Andrew Cooper decides to become a part owner of a corporation. As a part owner, he expects to receive a profit as payment because he has assumed the risk of
A) serious inflation eroding the purchasing power of his investment.
B) being paid before the suppliers and employees are paid.
C) losing his home, car, and life savings.
D) losing the money he has invested in the corporation and not receiving profits.
E) the company giving all of the profits to local communities.

Question

Quizplus · Accepted Answer

As a part owner of a corporation, Andrew Cooper has assumed the risk of losing the money he has invested in the corporation and not receiving profits. Therefore, he expects to receive a profit as payment for taking on that risk. Option A refers to the risk of inflation, which is a risk faced by all investors and not unique to being a part owner of a corporation. Option B refers to the order in which payments are made, but does not address the risk that Andrew has assumed. Option C is a possible consequence of assuming risks, but is not the risk itself. Option E is not a typical scenario in which a corporation distributes profits.

Andrew Cooper Decides to Become a Part Owner of a Corporation