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Concept Review Questions
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  1. What is meant by limited liability? Do corporations have limited liability? What about sole proprietorships? (page 3)


  2. There is an important tax drawback in the United States to organizing as a corporation. What is it? (page 4)


  3. Firms invest real assets and finance them by selling financial assets. Give some examples of each. (page 4)


  4. Explain the difference between the roles of the treasurer and financial controller. (pages 6-7)


  5. Conflicts between shareholders and managers create agency costs. What are agency costs and when are they incurred? (page 8)


  6. It is often said that in battles the winning firm pays more than the target company is worth. What behavioral characteristics on the part of the acquiring firm's managers might account for this? (page 8)





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