Which of the following statements is CORRECT?
A) One disadvantage of organizing a business as a corporation rather than a partnership is that the equity investors in a corporation are exposed to unlimited liability.
B) Using restrictive covenants in debt agreements is an effective way to reduce conflicts between stockholders and managers.
C) Managers generally welcome hostile takeovers since the "raider" generally offers a price for the stock that is higher than the price before the takeover action started.
D) The managers of established,stable companies sometimes attempt to get their state legislatures to impose rules that make it more difficult for raiders to succeed with hostile takeovers.
E) Most business in U.S.is conducted by corporations,and corporations' popularity results primarily from their favorable tax treatment.

Question

Which of the following statements is CORRECT?
A) One disadvantage of organizing a business as a corporation rather than a partnership is that the equity investors in a corporation are exposed to unlimited liability.
B) Using restrictive covenants in debt agreements is an effective way to reduce conflicts between stockholders and managers.
C) Managers generally welcome hostile takeovers since the "raider" generally offers a price for the stock that is higher than the price before the takeover action started.
D) The managers of established,stable companies sometimes attempt to get their state legislatures to ​impose rules that make it more difficult for raiders to succeed with hostile takeovers.
E) Most business in U.S.is conducted by corporations,and corporations' popularity results primarily from their favorable tax treatment.

Quizplus · Accepted Answer

The managers of established, stable companies sometimes attempt to get their state legislatures to impose rules that make it more difficult for raiders to succeed with hostile takeovers. This is because hostile takeovers can lead to job losses and changes in leadership, which can be disruptive to the company and its employees. Restrictive covenants in debt agreements may be used to reduce conflicts between stockholders and managers, but it is not the most effective way. Equity investors in a corporation are not exposed to unlimited liability, as they have limited liability. Managers do not generally welcome hostile takeovers, as they can threaten their job security and authority. The popularity of corporations is not solely due to their favorable tax treatment, but also their ability to raise capital and limit liability for their shareholders.

Which of the Following Statements Is CORRECT