Consider the following statements:
i.A corporation differs from other forms of business organisation only in that it tends to be larger.
ii.The corporate form of business organisation is destined to fail because 'managers',and not the 'owners',run the business.
iii.The corporate entity ceases on the death or bankruptcy of the individual shareholders.
iv.The stock exchange is important to the corporation only because it provides the institutional framework through which new shares may be sold to the public.
v.Maximisation of shareholder utility is presumed when managers maximise possible profit.
How many of these statements are true and how many are false?

Question

Quizplus · Accepted Answer

Explanation:i. False. A corporation differs from other forms of business organization in several ways beyond size, including legal structure, liability, and taxation.ii. False. The corporate form of business organization has been successful and prevalent despite the separation of ownership and management. This separation does not inherently destine corporations to fail.iii. False. The corporate entity continues to exist beyond the death or bankruptcy of individual shareholders, which is one of the advantages of the corporate form in terms of continuity.iv. False. The stock exchange is important for corporations not only for issuing new shares but also for providing liquidity and a market for existing shares, facilitating price discovery, and offering a mechanism for valuation.v. True. The maximization of shareholder utility is often presumed when managers aim to maximize profits, as higher profits can lead to higher stock prices and dividends, benefiting shareholders.

Consider the Following Statements