Which of the Following Statements Is CORRECT

question 1

Multiple Choice

Which of the following statements is CORRECT?

• A) One disadvantage of operating as a corporation rather than as a partnership is that corporate shareholders are exposed to more personal liability than partners.
• B) There is no good reason to expect a firm's bondholders and stockholders to react differently to the types of new asset investments a firm makes.
• C) Bondholders are generally more willing than stockholders to have managers invest in risky projects with high potential returns as opposed to safer projects with lower expected returns.
• D) Stockholders are generally more willing than bondholders to have managers invest in risky projects with high potential returns as opposed to safer projects with lower expected returns.
• E) Relative to sole proprietorships, corporations generally face fewer regulations, which makes raising capital easier for corporations.

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Definitions:

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since it was put into use.

Indirect Method

A way of preparing a cash flow statement where net income is adjusted for changes in balance sheet accounts to calculate cash flow from operating activities.

Operating Activities

Transactions and events related to the primary operations of a business, such as revenue from sales and expenses from operations.

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for.