Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Characteristics of a Corporation

Financial Accounting

12. Stockholders' Equity

Characteristics of a Corporation

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Multiple Choice

Which of the following is an attractive benefit of a corporation?

Exemption from all forms of taxation

Limited liability for shareholders

Unlimited personal liability for owners

Direct management by all shareholders

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Verified step by step guidance

Understand the concept of a corporation: A corporation is a legal entity that is separate from its owners (shareholders). It has its own rights and responsibilities, including the ability to enter into contracts, own assets, and be liable for debts.

Review the concept of limited liability: Limited liability means that shareholders are only responsible for the debts and obligations of the corporation up to the amount they have invested. Their personal assets are protected from corporate liabilities.

Compare the options provided: Analyze each option to determine which aligns with the characteristics of a corporation. For example, corporations are not exempt from taxation; they are subject to corporate taxes. Unlimited personal liability is not a feature of corporations, as shareholders have limited liability. Direct management by all shareholders is not typical, as corporations often have a board of directors and management team.

Identify the correct benefit: Limited liability for shareholders is an attractive feature of corporations because it reduces the financial risk for individuals investing in the company.

Conclude the reasoning: Based on the analysis, the correct answer is 'Limited liability for shareholders,' as it is a key advantage of the corporate structure.