Which of the Following Statements Is Correct

question 31

Multiple Choice

Which of the following statements is correct?

• A) Other things held constant, it is generally safer to invest money in a proprietorship than in a company.
• B) There really is no difference between a general partnership and a company, because both have multiple owners and both offer limited liability to the owners.
• C) If you are planning to start a business, which you will run as the sole employee, and if you expect the business to earn R1,000,000 per year before taxes, you always can minimise the total taxes you pay by setting up the business as a company.
• D) According to the text, "agency problems" tend to increase when managers own larger relative amounts of the company's shares.
• E) Maximising the income statement item "net income" might not be the best goal for a company if the managers are interested in maximising the economic welfare of the firm's shareholders (that is, the firm's share price).

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