Which of the Following Statements Is CORRECT

question 22

Multiple Choice

Which of the following statements is CORRECT?

• A) In a typical partnership,liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business.
• B) In a limited partnership,the limited partners have voting control,while the general partner has operating control over the business,and the limited partners are individually responsible,on a pro rata basis,for the firm's debts in the event of bankruptcy.
• C) A slow-growth company,with little need for new capital,would be more likely to organize as a corporation than would a faster growing company.
• D) Partnerships have more difficulty attracting large amounts of capital than corporations because of such factors as unlimited liability,the need to reorganize when a partner dies,and the illiquidity (difficulty buying and selling)of partnership interests.
• E) A major disadvantage of a partnership relative to a corporation is the fact that federal income taxes must be paid by the partners rather than by the firm itself.

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Definitions:

Investing Activities

Transactions related to the acquisition or disposal of long-term assets and investments, used to assess a company's growth projects and capital expenditure.

Net Cash

The difference between the cash inflows and outflows in a given period, indicating the net change in a company's cash position.

Financing Activities

Transactions that result in changes in the size and composition of the equity and borrowings of a company, as reflected in its cash flows.

Free Cash Flow

The amount of cash a company produces through its operations, after subtracting the cost of expenditures on assets.