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Free Questions › CFA › Corporate Issuers
Free CFA Corporate Issuers Practice Questions & Answers
900 exam-style Corporate Issuers questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 631
Which of the following is a characteristic of private limited companies?
Select an option first.
Correct answer: C — Limited liability for owners
Explanation: C is correct because private limited companies provide limited liability. A is wrong because many jurisdictions cap the number of owners. B is wrong because private shares are not freely tradeable. D is wrong because private companies have limited disclosure requirements.
Question 632
Which of the following is a key disadvantage of private companies?
Select an option first.
Correct answer: B — Limited transferability of shares
Explanation: B is correct because private companies restrict share transfers, making liquidity low. A is wrong because limited liability is an advantage. C is wrong because private capital raising is an advantage. D is wrong because fewer disclosures are also an advantage.
Question 633
What is the main reason public companies can raise more capital than other forms?
Select an option first.
Correct answer: B — They can issue shares to the public
Explanation: B is correct because public companies can sell shares widely on exchanges. A is wrong because public companies face more regulations. C is wrong because they have limited liability. D is wrong because they face double taxation.
Question 634
Which of the following is a feature of limited liability partnerships (LLPs)?
Select an option first.
Correct answer: B — All partners have limited liability
Explanation: B is correct because LLPs eliminate the need for a GP and give all partners limited liability. A is wrong because LLPs do not require a GP. C is wrong because LLPs are often restricted to professional firms. D is wrong because LLPs are typically pass-through entities.
Question 635
Which of the following is a key feature of corporate legal identity?
Select an option first.
Correct answer: C — It is separate from its owners
Explanation: C is correct because corporations are legally separate entities. A is wrong because corporations continue regardless of ownership changes. B is wrong because corporations can enter contracts. D is wrong because corporations can be sued.
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Question 636
Which of the following is a reason companies may choose to go private?
Select an option first.
Correct answer: B — To reduce regulatory burden
Explanation: B is correct because going private reduces reporting and compliance costs. A is wrong because disclosure decreases, not increases. C is wrong because liquidity decreases. D is wrong because free float disappears entirely.
Question 637
Which organizational form is most likely to be used by early-stage companies seeking high growth?
Select an option first.
Correct answer: B — Private limited company
Explanation: B is correct because private limited companies allow limited liability and flexible ownership while avoiding public disclosure. A is wrong because sole proprietorships have limited financing. C is wrong because partnerships have liability constraints. D is wrong because early-stage companies rarely go public.
Question 638
Which of the following is a characteristic of public exchanges?
Select an option first.
Correct answer: C — Rules-based trading with price transparency
Explanation: C is correct because exchanges provide transparent, rules-based trading. A is wrong because transparency is a key feature. B is wrong because exchanges are open access. D is wrong because many instruments and investors participate.
Question 639
Which of the following is a key difference between private and public companies?
Select an option first.
Correct answer: B — Public companies must disclose financial information; private companies have limited disclosure
Explanation: B is correct because public companies must file audited reports, while private companies disclose far less. A is wrong because both forms have limited liability. C is wrong because private companies cannot list shares. D is wrong because public companies can raise debt.
Question 640
Which of the following best describes a corporation’s ability to operate across multiple jurisdictions?
Select an option first.
Correct answer: B — It is subject to regulations where it is incorporated, operates, and finances itself
Explanation: B is correct because corporations must comply with regulations in all jurisdictions where they incorporate, operate, or raise capital. A is wrong because operations abroad require compliance with foreign laws. C is wrong because corporations are not exempt from foreign regulations. D is wrong because corporations often operate in multiple jurisdictions.
Question 641
Which of the following is a key feature of limited partners (LPs) in a limited partnership?
Select an option first.
Correct answer: C — Their liability is limited to their investment
Explanation: C is correct because LPs’ losses are capped at their investment. A is wrong because LPs typically do not manage the business. B is wrong because only general partners have unlimited liability. D is wrong because capital contributions vary.
Question 642
Which of the following is a reason private companies may outperform public companies?
Select an option first.
Correct answer: B — They have fewer disclosure requirements
Explanation: B is correct because fewer disclosure requirements allow management to focus on long-term strategy. A is wrong because public companies face more short-term pressure. C is wrong because private companies do not report quarterly. D is wrong because private companies cannot access public capital markets.
Question 643
Which of the following is a characteristic of public limited companies?
Select an option first.
Correct answer: B — Shares can be traded on an exchange
Explanation: B is correct because public companies list shares on exchanges. A is wrong because ownership transfer is unrestricted. C is wrong because liability is limited. D is wrong because corporations face double taxation.
Question 644
Which of the following is a key reason general partnerships are formed?
Select an option first.
Correct answer: B — To pool resources and expertise
Explanation: B is correct because partnerships allow multiple owners to combine capital and skills. A is wrong because partners share management. C is wrong because liability is unlimited. D is wrong because partnerships cannot issue shares.
Question 645
Which of the following is a feature of private placements?
Select an option first.
