Why Is It Possible for a Corporation to Enter into Contracts

question 69

Multiple Choice

Why is it possible for a corporation to enter into contracts, acquire assets, incur obligations, and enjoy protection against the seizure of its property?

• A) Its owners are liable for any obligations it enters into.
• B) It is a legally defined, artificial entity that is separate from its owners.
• C) The number of owners, and hence the spread of risk among these owners, is not limited.
• D) The state in which the corporation is incorporated provides safeguards against any wrongdoing by the corporation.

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Definitions:

Impaired

A reduction in the recoverable value of an asset below its carrying value on the balance sheet, leading to recognition of an impairment loss.

Market Value

The market value denotes the ongoing rate at which an asset or service can be traded in a marketplace.

Market Value

The present rate at which a service or asset is available for purchase or sale on the open market.

Present Value

Present Value is a financial concept that calculates the current worth of a future sum of money or stream of cash flows given a specified rate of return.