When a Business Is Organized as a Corporation, Which of the Following

question 6

Multiple Choice

When a business is organized as a corporation, which of the following statements is true?

• A) Stockholders are liable for the debts of the business only in proportion to their percentage ownership of capital stock.
• B) Stockholders do not have to pay personal income taxes on dividends received, because the corporation is subject to income taxes on its earnings.
• C) Fluctuations in the market value of outstanding shares of capital stock do not affect the amount of stockholders' equity shown in the balance sheet.
• D) Each stockholder has the right to bind the corporation to contracts and to make other managerial decisions.

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Definitions:

Compounded Quarterly

The process of calculating interest on both the initial principal and the accumulated interest from previous periods four times a year.

Annual Percentage Rate

A measure that represents the actual yearly cost of funds over the term of a loan, including any fees or additional costs associated with the transaction.

Overdraft Fee

A charge imposed by a bank when a transaction exceeds the account's available balance, resulting in a negative balance.

Maintenance Fee

A periodic charge imposed by banks, credit unions, or HOAs to cover the cost of services or upkeep.