Which of the Following Statements Is CORRECT

question 27

Multiple Choice

Which of the following statements is CORRECT?

• A) Most businesses (by number and total dollar sales) are organized as proprietorships or partnerships because it is easier to set up and operate in 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.
• B) 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.
• C) Due to legal considerations related to ownership transfers and limited liability, most business (measured by dollar sales) is conducted by corporations in spite of large corporations' often
• Less favorable tax treatment.
• D) Large corporations are taxed more favorably than sole
• Proprietorships.
• E) Corporate stockholders are exposed to unlimited liability.

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Definitions:

Quick Ratio

A measure of a company's ability to meet its short-term obligations with its most liquid assets.

Inventory

The goods and materials a business holds for the purpose of resale or production.

Quick Ratio

A liquidity ratio that measures a company's ability to cover its short-term obligations with its most liquid assets, excluding inventory.

Current Ratio

A liquidity ratio that measures a company's ability to pay off its short-term liabilities with its short-term assets.