Question

which of the following statements is correct? a hostile takeover is the main method of transferring ownership interest in a corporation. a corporation is a legal entity created by a state, and it has a life and existence that is separate from the lives and existence of its owners and managers. unlimited liability and limited life are two key advantages of the corporate form over other forms of business organization. limited liability is an advantage of the corporate form of organization to its owners (stockholders), but corporations have more trouble raising money in financial markets because of the complexity of this form of organization. although the stockholders of the corporation are insulated by limited legal liability, the legal status of the corporation does not protect the firms managers in the same way, i.e., bondholders can sue the firms managers if the firm defaults on its debt.

Explanation:

• A: A hostile takeover is not the main method of ownership - transfer. Stock - trading is more common.
• B: A corporation is a legal entity separate from its owners and managers, having its own life and existence. This is correct.
• C: Unlimited liability and limited life are disadvantages, not advantages, of non - corporate forms compared to corporations.
• D: Corporations generally have an easier time raising money in financial markets due to their size and structure, not more trouble.
• E: While bondholders can sue the firm in case of default, the limited liability of the corporation protects both stockholders and, to some extent, managers in normal business operations.

Answer:

B. A corporation is a legal entity created by a state, and it has a life and existence that is separate from the lives and existence of its owners and managers.