Use the Following Statements to Answer This Question

question 38

Multiple Choice

Use the following statements to answer this question:
I.Risk of information asymmetry is high in an IPO because the company's public disclosure, as a public firm, is minimal.
II.An IPO prospectus eradicates the issue of information asymmetry completely.

• A)I and II are correct.
• B)I and II are incorrect.
• C)I is correct and II is incorrect.
• D)I is incorrect and II is correct.

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Definitions:

Advertising

The activity or profession of producing advertisements for commercial products or services to increase sales or public awareness.

Property Taxes

Taxes paid by property owners on their real estate and personal property, usually imposed by local governments based on the assessed value of the property.

Flow-through

A business entity that passes income to the owners or investors, avoiding corporate income tax, including S corporations, partnerships, and sole proprietorships.

C Corporation

A corporate legal framework where the entity is distinct for tax purposes from its owners or shareholders.