____ 17. Which of the following statements is CORRECT?
a. It is usually easier to transfer ownership in a corporation
than it is to transfer ownership in a sole proprietorship.
b. Corporate shareholders are exposed to unlimited
liability.
c. Corporations generally face fewer regulations than sole
proprietorships.
d. Corporate shareholders are exposed to unlimited liability,
and this factor may be compounded by the tax disadvantages 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.
____ 18. Which of the following could explain why a business
might choose to operate as a corporation rather than as a sole
proprietorship or a partnership?
a. Corporations generally find it relatively difficult to
raise large amounts of capital.
b. Less of a corporation's income is generally subjected to
taxes than would be true if the firm were a partnership.
c. Corporate shareholders escape liability for the firm's
debts, but this factor may be offset by the tax disadvantages of
the corporate form of organization.
d. Corporate investors are exposed to unlimited
liability.
e. Corporations generally face relatively few
regulations.
____ 19. You recently sold 100 shares of your new company,
XYZ Corporation, to your brother at a family reunion. At the
reunion your brother gave you a check for the stock and you gave
your brother the stock certificates. Which of the following
statements best describes this transaction?
a. This is an example of an exchange of physical assets.
b. This is an example of a primary market transaction.
c. This is an example of a direct transfer of capital.
d. This is an example of a money market transaction.
e. This is an example of a derivatives market
transaction.
____ 20. Which of the following statements is CORRECT?
a. If expected inflation increases, interest rates are likely
to increase.
b. If individuals in general increase the percentage of their
income that they save, interest rates are likely to increase.
c. If companies have fewer good investment opportunities,
interest rates are likely to increase.
d. Interest rates on all debt securities tend to rise during
recessions because recessions increase the possibility of
bankruptcy, hence the riskiness of all debt securities.
e. Interest rates on long-term bonds are more volatile than
rates on short-term debt securities like T-bills.