If a firm\'s board of directions wants to maximize value for its stockholders in
ID: 2730161 • Letter: I
Question
If a firm's board of directions wants to maximize value for its stockholders in general (as opposed to some specific stackholders), It should design an executive compensation system whole goal is to maximize the stock's intrinsic value rather than the stock's current market price. True False sheet, and the cash flow statement True False Companies typically provide four basic financial statements: the fixed income statement, the current income statement, the balance sheet, and the cash flow statements. On balance sheet, total assets must always equal the turn of total liabilities plus equity. True False Which of the following statements is CORRECT? One of the advantages of the corporate form of organization is that it avoids double taxation. It is easier to transfer one's ownership interest in a partnership than in a corporation. One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e.. "one person, one vote." Corporations of all types are subject to the corporate income tax. Which of the following statements is CORRECT? Corporations are taxed more favourably than sole proprietorships. Corporations have unlimited liability. Because of their size, large corporations face fewer regulations than smaller corporations and sole proprietorships. Reducing the threat of corporate takeover increases the likelihood that managers will act in shareholder's interests. Bond covenants are designed to protect bondholders and to reduce potential conflicts between stockholders and bondholders.Explanation / Answer
8. False
In order to increase the value for shareholders in general, the management should attempt to increase the market value of the company’s shares.
9. False
Typically, Companies provides three financial statements namely Balance sheet, Income statement and Cash flow statement.
10. True.
The balance sheet indicates the sources of funds i.e. Total liabilities and equity on one side and application of funds i.e. Total assets on the other side. Both the sides of the balance sheet must be equal.
1.
Answer is c. One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability.
2.
Answer is e. Bond covenants are designed to protect bondholders and to reduce potential conflicts between stockholders and bondholders.
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