Question

Which of the following statements is MOST CORRECT?

Select one:

a. It is easier to transfer one's ownership interest in a partnership than in a corporation.

b. Although stockholders of the corporation are insulated by limited legal liability, the legal status of the corporation does not protect the firms? managers in the same way.

c. One of the disadvantages of the corporate form of organization is that it has double taxation.

d. In part due to limited liability and ease of ownership transfer, corporations have more trouble raising money in financial markets than other organizational forms.

e. Unlimited liability and limited life are two key advantages of the corporate form over other forms of business organization.

The primary goal of a publicly-owned firm interested in serving its stockholders should be to:

Select one:

a. Maximize expected net income.

b. Minimize the chances of losses.

c. Maximize the stock price per share.

d. Maximize expected EPS.

e. Maximize expected total corporate profit.

Which of the following statements is INCORRECT?

Select one:

a. A CEO who is about to exercise a million dollars in stock options and then retire would prefer that the company's stock is overvalued.

b. A stock's current price is its market price whereas the value is based on perceived risk and return data.

c. A firm's intrinsic value is an estimate of a stock's "true" value based on accurate risk and return data.

d. A stock's "true long-run value" is more closely related to its intrinsic value than its current market price.

e. In general, managers' estimates of intrinsic value are worse than the estimates of outside financial analysts.

Answer 1

1. One of the disadvantages of the corporate form of organisation is that it suffers from double taxation and dividend will be doubly taxed.

Correct answer will be option (c)one of the disadvantages of the corporate form of organisation is that it has double taxation.

2. primary goal of publicly owned company who wants to serve its stockholders is to maximize the stock price for itself as it will be helping in maximizing the capital appreciation of The stockholder.

Correct answer will be option ( C) maximize the stock price

3. (E) managers are having better estimate of the intrinsic value than the estimate of the outsider financial analyst.

Correct answer will be option (e).