Sam, Alfredo, and Juan want to start a small U.S. business. Juan will fund the venture but wants to limit his liability

Sam, Alfredo, and Juan want to start a small U.S. business. Juan will fund the venture but wants to limit his liability to his initial investment and has no interest in the daily operations. Sam will contribute his full efforts on a daily basis but has limited funds to invest in the business. Alfredo will be involved as an active consultant and manager and will also contribute funds. Sam and Alfredo are willing to accept liability for the firm's debts as they feel they have nothing to lose by doing so. All three individuals will share in the firm's profits and wish to keep the initial organizational costs of the business to a minimum. Which form of business entity should these individuals adopt?    A.  sole proprietorship B.  joint stock company C.  limited partnership D.  general partnership E.  corporation Refer to section 1.2

36.

Sally and Alicia currently are general partners in a business located in Atlanta, Georgia. They are content with their current tax situation but are both very uncomfortable with the unlimited liability to which they are each subjected. Which form of business entity should they consider to replace their general partnership assuming they wish to remain the only two owners of their business? Whichever organization they select, they wish to be treated equally.    A.  sole proprietorship B.  joint stock company C.  limited partnership D.  limited liability company E.  corporation Refer to section 1.2

37.

Which one of the following best states the primary goal of financial management?    A.  maximize current dividends per share B.  maximize the current value per share C.  increase cash flow and avoid financial distress D.  minimize operational costs while maximizing firm efficiency E.  maintain steady growth while increasing current profits Refer to section 1.3

Alfredo has a non-cancelable, five year lease on an industrial-grade sewing machine for stitching upholstery

Alfredo has a non-cancelable, five year lease on an industrial-grade sewing machine for stitching upholstery. For accounting purposes, this is considered to be a capital lease. The life of the sewing machine is five years. Alfredo must pay all taxes and insurances related to this lease. Which type of lease does Alfredo have on this sewing machine?    A.  open B.  straight C.  operating D.  financial E.  tax-oriented Refer to section 27.1

5.	A financial lease in which the lessor is the owner for tax purposes is called a(n) _____ lease.    A.  open B.  straight C.  operating D.  tax-oriented E.  tax-exempt Refer to section 27.1

6.

Heavy Equipment Rentals borrows money on a nonrecourse basis from The Financial Group to fund its purchases of construction equipment such as backhoes, graders, earth movers, etc. This equipment is then leased to contractors. The leases are classified as tax-oriented leases. Which one of the following terms best describes these lease of construction equipment?    A.  leveraged lease B.  sale and leaseback arrangement C.  operating lease D.  perpetual lease E.  straight lease Refer to section 27.1

7.

Brentwood Industries is selling its tool and die equipment to Upward Financial and then leasing that equipment from Upward for a period of ten years, which is the useful remaining life of the equipment. Which type of lease arrangement is this?    A.  leveraged lease B.  sale and leaseback C.  operating lease D.  tax-oriented lease E.  straight lease Refer to section 27.1

8.	You are comparing a lease to a purchase. The NPV associated with this analysis is referred to as the:    A.  open interest net present value. B.  depreciated net present value. C.  net advantage to leasing. D.  profitability index. E.  net value of purchasing. Refer to section 27.5

9.

Which one of the following statements is correct concerning the lease versus buy decision?    A.  The lessor is primarily concerned with returning the asset at the end of the lease term without incurring any additional charges. B.  The lessor is primarily concerned about the use of the asset. C.  If Dell Computer became a lessor of its own computers it would be engaging in direct leasing. D.  A firm should always purchase, rather than lease, any asset that has a projected positive salvage value at the end of the relevant period of use. E.  Lessors provide a source of financing for lessees. Refer to section 27.1

10.	In a direct lease, the lessor: I. is the end user of the asset. II. rents the leased asset from the manufacturer. III. owns the asset. IV. is generally an independent leasing company.    A.  II and III only B.  I and IV only C.  III and IV only D.  II, III, and IV only E.  I, II, III, and IV