Which of the following statements is CORRECT?
A)One disadvantage of operating as a corporation rather than as a partnership is that corporate shareholders are exposed to more personal liability than partners.
B)There is no good reason to expect a firm's stockholders and bondholders to react differently to the types of new asset investments a firm makes.
C)Bondholders are generally more willing than stockholders to have managers invest in risky projects with high potential returns as opposed to safer projects with lower expected returns.
D)Stockholders are generally more willing than bondholders to have managers invest in risky projects with high potential returns as opposed to safer projects with lower expected returns.
E)Relative to sole proprietorships, corporations generally face fewer regulations, and this makes it easier for corporations to raise capital.

Question

Quizplus · Accepted Answer

Stockholders, as the owners of the company, have the potential to benefit more from investments with high returns. Bondholders, on the other hand, are primarily interested in receiving their scheduled interest payments and repayment of their principal at maturity and are therefore more risk-averse.

Which of the Following Statements Is CORRECT