Which of the Following Statements Is CORRECT

question 16

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 are partners.
• B) Relative to proprietorships,corporations generally face fewer regulations,and they also find it easier to raise capital.
• C) There is no good reason to expect a firm's stockholders and bondholders to react differently to the types of assets in which it invests.
• D) Stockholders should generally be happier than bondholders to have managers invest in risky projects with high potential returns as opposed to safe projects with lower expected returns.
• E) Stockholders in general would be better off if managers never disclosed favorable events and therefore caused the price of the firm's stock to sell at a price below its intrinsic value.

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Definitions:

Express Agency

A type of agency relationship explicitly agreed upon by the principal and agent, either orally or in writing.

Implied Agency

A type of agency relationship created by actions of the parties involved rather than a written agreement, suggesting that one party agrees to act on behalf of another.

Duty of Notification

The obligation to inform or update relevant parties about important information or changes.

Constructive Information

Constructive information refers to knowledge that one is presumed by law to have, often because it is a matter of public record or because one should have discovered it by due diligence.