Fin534 Week One Homework

In: Business and Management

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Homework – Chapter 1

1. One drawback of switching from a partnership to the corporate form of organization is the following:
a. It subjects the firm to additional regulations.
b. It cannot affect the amount of the firm's operating income that goes to taxes.
c. It makes it more difficult for the firm to raise additional capital.
d. It makes the firm's investors subject to greater potential personal liabilities.
e. It makes it more difficult for the firm's investors to transfer their ownership interests. 2. Which of the following statements is CORRECT?
a. The main method of transferring ownership interest in a corporation is by means of a hostile takeover.
b. Two key advantages of the corporate form over other forms of business organization are unlimited liability and limited life.
c. A corporation is a legal entity that is generally created by a state; its life and existence is separate from the lives of its individual owners and managers.
d. Limited liability of its stockholders is an advantage of the corporate form of organization, but corporations have more trouble raising money in financial markets because of the complexity of this form of organization. e. Although its stockholders are insulated by limited legal liability, the corporation's legal status does not protect the firm's managers in the same way; i.e., bondholders can sue its managers if the firm defaults on its debt, even if the default is the result of poor economic conditions. 3. Which of the following statements is CORRECT?
a. In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business.
b. Attracting large amounts of capital is more difficult for partnerships than for corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the…...

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