What is a major drawback of the corporate form of business organization compared to proprietorships and partnerships?
Explanation
While the corporate form offers significant advantages like limited liability and ease of ownership transfer, its primary disadvantage is the double taxation of earnings, first at the corporate level and again at the personal level when distributed as dividends.
Other questions
What is considered the primary financial goal that managers of publicly owned companies should pursue?
Which area of finance focuses on decisions relating to how much and what types of assets to acquire, how to raise capital, and how to run the firm to maximize its value?
What term describes the value of a stock based on perceived but possibly incorrect information as seen by the investor whose views determine the actual stock price?
Conflicts between stockholders and managers are often studied under what theory in finance literature?
What is the term for individuals who target corporations for takeover because they believe the corporations are undervalued?
A company raised $2,000 in capital: $1,000 from bondholders at an 8 percent annual interest rate, and $1,000 from stockholders. It invests in Project L, which has a 50 percent chance of being worth $2,400 and a 50 percent chance of being worth $2,000 in one year. What is the expected return for the stockholders?
A company raised $2,000 in capital: $1,000 from bondholders at an 8 percent annual interest rate, and $1,000 from stockholders. It invests in a risky Project H, which has a 50 percent chance of being worth $4,400 and a 50 percent chance of being worth $0 in one year. What is the expected return for the bondholders?
What is the primary way that bondholders protect themselves from stockholder-debtholder conflicts, such as the firm taking on excessively risky projects?
Which of the following is NOT one of the three main areas of finance as generally taught in universities?
The Sarbanes-Oxley Act of 2002 requires which two corporate officers to certify that their firm's financial statements are accurate?
Which form of business organization combines the limited liability protection of a corporation with the tax advantages of a partnership?
The situation in which a stock's actual market price equals its intrinsic value is defined as what?
When managers' personal goals, such as maximizing their own wealth, compete with the goal of maximizing shareholder wealth, this is an example of what?
Which of the following is NOT a technique stockholders can use to motivate managers to act in their best interests?
What is the primary financial goal for managers of publicly owned companies according to the textbook?
In the context of business ethics, what term is defined as 'standards of conduct or moral behavior'?
Which of the following is NOT an advantage of a proprietorship?
What is the primary reason that the value of a business is likely to be maximized if it is organized as a corporation?
What does a stock's intrinsic value represent in the context of financial management?
If a company's stock price is below its intrinsic value, the stock is considered to be what?
The establishment of rules and practices by a Board of Directors to ensure that managers act in shareholders' interests while balancing the needs of other key constituencies is known as what?
Why do debtholders (e.g., bondholders) and stockholders often have conflicting views on a company's projects?
What is the primary task of a firm's finance department in evaluating proposed decisions, such as a new marketing campaign or equipment purchase?
What is a primary characteristic of a 'B' or 'benefit' corporation?