Which of the Following Statements Is CORRECT

question 61

Multiple Choice

Which of the following statements is CORRECT?

• A) Corporations face few regulations and more favorable tax treatment than do sole proprietorships and partnerships.
• B) Managers who face the threat of hostile takeovers are less likely to pursue policies that maximize shareholder value compared to managers who do not face the threat of hostile takeovers.
• C) Bond covenants are an effective way to resolve conflicts between shareholders and managers.
• D) Because of their simplified organization, it is easier for sole proprietors and partnerships to raise large amounts of outside capital than it is for corporations.
• E) One advantage to forming a corporation is that the owners of the firm have limited liability.

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Definitions:

Business Organization

A business organization is a legal and operational structure created to conduct commercial activities, such as corporations, partnerships, and sole proprietorships.

Liabilities

Financial obligations or debts that an entity owes to others, which must be settled over time through the transfer of assets or services.

Assets

Resources owned by a business that have economic value and can be converted into cash or provide future benefits.

Borrowing Money

Acquiring funds from a lender under the condition of returning the principal sum along with agreed interest, used by individuals or organizations to finance their needs.