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 advantage of the corporate form of business?

Limited ability to raise capital

Unlimited liability for owners

Difficulty in transferring ownership

Limited liability for shareholders

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Verified step by step guidance

Understand the concept of a corporate form of business: A corporation is a legal entity that is separate from its owners (shareholders). It has distinct advantages and disadvantages compared to other business structures like sole proprietorships or partnerships.

Review the concept of 'limited liability': In a corporate structure, shareholders are only liable for the debts and obligations of the corporation up to the amount they have invested. This means their personal assets are protected from corporate liabilities.

Compare the options provided in the question: Analyze each option to determine which aligns with the advantages of a corporate form of business. For example, 'Limited ability to raise capital' is incorrect because corporations generally have a greater ability to raise capital through issuing shares.

Eliminate incorrect options: 'Unlimited liability for owners' is incorrect because corporations provide limited liability to shareholders. 'Difficulty in transferring ownership' is also incorrect because shares in a corporation can typically be bought and sold easily, facilitating ownership transfer.

Identify the correct answer: Based on the analysis, the correct advantage of the corporate form of business is 'Limited liability for shareholders,' as this is a key feature that distinguishes corporations from other business structures.