Which of the Following Statements Is Correct

question 15

Multiple Choice

Which of the following statements is correct?

• A)Other things held constant, it is generally safer to invest money in a proprietorship than in a corporation.
• B)There really is no difference between a general partnership and a corporation, because both have multiple owners and both offer limited liability to the owners.
• C)If you are planning to start a business, which you will run as the sole employee, and if you expect the business to earn $1,000,000 per year before taxes, you always can minimize the total taxes you pay by setting up the business as a corporation.
• D)According to the text, "agency problems" tend to increase when managers own larger relative amounts of the company's stock.
• E)Maximizing the income statement item "net income" might not be the best goal for a corporation if the managers are interested in maximizing the economic welfare of the firm's stockholders (that is, the firm's stock price).

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Definitions:

Direct Labor Rate

The cost per hour for labor directly involved in manufacturing goods or providing services.

Production Budget

A plan that outlines the expected production in units, considering sales forecasts and inventory requirements.

Direct Labor-Hours

The total hours worked directly on the production of goods or the provision of services.

Direct Labor Rate

The cost per hour for direct labor incurred in the production of goods.