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Finance Chaper 1 Quiz Question 1 Which of the following statements is CORRECT? Proprietorships and partnerships generally have a tax advantage over corporations. In any partnership, every partner... has the same rights, privileges, and liability exposure as every other partner. Proprietorships are subject to more regulations than corporations. One of the disadvantages of incorporating your business is that you could become subject to the firm's liabilities in the event of bankruptcy. Corporations of all types are subject to the corporate income tax. Question 2 Which of the following statements is CORRECT? There is a tax disadvantage to incorporation, and there is no way any corporation can escape this disadvantage, even if it is very small. It is usually easier to transfer ownership in a corporation than in a partnership. Corporations generally face fewer regulations than proprietorships. Corporate shareholders are exposed to unlimited liability, but this factor is offset by the tax advantages of incorporation. Corporate shareholders are exposed to unlimited liability. Question 3 Which of the following actions would be most likely to reduce potential conflicts of interest between stockholders and bondholders? Financing risky projects with additional debt. The threat of hostile takeovers. Abolishing the Security and Exchange Commission. Compensating managers with stock options. The use of covenants in bond agreements that limit the firm's use of additional debt and constrain managers' actions. Question 4 [Show More]

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