1. Which of the following is/are an advantage of incorporation?
A) Acccess to capital markets
B) Limited liability
C) Unlimited life
D) All of the above
2. Which of the following statements is FALSE?
A. Creditors often place restrictions on the actions that the firm can take. Such restrictions are referred to as debt covenants.
B. Covenants are often designed to prevent management from exploiting debt holders, so they may help to reduce agency costs.
C. Agency costs are smallest for long-term debt.
D. Covenants may limit the firm's ability to pay large dividends or the types of investments that the firm can make.