Q19E_4 - 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.

d. Stockholders’ liability is limited.

Step-by-Step Solution

Answer

The liability of shareholders will be limited serves as an advantage of a corporation.

Step 1: Basic Introduction

Limited liability is a condition under which the losses that stakeholders of a corporation may incur are limited to the amount of the capital invested by them in the corporation.

Step 2: Identification of quality

The shareholders will not be liable personally that means at the time of winding up or liquidation a corporate will be unlimitedly liable for it but the shareholders will be liable to the proportion of their shareholdings.