Actg470 Exam 2 With
Complete Solution
What is a corporation? - ANSWER -one of several different forms kf business
structure
-a legal entity, charactered by a U.S., state or federal government, and
seperate and distinct frim the persons who own it, giving rise to a jurists
remark that it has "neither a soul to damn nor a body to kick." Nonetheless,
it is required by the courts as an artificial person; it may own property, incur
debts, sue, or be sued.
Sole Proprietorship - ANSWER -A business owned by one person
-simple idea, brought to reality by a sole owner
-no legal formalities
-business is an extension of the persona of owners, who have full personal
liability for the debts of the business
General Partnership - ANSWER -partnership in which partners share equally
in both responsibility and liability
-very bad
-no legal formalities
-business is an extension of the persona of owners, who have full personal
liability for the debts of the business
,business corporation - ANSWER -Legal entity existing under the authority of
the state legislature
-legal person separate and distinct from the owners
-the owners and officers generally have no risk of personal liability for the
business debts
Corporation - ANSWER -A business owned by stockholders who share in its
profits but are not personally responsible for its debts
- creation of law
-artificial person, not a real person
-it is a "person" only in so far as the law says it is a person, and only has such
rights and powers as the law gives it, nothing more nothing less
-no soul to damn nor body to kick
If a corporation is soulless, bodiless and mindless, how does it do anything? -
ANSWER It doesn't, only people do something
Ex: shareholders own a corporation
Since 2010, the U.S. Supreme Court has ruled that a business corporation can
have... - ANSWER -the right of free speech on political issues
-religious views on women's reproductive rights and same sex marriage
-a race, and capable of being the victim of racial discrimination
What is the role of a corporation? - ANSWER -capitalism and freedom(aka
shareholder view)
-stakeholder view
, Shareholder view of corporation - ANSWER There is one and only one social
responsibility of business: to use its resources and engage in activities
designed to increase its profits so long as it stays within the rules of the
game, which is to say, engages in open and free competition, without
deception or fraud
agency - ANSWER The board is nothing more than an agent to the
shareholders
Is it appropriate for a member of the management of the company, on his or
her own authority, to make a charitable contribution of the company's funds?
- ANSWER Friedman would agree that it is not because it's not the managers
money
Friedman's 3 concepts - ANSWER Ownership, agency, contract
ownership - ANSWER Any profits made by the company rightfully belong to
the people that own that company
contract - ANSWER -everything we doin business is a relationship built on
some form of mutual agreement
-Friedman: calls competitive capitalism or free enterprise: two sides of a
transaction enter into a deal voluntarily and without coercion for their
mutual benefit
Ethics in contracts - ANSWER What an individual may contract to buy or do is
a reflection of their ethics
Stakeholder view of corporation - ANSWER -create as much value for
stakeholders as possible and that no stakeholder interest is viable in isolation
of the other stakeholders, including shareholders
Complete Solution
What is a corporation? - ANSWER -one of several different forms kf business
structure
-a legal entity, charactered by a U.S., state or federal government, and
seperate and distinct frim the persons who own it, giving rise to a jurists
remark that it has "neither a soul to damn nor a body to kick." Nonetheless,
it is required by the courts as an artificial person; it may own property, incur
debts, sue, or be sued.
Sole Proprietorship - ANSWER -A business owned by one person
-simple idea, brought to reality by a sole owner
-no legal formalities
-business is an extension of the persona of owners, who have full personal
liability for the debts of the business
General Partnership - ANSWER -partnership in which partners share equally
in both responsibility and liability
-very bad
-no legal formalities
-business is an extension of the persona of owners, who have full personal
liability for the debts of the business
,business corporation - ANSWER -Legal entity existing under the authority of
the state legislature
-legal person separate and distinct from the owners
-the owners and officers generally have no risk of personal liability for the
business debts
Corporation - ANSWER -A business owned by stockholders who share in its
profits but are not personally responsible for its debts
- creation of law
-artificial person, not a real person
-it is a "person" only in so far as the law says it is a person, and only has such
rights and powers as the law gives it, nothing more nothing less
-no soul to damn nor body to kick
If a corporation is soulless, bodiless and mindless, how does it do anything? -
ANSWER It doesn't, only people do something
Ex: shareholders own a corporation
Since 2010, the U.S. Supreme Court has ruled that a business corporation can
have... - ANSWER -the right of free speech on political issues
-religious views on women's reproductive rights and same sex marriage
-a race, and capable of being the victim of racial discrimination
What is the role of a corporation? - ANSWER -capitalism and freedom(aka
shareholder view)
-stakeholder view
, Shareholder view of corporation - ANSWER There is one and only one social
responsibility of business: to use its resources and engage in activities
designed to increase its profits so long as it stays within the rules of the
game, which is to say, engages in open and free competition, without
deception or fraud
agency - ANSWER The board is nothing more than an agent to the
shareholders
Is it appropriate for a member of the management of the company, on his or
her own authority, to make a charitable contribution of the company's funds?
- ANSWER Friedman would agree that it is not because it's not the managers
money
Friedman's 3 concepts - ANSWER Ownership, agency, contract
ownership - ANSWER Any profits made by the company rightfully belong to
the people that own that company
contract - ANSWER -everything we doin business is a relationship built on
some form of mutual agreement
-Friedman: calls competitive capitalism or free enterprise: two sides of a
transaction enter into a deal voluntarily and without coercion for their
mutual benefit
Ethics in contracts - ANSWER What an individual may contract to buy or do is
a reflection of their ethics
Stakeholder view of corporation - ANSWER -create as much value for
stakeholders as possible and that no stakeholder interest is viable in isolation
of the other stakeholders, including shareholders
