When Forming a Corporation, a Transferor-Shareholder May Choose to Receive

question 79

Essay

When forming a corporation, a transferor-shareholder may choose to receive some corporate debt along with stock.
Identify some of the issues the transferor must consider when deciding whether debt should be a part of the transaction.

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Definitions:

Marginal Cost

The hike in overall costs when one extra unit of a product or service is produced.

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, representing surplus remaining after all costs have been paid.

Entry Barriers

Obstacles that prevent or hinder new competitors from easily entering an industry or area of business.

Total Profit

The financial gain obtained by subtracting total expenses from total revenue generated from sales or operations.