Answered: Which of the following statements is…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter10: Corporate Governance

Section: Chapter Questions

Problem 3MC

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Question

Which of the following statements is CORRECT?

a. Most business in the U.S. is conducted by corporations, and corporations' popularity results primarily from their favorable tax treatment.

b. Corporations and partnerships have an advantage over proprietorships because a proprietor is exposed to unlimited liability, but the liability of all investors in the other types of businesses is more limited.

c. Conflicts can exist between stockholders and managers, but potential conflicts are reduced by the possibility of hostile takeovers.

d. A good goal for a firm's management is the maximization of expected EPS.

e. For a stock to be in equilibrium, its intrinsic value must be greater than the actual market price.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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