FIN 310 Examen 1

An advantage of the corporate form of organization is that corporations are generally less highly regulated than proprietorships and partnerships. A. True B. False

False

If a stock's intrinsic value is greater than its market price, then the stock is overvalued and should be sold. A. True B. False

False

It is generally less expensive to form a corporation than a proprietorship because, with a proprietorship, extensive legal documents are required. A. True B. False

False

One advantage of the corporate form of organization is that it avoids double taxation. A. True B. False

False

Which of the following statements is CORRECT? A. Corporations generally face fewer regulations than proprietorships. B. Corporate shareholders are exposed to unlimited liability. C. It is usually easier to transfer ownership in a corporation than in a partnership. D. Corporate shareholders are exposed to unlimited liability, but this factor is offset by the tax advantages of incorporation. E. There is a tax disadvantage to incorporation, and there is no way any corporation can escape this disadvantage, even if it is very small.

C

In order to maximize its shareholders' value, a firm's management must attempt to maximize the stock price in the long run, or the stock's "intrinsic value." A. True B. False

True

One danger of starting a proprietorship is that you may be exposed to personal liability if the business goes bankrupt. This problem would be avoided if you formed a corporation to operate the business. A. True B. False

True