Key to Financial Reporting, Financial Statement Analysis and Evaluation

4306 Words Apr 22nd, 2011 18 Pages
Chapter 1 An Overview of Financial Management and The Financial Environment
ANSWERS TO END-OF-CHAPTER QUESTIONS
1-1 a. A proprietorship, or sole proprietorship, is a business owned by one individual. A partnership exists when two or more persons associate to conduct a business. In contrast, a corporation is a legal entity created by a state. The corporation is separate and distinct from its owners and managers. b. In a limited partnership, limited partners’ liabilities, investment returns and control are limited, while general partners have unlimited liability and control. A limited liability partnership (LLP), sometimes called a limited liability company (LLC), combines the limited liability advantage of a corporation with the tax
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A computer/telephone network, such as Nasdaq, consists of all the facilities that provide for security transactions not conducted at a physical location exchange. These facilities are, basically, the communications network that links the buyers and sellers. i. An open outcry auction is a method of matching buyers and sellers. In an auction, the buyers and sellers are face-to-face, with each stating the prices and which they will buy or sell. In a dealer market, a dealer holds an inventory of the security and makes a market by offering to buy or sell. Others who wish to buy or sell can see the offers made by the dealers, and can contact the dealer of their choice to arrange a transaction. In an ECN, orders from potential buyers and sellers are automatically matched, and the transaction is automatically completed.

Answers and Solutions: 1- 2

j. Production opportunities are the returns available within an economy from investment in productive assets. The higher the production opportunities, the more producers would be willing to pay for required capital. Consumption time preferences refer to the preferred pattern of consumption. Consumer’s time preferences for consumption establish how much consumption they are willing to defer, and hence save, at different levels of interest. q. A foreign trade deficit occurs when businesses and individuals in the U. S. import more goods from foreign countries than are

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