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3. In terms of organizational costs, which of the following sequences is generally correct, moving from lowest to highest cost? A) General partnership, sole proprietorship, limited partnership, corporation B) Sole proprietorship, general partnership, limited partnership, corporation C) Corporation, limited partnership, general partnership, sole proprietorship D) Sole proprietorship, general partnership, corporation, limited partnership Answer: B 4. The cash flow statement shows amounts that the company has earned but for which it has not yet received cash. TRUE OR FALSE Answer: FALSE PRINCIPLES OF FINANCE \& FINANCIAL MARKETS Chap 1 and 2 1. What is the chief disadvantage of the sole proprietorship as a form of business organization when compared to the corporate form? A) Sole proprietorships are subject to double taxation of profits. B) The cost of formation. C) Inadequate profit sharing. D) Owners have unlimited liability. Answer: D 2. Profit maximization is not an adequate goal of the firm when making financial decisions because A) it does not necessarily reflect shareholder wealth maximization. B) it ignores the risk inherent in different projects that will generate the profits. C) it ignores the timing of a project's returns. D) all of the above are correct. Answer: D