FIN 534 RANK Imagine Your Future /fin534rank.com FIN 534 RANK Imagine Your Future /fin534rank.com | Page 32

a. A good goal for a firm’s management is maximization of expected
EPS.
b. Most business in the U.S. is conducted by corporations, and
corporations’ popularity results primarily from their favorable tax
treatment.
c. Because most stock ownership is concentrated in the hands of a
relatively small segment of society, firms' actions to maximize their
stock prices have little benefit to society.
d. Corporations and partnerships have an advantage over proprietorships
because a sole proprietor is exposed to unlimited liability, but the
liability of all investors in the other types of businesses is more limited.
e. The potential exists for agency conflicts between stockholders and
managers.
5. Which of the following statements is NOT CORRECT?
a. When a corporation’s shares are owned by a few individuals and are
not traded on public markets, we say that the firm is “closely, or
privately, held."
b. “Going public” establishes a firm's true intrinsic value, and it also
insures that a highly liquid market will always exist for the firm’s shares.
c. When stock in a closely held corporation is offered to the public for
the first time, the transaction is called “going public,” and the market for
such stock is called the new issue market.