Question

question 6 0.5 pts which of the following statements is correct? bond covenants are an effective way to resolve conflicts between shareholders and managers. because of their simplified organization, it is easier for proprietors and partnerships to raise large amounts of outside capital than it is for corporations. one advantage to forming a corporation is that the owners of the firm have limited liability. corporations face few regulations and more favorable tax treatment than do proprietorships and partnerships. managers who face the threat of hostile takeovers are less likely to pursue policies that maximize shareholder value compared to managers who do not face the threat of hostile takeovers.

Explanation:

• Bond covenants are agreements between bond - issuers and bond - holders, not for resolving shareholder - manager conflicts.
• Proprietorships and partnerships generally have more difficulty raising large amounts of outside capital compared to corporations due to limited resources and higher risk perception.
• One of the key advantages of a corporation is that the owners (shareholders) have limited liability, meaning their personal assets are generally protected from the firm's debts.
• Corporations usually face more regulations and less favorable tax treatment than proprietorships and partnerships.
• Managers facing the threat of hostile takeovers are more likely to pursue policies that maximize shareholder value to avoid being ousted.

Answer:

One advantage to forming a corporation is that the owners of the firm have limited liability.