Which of the Following Statements Best Describes Firm Organization

question 40

Multiple Choice

Which of the following statements best describes firm organization?

• A) It is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required.
• B) One disadvantage of operating a business as a sole proprietorship is that the firm is subject to double taxation, at both the firm level and the owner level.
• C) One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership.
• D) If a regular partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business.

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Definitions:

Credit Card Fees

Charges imposed by credit card companies for the processing of transactions, often including a percentage of the transaction amount and a flat fee.

Multiple-Step Income Statement

An income statement that separates operating transactions from non-operating transactions and calculates gross margin and operating income.

Administrative Expenses

Overhead or general expenses related to the day-to-day operations of a business, which do not directly contribute to the production of goods or services.

Interest Expense

The cost incurred by an entity for borrowed funds, typically reported as a non-operating expense on the income statement.