Question

hich of the following statements is CORRECT? a. A corporation is a legal entity created by a state, and it has a life and existence that is separate from the lives and existence of its owners and managers. b. A hostile takeover is the main method of transferring ownership interest in a corporation. c. Limited liability is an advantage of the corporate form of organization to its owners (stockholders), but corporations have more trouble raising money in financial markets because of the complexity of this form of organization. d. Unlimited liability and limited life are two key advantages of the corporate form over other forms of business organization. e. Although the stockholders of the corporation are insulated by limited legal liability, the legal status of the corporation does not protect the firm's managers in the same way, i.e., bondholders can sue the firm's managers if the firm defaults on its debt.

Answer 1

The correct answer is a, stating that a corporation is a legal entity separate from its owners and managers. Hostile takeovers are not the primary method of ownership transfer, and the ability to raise funds is an advantage, not a disadvantage, of corporations. Limited liability applies to stockholders, but not necessarily to firm managers in all situations.

Step-by-step explanation:

The correct statement is a. A corporation is indeed a legal entity created by a state and has a life and existence that is separate from the lives and existence of its owners and managers. This means that although the individual shareholders own parts of the company, the corporation itself is recognized by law as a separate entity with its own rights and liabilities.

Hostile takeovers are not the main method of transferring ownership interest in a corporation; they are just one of several methods, and not the most common. The ability to raise funds is actually an advantage of the corporate form of organization because corporations can issue stock or bonds, not a disadvantage due to complexity.

While limited liability is indeed an advantage for the stockholders, the corporate form does not necessarily provide the same legal protection to its managers in the case of the firm's default on its debts. In certain circumstances, managers can be held personally liable if they violate the law or engage in misconduct.

Answer 2

e. Although the stockholders of the corporation are insulated by limited legal liability, the legal status of the corporation does not protect the firm's managers in the same way, i.e., bondholders can sue the firm's managers if the firm defaults on its debt.

Step-by-step explanation:

a.- A corporation is a separate legal entity created under state law, with a legal existence distinct from its owners.

The diference is that "by state" measn they are owned by the goverment

While under state law, means they are created from individuals and follow certain regulation.

b.- The ownership can be obtained in other ways as well.

c.- The limited liability of corporation makes them more attractive to investors. It does not generate troubles to raising money.

d.- corporation have limited liability

e.- The manager are liable for mistakes committed during their mandate