Correct answer: C — They are offered to a limited group of investors
Explanation: C is correct because private placements target accredited or sophisticated investors. A is wrong because private placements are not exchange-traded. B is wrong because disclosure is limited. D is wrong because liquidity is low.
Question 646
Which of the following best describes the taxation of public corporations?
Select an option first.
Correct answer: C — Taxed at the corporate level and again at the shareholder level
Explanation: C is correct because public corporations face double taxation. A is wrong because pass-through applies to partnerships and proprietorships. B is wrong because corporations pay taxes. D is wrong because reinvested profits avoid shareholder tax, not corporate tax.
Question 647
Which of the following is a benefit of going public?
Select an option first.
Correct answer: B — Increased access to capital
Explanation: B is correct because public companies can raise capital from a wide investor base. A is wrong because regulatory burden increases. C is wrong because shareholders retain voting rights. D is wrong because profits are not guaranteed.
Question 648
Which of the following is a disadvantage of sole proprietorships?
Select an option first.
Correct answer: B — Limited access to financing
Explanation: B is correct because financing is limited to the owner’s resources. A is wrong because formation is simple. C is wrong because taxation is pass-through. D is wrong because the owner manages the business.
Question 649
Which of the following is a characteristic of corporations that helps attract investors?
Select an option first.
Correct answer: B — Limited liability
Explanation: B is correct because limited liability protects investors’ personal assets. A is wrong because unlimited liability deters investment. C is wrong because ownership is not equal. D is wrong because corporations have extensive reporting requirements.
Question 650
Which of the following is a key feature of the economic balance sheet?
Select an option first.
Correct answer: B — It includes intangible assets like human capital
Explanation: B is correct because the economic balance sheet includes intangible and hard-to-measure assets. A is wrong because it includes more than financial assets. C is wrong because liabilities are included. D is wrong because it is broader than the financial balance sheet.
Question 651
Which of the following is a reason corporations are more expensive to form?
Select an option first.
Correct answer: B — They must file articles of incorporation
Explanation: B is correct because incorporation requires formal filings and compliance. A is wrong because legal documentation is required. C is wrong because liability is limited. D is wrong because corporations can raise significant financing.
Question 652
Which of the following is a feature of public company share trading?
Select an option first.
Correct answer: B — Conducted on exchanges with transparent pricing
Explanation: B is correct because exchanges provide transparent, rules-based trading. A is wrong because private negotiation applies to private companies. C is wrong because public shares are widely available. D is wrong because trading occurs continuously.
Question 653
Which of the following is a characteristic of limited liability companies (LLCs)?
Select an option first.
Correct answer: B — Pass-through taxation in many jurisdictions
Explanation: B is correct because LLCs often receive pass-through tax treatment. A is wrong because liability is limited. C is wrong because LLC shares are not publicly traded. D is wrong because reporting requirements are limited.
Question 654
Which of the following is a key advantage of limited partnerships?
Select an option first.
Correct answer: B — LPs have limited liability
Explanation: B is correct because LPs’ liability is capped at their investment. A is wrong because LPs typically cannot manage. C is wrong because GPs have unlimited liability. D is wrong because partnerships cannot issue public shares.
Question 655
Which of the following is a reason corporations issue debt?
Select an option first.
Correct answer: C — Debt allows financing without giving up ownership
Explanation: C is correct because debt financing preserves ownership. A is wrong because debt requires interest. B is wrong because debt does not dilute ownership. D is wrong because debt is not tax-free.
Question 656
Which of the following is a characteristic of public company investors?
Select an option first.
Correct answer: B — They can buy shares through exchanges
Explanation: B is correct because public shares are accessible to all investors. A is wrong because investors do not manage the company. C is wrong because accreditation is not required for public markets. D is wrong because shares can be sold anytime.
Question 657
Which of the following is a reason private companies may remain private?
Select an option first.
Correct answer: B — To maintain control among existing owners
Explanation: B is correct because private companies often want to preserve control. A is wrong because regulatory oversight decreases. C is wrong because liquidity is lower. D is wrong because private companies cannot access public markets.
Question 658
Which of the following is a characteristic of corporations that helps them raise capital?
Select an option first.
Correct answer: B — Ability to issue standardized securities
Explanation: B is correct because standardized securities (shares, bonds) attract investors. A is wrong because liability is limited. C is wrong because ownership is not equal. D is wrong because corporations do not use pass-through taxation.
Question 659
Which of the following is a characteristic of private company share transfers?
Select an option first.
Correct answer: B — Often restricted by agreements
Explanation: B is correct because private companies restrict transfers. A is wrong because shares are not freely tradeable. C is wrong because transfers may be denied. D is wrong because private companies do not list shares.
Question 660
Which of the following is a feature of corporate debt?
Select an option first.
Correct answer: B — It must be repaid with interest
Explanation: B is correct because debt requires repayment plus interest. A is wrong because debt does not confer ownership. C is wrong because repayment is mandatory. D is wrong because debt has priority over equity.
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