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

question 45

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 files for bankruptcy.Who has been defrauded?

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

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Definitions:

Increased Advertising

A strategy involving the amplification of efforts in promoting products or services to boost brand visibility and sales.

Sales

The total income a company generates from selling its goods or services.

Margin of Safety Percentage

The ratio that indicates how much sales can decline before a business reaches its break-even point.

Total Sales

The aggregate revenue generated from all goods and services sold by a company within a specific period.