Which of the Following Statements Is CORRECT

question 39

Multiple Choice

Which of the following statements is CORRECT?

• A) One disadvantage of organizing a business as a corporation rather than a partnership is that the equity investors in a corporation are exposed to unlimited liability.
• B) Using restrictive covenants in debt agreements is an effective way to reduce conflicts between stockholders and managers.
• C) Managers generally welcome hostile takeovers since the "raider" generally offers a price for the stock that is higher than the price before the takeover action started.
• D) The managers of established, stable companies sometimes attempt to get their state legislatures to impose rules that make it more difficult for raiders to succeed with hostile takeovers.
• E) The managers of established, stable companies sometimes attempt to get their state legislatures to remove rules that make it more difficult for raiders to succeed with hostile takeovers.

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Definitions:

Par Value

The face value of a bond or stock as stated by the issuing company, which does not necessarily reflect its market value.

Coupon Interest Rate

Yearly rate of interest on a bond, denoted as a percentage of its principal value.

Yield To Maturity

The total return anticipated on a bond if the bond is held until it matures, encompassing all interest payments and the repayment of principal.

Par Value

The face value of a bond, or the stock value stated in the corporate charter, often used as the basis for accounting of the bond or stock.