Jim Created a Shoe-Manufacturing Corporation by Contributing $1,000

question 68

Multiple Choice

Jim created a shoe-manufacturing corporation by contributing $1,000.He stayed as the sole shareholder and director of the corporation.To inject further capital into the corporation,he loaned the corporation $100,000 and secured the loan in exchange for all the corporation's assets.Five years into operations,the corporation has still failed to make profits and consequently filed for bankruptcy.Who has been defrauded?

• A)Ordinary shareholders
• B)Preferred shareholders
• C)Nonshareholder-creditors
• D)Board of directors

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Definitions:

Accounting Profits

The difference between total revenue and explicit costs, reflecting the net income reported on financial statements.

Economic Profits

Profits exceeding the opportunity costs of all inputs into a business, considered a measure of efficiency and economic performance beyond just accounting profit.

Farmer's Market

A public and recurring assembly of farmers or their representatives selling the food and products they produce directly to consumers.

Implicit Costs

The opportunity costs of using resources that a company already owns, not directly paid for with cash.