" makes this option wrong.)

Correct Answer: B

Choice "b" is correct. The bylaws are adopted by the incorporators or directors, are not required to be filed, and generally will contain rules desired regarding the operation of the corporation. Choice "a" is incorrect. Articles of incorporation are filed with the state and contain information regarding the formation of the corporation. Choice "c" is incorrect. A certificate of authority is filed with the foreign state that a business wishes to do business in and with permission from that state. Choice "d" is incorrect. A shareholder agreement is a contract between shareholders for any rights or duties agreed upon between the parties.

Correct Answer: D

Choice "d" is correct. Shareholders must be individuals, estates, or certain trusts. Corporations are not

permitted to be shareholders of an S corporation.

Choices "a", "b", and "c" are incorrect, per the above Explanation.

Correct Answer: D

Choice "d" is correct. Shareholders have the right to elect and remove directors through the voting

process.

Choice "a" is incorrect. Officers are selected by the directors rather than by the shareholders.

Choice "b" is incorrect. Because officers are selected by the directors, generally they may be removed only

by the directors.

Choice "c" is incorrect. Dividends generally can be declared only by the directors; shareholders usually do

not have any right to declare or vote on a distribution.

Correct Answer: B

Choice "b" is correct. Oligopoly market conditions are characterized by:

?Few firms in the market ?Significant barriers to entry ?Differentiated products ?Fixed (or semi fixed) prices ?Kinked demand curves

Choice "a" is incorrect. This is an example of monopoly. Choice "c" is incorrect. Horizontal demand curves represent demand that is perfectly price elastic (buyers will only pay one price for any quantity of a product). This occurs in perfectly competitive markets. Choice "d" is incorrect. This is characteristic of perfect competition, as there are no barriers to entry ("size doesn't matter") in perfect competition.

Correct Answer: A

Choice "a" is correct. Product demands become more elastic the greater the number of substitutes available. With price increases, consumers will switch to substitute goods.

Choice "b" is incorrect. Consumer income will not affect demand elasticity.

Choice "c" is incorrect. Elasticity of supply and demand is unrelated.

Choice "d" is incorrect. Product demand is more elastic the longer the time period, since more choices

become available.

Correct Answer: A

Choice "a" is correct. Historical weighted average cost of capital is usually used as the target or hurdle rate

in the residual income approach.

Choices "b", "c", and "d" are incorrect, per the above definition.

Correct Answer: D

Choice "d" is correct. The net present value method of capital budgeting assumes that cash flows are

reinvested at the discount rate used in the analysis.

Choices "a", "b", and "c" are incorrect, per the above Explanation.

Correct Answer: B

Rule: Operating leverage is the presence of fixed costs in operations, which allows a small change in sales to produce a larger relative change in profits. Choice "b" is correct. A firm with a higher degree of operating leverage when compared to the industry average implies that the firm's profits are more sensitive to changes in sales volume.

Choice "a" is incorrect. Higher variable costs imply a lower degree of operating leverage.

Choice "c" is incorrect. Profits will depend upon sales.

Choice "d" is incorrect. A firm using a significant amount of debt financing has a higher degree of "financial

leverage."

Correct Answer: B

Choice "b" is correct. Paying by means of a draft (or check) allows the firm to take advantage of the float

period. These delays cash disbursements.

Choice "a" is incorrect. A centralized disbursement function will not necessarily delay cash disbursements.

Choice "c" is incorrect. Factoring is the sale of accounts receivable to a factor. This has no effect on cash

disbursements.

Choice "d" is incorrect. Trade discounts are discounts on account receivable and do not impact cash

disbursements.