In addition to the general partnership, in which all partners are jointly liable without limitation, a limited partnership permits one or more of the partners to have limited liability.

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False

Shareholders may prefer the compensation package that includes stock options because the options give the CEO the incentive to maximize the price of the company's stock, thus benefiting the shareholders. A fixed salary, regardless of stock price performance, can lead to a CEO who is willing to do the minimum necessary to maintain the job, but who is not motivated to work extra hard for shareholders.

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False

The advantages of the corporation begin to dominate as the firm grows and needs access to the capital markets to raise funds. Because of the limited liability, the ease of transferring ownership through the sale of common shares, and the flexibility in dividing the shares, the corporation is the ideal business entity in terms of attracting new capital.

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False

For risk averse investors, higher expected returns are required before they will take on higher risks. However, higher expected returns do not always materialize. Risky projects sometimes result in lower actual returns. This is what makes them risky.

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False