If a stock's market price is above its intrinsic value, then the stock can be thought of as being undervalued, and it would be a good buy.

Group of answer choices

True

Falsec Which of the following statements is CORRECT?

Group of answer choices

Corporations are taxed more favorably than proprietorships.

Corporations have unlimited liability.

Because of their size, large corporations face fewer regulations than smaller corporations and proprietorships.

Reducing the threat of corporate takeover increases the likelihood that managers will act in shareholders' interests.

Bond covenants are designed to protect bondholders and to reduce potential conflicts between stockholders and bondholders.

In order to maximize its shareholders' value, a firm's management must attempt to maximize the stock price in the long run, or the stock's "intrinsic value."

Group of answer choices

True

False With which of the following statements would most people in business agree?

Group of answer choices

A corporation's short$-$run profits will almost always increase if the firm takes actions that the government has determined are in the best interests of the nation.

Firms and government agencies almost always agree with one another regarding the restrictions that should be placed on hiring and firing employees.

"Whistle blowers," because of the courage it takes to blow the whistle, are generally promoted more rapidly than other employees.

It is not useful for large corporations to develop a formal set of rules defining ethical and unethical behavior.

Although people's moral characters are probably developed before they are admitted to a business school, it is still useful for business schools to cover ethics, if only to give students an idea about the adverse consequences of unethical behavior to themselves, their firms, and the nation.

A disadvantage of the corporate form of organization is that corporate stockholders are more exposed to personal liabilities in the event of bankruptcy than are investors in a typical partnership.

Group of answer choices

True

False

There are many types of unethical business behavior. One example is where executives provide information that they know is incorrect to banks and to stockholders. It is illegal to provide such information to banks, but it is not illegal to provide it to stockholders because they are the owners of the firm, not outsiders.

Group of answer choices

True

False The primary operating goal of a publicly$-$owned firm trying to best serve its stockholders should be to

Group of answer choices

Maximize managers' own interests, which are by definition consistent with maximizing shareholders' wealth.

Maximize the firm's expected EPS, which must also maximize the firm's price per share.

Minimize the firm's risks because most stockholders dislike risk. In turn, this will maximize the firm's stock price.

Use a well$-$structured managerial compensation package to reduce conflicts that may exist between stockholders and managers.

Since it is impossible to measure a stock's intrinsic value, the text states that it is better for managers to attempt to maximize the current stock price than its intrinsic value. If a corporation elects to be taxed as an S corporation, then both it and its stockholders can avoid all Federal taxes. This provision was put into the Federal Tax Code in order to encourage the formation of small businesses.

Group of answer choices

True

False The primary operating goal of a publicly$-$owned firm interested in serving its stockholders should be to

Group of answer choices

Maximize its expected total corporate income.

Maximize its expected EPS.

Minimize the chances of losses.

Maximize the stock price per share over the long run, which is the stock's intrinsic value.

Maximize the stock price on a specific target date.

Which of the following statements is CORRECT?

Group of answer choices

One of the advantages of the corporate form of organization is that it avoids double taxation.

It is easier to transfer one's ownership interest in a partnership than in a corporation.

One of the disadvantages of a proprietorship is that the proprietor is exposed to unlimited liability.

One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i$.$eA disadvantage of the corporate form of organization is that corporate stockholders are more exposed to personal liabilities in the event of bankruptcy than are investors in a typical partnership.

Group of answer choices

True

False