Which of the Following Statements Is CORRECT

question 40

Multiple Choice

Which of the following statements is CORRECT?

• A) A hostile takeover is the main method of transferring ownership interest in a corporation.
• B) A corporation is a legal entity created by a state,and it has a life and existence that is separate from the lives and existence of its owners and managers.
• C) Unlimited liability and limited life are two key advantages of the corporate form over other forms of business organization.
• D) Limited liability is an advantage of the corporate form of organization to its owners (stockholders),but corporations have more trouble raising money in financial markets because of the complexity of this form of organization.
• E) Although the stockholders of the corporation are insulated by limited legal liability,the legal status of the corporation does not protect the firm's managers in the same way,i.e. ,bondholders can sue the firm's managers if the firm defaults on its debt.

---

Definitions:

Preferred Stock

A class of ownership in a corporation with a fixed dividend that is paid out before dividends to common stockholders.

Preemptive Rights

A shareholder's right to buy new shares issued by a company in proportion to their existing shareholding, before the shares are offered to the public.

Stock Purchase

The act of buying shares in a company, giving the purchaser a portion of ownership in that company.

Common Stock Holders

Individuals or entities that own a share of common stock in a corporation, granting them voting rights and a portion of the company’s profits.