Which of the Following Statements Is CORRECT

question 21

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) Unlimited liability and limited life are two key advantages of the corporate form over other forms of business organization.
• C) A corporation is a legal entity that is generally created by a state, and it has a life and existence that is separate from the lives of its individual owners and managers.
• D) Limited liability of its stockholders is an advantage of the corporate form of organization, but corporations have more trouble raising money in financial markets because of the complexity of this form of organization.
• E) Although its stockholders 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 its managers if the firm defaults on its debt, even if the default is the result of poor economic conditions.

---

Definitions:

Operating Cycles

The period it takes for a company to purchase inventory, sell it, and convert the sale into cash.

Financial Statements

Reports that provide an overview of a company's financial condition, including balance sheet, income statement, and cash flow statement.

Cost of Merchandise Sold

The total cost incurred to acquire goods that have been sold during a period, including purchase price and other expenses related to procurement.

FOB Shipping Point

A term indicating that the buyer takes ownership and pays for transportation costs once the goods leave the seller’s premises.