Question

You have just purchased 10 shares of a stock selling at $50 per share. Since that time, the company was found to be in violation of several environmental laws and has several major lawsuits outstanding. Which of the following statements is most correct?

A) You could lose up to your $500 investment.
B) You could lose more than your $500 investment.
C) You cannot lose your investment based on the actions of the company.
D) By owning stock in the company, you have also technically violated the law.
E) None of the above

Answer 1

Option A is the most correct option,you could lose up to your $500 investment

Step-by-step explanation:

The principle of limited liability is that the liabilities of an individual shareholder is limited to the amount invested in the shares of the company.

Should the debts of the company outweigh its asset resources, the shareholders would not be required to make up for the short-fall from private pockets unlike the sole proprietors or partners in a partnership business.

The most the investor can lose should be company go under due its environmental violations is $500,the sum invested in the company.