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1. One disadvantage of switching from a partnership to the corporate form of organization is the given:

a) It subjects the firm to additional regulations.

b) It can't influence the amount of the firm's operating income which goes to taxes.

c) This makes it harder for the firm to increase additional capital.

d) It makes the firm's investors subject to greater potential personal liabilities.

e) It makes it harder for the firm's investors to transfer their ownership interests.

2. Which of the given statements is accurate?

a) The main technique of transferring ownership interest in a corporation is by means of a hostile take-over.

b) Two key merits of the corporate form over other forms of business organization are unlimited liability and limited life.

c) A corporation is a legal entity which is usually 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 a benefit of the corporate form of organization; however corporations have more trouble increasing money in financial markets since of the complexity of this form of organization.

e. However its stockholders are insulated through limited legal liability, the corporation's legal status doesn't protect the firm's managers in the similar way; that is, bondholders can sue its managers if the firm defaults on its debt, even if the default is the result of poor economic conditions.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M915920

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