Which of the Following Statements Is CORRECT

question 1

Multiple Choice

Which of the following statements is CORRECT?

• A) Corporations generally are subject to fewer regulations and more favorable tax treatment than sole proprietorships and partnerships. This is why corporations do most of the business in the United
• States.
• B) Managers who face the threat of hostile takeovers are less likely to pursue policies that maximize shareholder value than are
• Managers who do not face the threat of hostile takeovers.
• C) One advantage of the corporate form of organization is that liability of the owners of the firm is limited to their investment
• In the firm.
• D) Because of their simplified organization, it is easier for sole proprietorships and partnerships to raise large amounts of outside
• Capital than it is for corporations.
• E) Bond covenants are an effective way to resolve conflicts between shareholders and managers.

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Definitions:

Production Possibilities Curve

Represents different combinations of two goods that can be produced with a given set of resources and technology, assuming efficient use of resources.

Domestic Output

The total value of all goods and services produced within the borders of a country within a specific period.

Before-Tax Household Income

The total income earned by all members of a household before any taxes are deducted.

Percent

A way to express a number as a fraction of 100, denoting proportions or ratios.