1. Which one of the following is not a reason for including a large proportion of debt in a C corporation's capital structure?

a. Financing business operations with debt can increase its shareholders' return on their investment.

b. Interest paid shareholder/creditors may be deducted by the corporation when calculating its taxable income.

c. If a corporation's debt becomes worthless, the holder of the debt may deduct the loss as an ordinary loss.

d. Financing business operations with debt can minimize the negative return on its shareholders' investment when the corporation suffers a loss.

2. In order for an angel investor or venture capitalist to exchange capital for ownership in a business that is a sole proprietorship, which of these must happen?

A. The business must be re-formed as a partnership.

B. The owner must give up some control.

C. The owner must co-sign on all loans.

D. Both A and B