Financial Management Firm Organization False. The Form Essay

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Financial Management

Firm Organization

False. The form of business organization direct affects the taxation structure of the firm, particularly with regard to flow-through taxation on some forms (sole proprietorship, most partnerships) and not on others (most corporations).

Firm Organization

False. The partners in a regular partnership have a high degree of liability.

Partnership

True. Most partnerships remains fairly small due to these constraints.

Proprietorship

True. In a sole proprietorship, the owner holds all the capital, making it difficult to raise from outside sources, and the proprietor has all the liability associated with the business.

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Limited Liability

False. The owners do see their risk reduced by limited liability, but the firm still has this risk. Therefore, the firm's value should not be reduced. The firm can still be bankrupted, leaving potential owners with nothing.

Value Maximization

a. True. Earnings per share has a strong correlation with the firm's stock price. A firm that has the objective of maximizing shareholder wealth will also be seen by investors as having good growth potential, all other factors being equal.….....

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