Question

Corporations can raise large amounts of money because:

Multiple Choice

A) shares of stock in public companies can easily be bought and sold by investors.

B) the unlimited liability feature makes corporate ownership attractive to investors.

C) corporate earnings are not taxed.

D) all investments in corporate stock earn money for investors.

Answer 1

Corporations can raise large amounts of capital because their stocks are liquid and shareholders have limited liability, facilitating the process of investment and risk-taking.

Step-by-step explanation:

Corporations can raise large amounts of money primarily because shares of stock in public companies can be easily bought and sold by investors. This liquidity of shares makes corporate ownership particularly attractive to investors. Additionally, shareholders benefit from limited liability, meaning they are only at risk of losing the amount they have invested, and no more, should the corporation go bankrupt or face legal issues. Furthermore, corporations have the flexibility to raise capital through the sale of stock or issuance of bonds, enhancing their ability to finance expansion or other business purposes.