Q19E_1 - Horngren'S Financial And Managerial Accounting

Question

Identifying advantages and disadvantages of a corporation

Following is a list of advantages and disadvantages of the corporate form of business. Identify each quality as either an advantage or a disadvantage.

a. Ownership and management are separated.

Step-by-Step Solution

Answer

Ownership and management are separate is a disadvantage for a corporation.

Step 1: Basic Introduction

Corporation is a legal structure incorporated with the purpose to carry out business or operational activities and is considered distinct from its owners.

Step 2: Identification of quality

Separation of ownership and management in corporate includes putting the management of the firm under the responsibility of experts or professionals who are not the owners of the corporation. 

Owners of a company may involve shareholders, government entities, directors, other corporations and the primary founders of the corporation.