Fin534 Quiz 1 - 1774 Words

CHAPER 1 1. Which of the following statements is CORRECT? Answer One disadvantage of operating as a corporation rather than as a partnership is that corporate shareholders are exposed to more personal liability than partners. There is no good reason to expect a firm s stockholders and bondholders to react differently to the types of new asset investments a firm makes. Bondholders are generally more willing than stockholders to have managers invest in risky projects with high potential returns as opposed to safer projects with lower expected returns. Stockholders are generally more willing than bondholders to have managers invest in risky projects with high potential returns as opposed to safer projects with lower†¦show more content†¦Although people’s moral characters are probably developed before they get into a business school, it is still useful for business schools to cover ethics, including giving students an idea about the adverse consequences of unethical behavior to themselves, their firms, and the nation. It is not useful for a large corporation to develop a formal set of rules defining ethical and unethical behavior. Such rules generally can t be applied in many specific instances, so it is better to deal with ethical issues on a case-by-case basis. â€Å"Whistle blowers,† because of the courage it takes to blow the whistle, are generally promoted more rapidly than other employees. 2 points Question 6 1. Which of the following statements is CORRECT? Answer It is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required. Corporations face fewer regulations than sole proprietorships. One disadvantage of operating a business as a sole proprietorship is that the firm is subject to double taxation, at both the firm level and the owner level. One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership. If a regular partnership goes