Which of the Following Statements Is CORRECT

question 13

Multiple Choice

Which of the following statements is CORRECT?

• A) Due to limited liability,unlimited lives,and ease of ownership transfer,the vast majority of U.S.businesses (in terms of number of businesses)are organized as corporations.
• B) Most businesses (by number and total dollar sales)are organized as proprietorships or partnerships because it is easier to set up and operate one of these forms rather than as a corporation.However,if the business gets very large,it becomes advantageous to convert to a corporation,primarily because corporations have important tax advantages over proprietorships and partnerships.
• C) Due to legal considerations related to ownership transfers and limited liability,which affect the ability to attract capital,most business (measured by dollar sales)is conducted by corporations in spite of large corporations' less favorable tax treatment.
• D) Large corporations are taxed more favorably than proprietorships.
• E) Corporate stockholders are exposed to unlimited liability.

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Definitions:

Depreciation

The allocation of the cost of a tangible asset over its useful life.

Net Operating Income

The income earned from a company's everyday business operations, excluding taxes and interest.

Internal Rate

Often referenced in the context of the internal rate of return (IRR), it is a metric used in capital budgeting to estimate the profitability of potential investments.

Investment Project

An undertaking requiring capital investments with the goal of generating future returns or benefits.