E13-19 (book/static) Questio Following is a list of advantages and disadvantages
ID: 2585435 • Letter: E
Question
E13-19 (book/static) Questio Following is a list of advantages and disadvantages of the corporate form of business. Identify each quality as either an advantage or a disadvantage. a. Ownership and management are separated b. Entity has continuous life c. Transfer of ownership is easy d. Stockholders' liability is limited e. Exposure to double taxation is evident f. Entity can raise more money than a partnership or sole proprietorship. g. Government regulation is expensive. Choose from any drop-down list and then click Check Answer Clear All Check Answer All parts showingExplanation / Answer
Identification of qualities as either advantage or disadvantage with explanation
There are lot of sources through which entity can raise money.
Example - By selling stock, issuing other stock like preferred stock, issuing debentures .
Point Advantage or disadvantage Explanation (a) Disadvantage Owners and managers are different in am entity. It causes communication problems. It also increases the decision making process. Owners are not involved in day to dat operations. (b) Advantage An entity has shareholders as its members. An entity will continue to run even if its shareholders dies. An entity will continue to exist till it is dissolved. (c) Advantage Transfer of ownership is very easy. There must be a willing buyer only. In modern times, Transferability takes place every minute through stock market (d) Advantage Liability of a shareholder is limited to the amount of investment of shareholder. If company becomes bankrupt then it cannot ask the shareholder to pay more than the his investment amount (e) Disadvantage There is double taxation. Entity ends up paying the corporate tax plus dividend distribution tax (f) AdvantageThere are lot of sources through which entity can raise money.
Example - By selling stock, issuing other stock like preferred stock, issuing debentures .
(g) Disadvantage In today's times, government regualtions are very expensive. It really hampers business in negative way with little value addition and is one of the biggest obstacle in ease of doing business.Related Questions
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