1. Because a single proprietorship is not a legal entity, any income generated by the business goes directly on the owner’s personal tax return.

True

False

2. In S-corporations, a failure to comply with the definition of “reasonable” salary means that the IRS can reclassify the profits as wages and tax the amount at the personal income rate.

True

False

3. A general partnership is comparable to a sole proprietorship in that neither is a taxable entity; therefore, the partners’ profits are taxed as personal income.

True

False

4. Many students find funding to start up a business through business plan competitions, which are often hosted by colleges and universities or small business associations.

True

False

5. The Community Adjustment and Investment Program is designed to assist businesses that might have been adversely impacted by NAFTA.

True

False

6. Generation of internal funding means that a business plows its retained earnings back into the business.

True

False

7. The term financial leveragecan be seen as being comparable to the base word—lever; a certain level of debt can amplify the “lifting” power of a business.

True

False

8. A breakeven analysis is remarkably useful to someone considering starting up a business.

True

False

9. Total variable costs are those costs that change across the volume of production.

True

False

10. If the NPV of a firm is negative, then it should undertake the investment; if it is positive, the firm should not undertake the investment.

True

False