unit 1 finma

The primary reason for the conflict between managers and shareholders has been

attributed to the separation of ownership (shareholders) and control (management).

• true

• false

Profit maximization has weaknesses.

• true

• false

Market value of a share is defined as the price at which the stock trades in the

marketplace.

• true

• false

There is a potential that managers may pursue goals consistent with their self-interest

and not the interest of the shareholders.

• true

• false

Threat of takeover is one of the mechanisms designed to reduce manager-shareholder

conflict.

• true

• false

An advantage of a proprietorship is that it is taxed like individual meaning earnings are

taxed only once.

• true

• false

A sole proprietor has unlimited personal liability, any debts of the business are the

responsibility of the sole owner.

• true

• false

An advantage of a corporation is the ease of transfer.

• true

• false

A corporation has an unlimited life.

• true

• false

An S corporation has more than 100 stockholders.

• true

• false