Which of the Following Statements Is CORRECT

question 34

Multiple Choice

Which of the following statements is CORRECT?

• A) One disadvantage of operating as a corporation rather than as a partnership is that corporate shareholders are exposed to more personal liability than are partners.
• B) Relative to sole proprietorships, corporations generally face fewer regulations, and they also find it easier to raise capital.
• C) There is no good reason to expect a firm's stockholders and bondholders to react differently to the types of assets in which it invests.
• D) Stockholders should generally be happier than bondholders to have managers invest in risky projects with high potential returns as opposed to safe projects with lower expected returns.
• E) Bondholders should generally be happier than stockholders to have managers invest in risky projects with high potential returns as opposed to safe projects with lower expected returns.

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Definitions:

Income Statement

A financial statement that shows a company's revenue and expenses over a specific period, resulting in a net profit or loss.

Statement of Retained Earnings

A financial statement that shows how a company's retained earnings have changed over a given period due to profits retained in the business or dividends distributed.

Adjusted Trial Balance

A trial balance that accounts for all adjustments made in the accounting period, used for preparing financial statements.

General Ledger Accounts

The complete record of all financial transactions over the life of a company, organized by account.