A corporation cannot survive if the original owners are the only ones to invest in terms of equty financing. In short, external shareholders are always necessary. Group of answer choices True False
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A corporation cannot survive if the original owners are the only ones to invest in terms of equty financing. In short, external shareholders are always necessary.
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- What is the important question of corporate finance when a finance manager advises the company’s management to accept or reject a long-term investment project? What the finance manager needs to analyse to justify her/his adviceHow a corporation is different from a partnership in terms of owner, legal status, liabilities, life, regulation, access to capital, taxation and transfer?Suppose you need additional capital to expand,and you sell some stock to outside investors. If youmaintain enough stock to control the company,what type of agency conflict might occur?Which of the following is CORRECT? a. One advantage of operating a business as a corppration is that stockholders can deduct their pro rata share of the taxes the firm pays, thereby eliminating the double taxation investors would face in partnership. b. Because bankruptcy requires that corporate bondholders be paid in full before stockholders receive anything, bondholders generally prefer to see corporate managers invest in high risk high return project rather than low risk low return. c. Since bondholders receive fixed payments, they do not share in the gains if risky projects turn out to be highly successful. However they do share in the losses if risky projects fail and drive the firm into bankruptcy. Therefore, bondholders generally prefer to see corporate managers invest in low risk low return projects rather than high risk high return project. d. One drawback of forming a corporation is that you lose the limited liability that you would otherwise receive as a proprietor. e.…
- A corporation may choose to use debt financing because it has an income tax advantage. it typically has a higher cost of capital than equity. it carries voting rights. it reduces financial leverage.Which of the following statements is CORRECT? Select one: a. Conflict of interest between shareholders and managers is not possible. b. By definition, the agency problem can only take place in corporations but not in proprietorships and partnerships. c. Conflict of interest between shareholders and bondholders is not possible. d. Managers always work to maximize the long-run value, and therefore the price, of their company stocks. This is exactly what shareholders desire.Critically discuss this statement, do you agree with it? "Although a rights issue allows shareholders to purchase shares below market value, it may not increase shareholder value"
- Your corporation needs additional capital to fund an expansion. Discuss the advantages and disadvantages of raising capital through the issuance of stock. Would debt be a better option? Why or why not?Which of the following is not an advantage of the corporate form of business? a. limited liability b. easy transferability of shares c. enhanced ability to raise capital d. lack of government regulationWhich of the following statements is CORRECT? One drawback of forming a corporation is that it generally subjects the firm to additional regulations. One disadvantage of forming a corporation is that it is more difficult for the firm's investors to transfer their ownership interests. One drawback of forming a corporation is that it makes it more difficult for the firm to raise capital. One advantage of forming a corporation is that it subjects the firm's investors to fewer taxes. One drawback of forming a corporation is that it subjects the firm's investors to increased personal liabilities.
- When valuing private companies, we use public companies as comparables to gain insights into how the capital markets assess the riskiness of the private company’s business. Are there any potential caveats to this approach?Which of the following does not apply to secondary markets? Group of answer choices Many investors might be unwilling to provide resources to corporations if there is no available mechanism for the future sale of their stocks and bonds to others. Transactions help to establish market prices for additional shares that may be issued in the future. Transactions are important to the efficient allocation of resources in our economy. New resources are provided when shares of stock are sold by the corporation to the initial owners.Is forming a corporation does not have the same advanatges as forming an LLC, but the cost are likely to be higher? Please answer immediately :) Thank you
