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 statements is true regarding corporations?

Corporations are always managed directly by their shareholders.

Corporations cannot issue shares to raise capital.

Corporations have limited liability, meaning shareholders are not personally responsible for the corporation's debts.

Corporations do not exist as separate legal entities from their owners.

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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). This means it has its own rights and responsibilities, such as entering contracts, owning assets, and being liable for debts.

Clarify the term 'limited liability': Limited liability means that shareholders are not personally responsible for the debts or obligations of the corporation. Their financial risk is limited to the amount they invested in the corporation.

Evaluate the statement 'Corporations are always managed directly by their shareholders': This is false because corporations are typically managed by a board of directors and executives, not directly by shareholders.

Evaluate the statement 'Corporations cannot issue shares to raise capital': This is false because issuing shares is one of the primary ways corporations raise capital from investors.

Confirm the correct statement: 'Corporations have limited liability, meaning shareholders are not personally responsible for the corporation's debts' is true, as it aligns with the legal structure and protections provided to shareholders in a corporation.