Which of the Following Statements Is True of a Corporation

question 131

Multiple Choice

Which of the following statements is true of a corporation?

• A)Corporations pay the same variety of taxes as other forms of business.
• B)Although a corporation is a separate legal entity,it cannot be sued.
• C)Any stockholder of a corporation can commit the corporation to a binding contract.
• D)The owners of a corporation are called stockholders.

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Definitions:

Arbitrage Pricing Theory

A financial model that estimates the return of an asset by considering multiple risk factors and their respective risk premiums, excluding unsystematic risk through diversification.

Nonsystematic Risk

The risk associated with a specific issuer of a security, also known as idiosyncratic or unsystematic risk, that can be reduced through diversification.

Well-Diversified Portfolio

An investment portfolio that includes a mix of assets (e.g., stocks, bonds, real estate) to reduce risk through diversification.

Nonsystematic Variance

Refers to the variability in a security or portfolio returns that is not due to market-wide influences but rather specific to an individual security or firm.