The Three Crosby Children Intend to Form a Business

question 65

Multiple Choice

The three Crosby children intend to form a business. The business will borrow $900,000 from a local bank. Which of the following statements is true?

• A) Regardless of whether the business is a partnership or an S corporation, the owners will include the bank debt in the tax basis of their ownership interests.
• B) From a liability standpoint, the owners should be indifferent as to whether they are a general partnership or an S corporation.
• C) If the business is an S corporation, the owners can allocate income and losses in any reasonable manner.
• D) If the business is a partnership the owners can allocate income and losses in any reasonable manner.

Calculate and interpret a firm's market-to-book ratio.

Apply the constant-growth dividend discount model (DDM) appropriately.

Understand the concepts of book value, liquidation value, market value, and Tobin's q.

Recognize the factors that influence the valuation of Internet companies.

---

Definitions:

Total Cost

The entire expense of production, incorporating both consistent and fluctuating costs.

Produce

Refers to agricultural products, especially fresh fruits and vegetables, created through farming.

Utility

Utility is a measure of satisfaction or happiness that consumers derive from consuming goods and services.

Consumption

The use of goods and services by households or individuals, typically considered as the end phase in the economic cycle of production, distribution, and use.