Which of the Following Is Not True About Promoters of a Corporation

question 87

Multiple Choice

Which of the following is not true about promoters of a corporation?

• A) A promoter can be relieved of liability on a contract entered into on behalf of a corporation with a third party if,after the corporation is formed,the third party agrees to a novation.
• B) A promoter can be relieved of liability on a contract entered into on behalf of a corporation with a third party if,at the time the contract is entered into,the third party agrees to a novation to occur automatically upon the valid creation of the corporation.
• C) The creation of the corporation does not automatically release the promoter from contracts entered into on behalf of the corporation.
• D) If the corporation fails to come into existence,the promoter cannot be held liable on a contract entered into on behalf of the corporation.

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Definitions:

Cost of Retained Earnings

This represents the opportunity cost for a company of using its retained earnings for investment purposes rather than distributing them as dividends.

Common Stock

A type of equity security that represents ownership in a corporation, giving holders voting rights and the potential for dividends.

Market Yield

The current rate of return anticipated on a bond if held until maturity, expressed as an annual percentage.

Component Cost

The cost related to each source of capital, such as debt and equity, that a company uses for funding.