Identify the choice that best completes the statement or answers the question.
Note that no question is identified as the bonus question. There are a couple of questions that will take a little longer than average, but no super-long questions. If you get stuck on any question, move on and come back to this question later.
__C__ 1. Which of the following statements is most correct?
|a. |One of the advantages of the corporate form of organization is that there is no double taxation. |
|b. |The partnership form of organization has easy transferability of ownership. |
|c. |One of the disadvantages of the sole proprietorship form of organization is that there is unlimited liability. |
|d. |All of these statements are correct. |
__A__ 2. Which of the following actions are likely to reduce agency conflicts between stockholders and managers?
|a. |Paying managers a large fixed salary. |
|b. |Increasing the threat of corporate takeover. X |
|c. |Placing restrictive covenants in debt agreements. |
|d. |All of the statements are correct. |
_C___ 3. Which of the following statements is most correct?
|a. |Bond covenants are a good way to resolve agency conflicts between stockholders and managers. |
|b. |Hostile takeovers tend to reduce a company's stock price. |
|c. |Corporations have limited liability.