Author Question: Sensitivity analysis is a statistics-based approach used in capital budgeting to asses risk by ... (Read 136 times)

hubes95 · **on:** Jul 10, 2018

Sensitivity analysis is a statistics-based approach used in capital budgeting to asses risk by applying predetermined probability distributions and random numbers to estimate risky outcomes.

Indicate whether the statement is true or false

Question 2

Define the term limited liability and state why you think it is an important feature of the corporate form of organization.

What will be an ideal response?

komodo7 · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

FALSE

Answer to Question 2

Answer: From a corporate standpoint, limited liability results from the corporation being defined as a legal entity with its own assets and liabilities. Limited liability thus occurs because the shareholders are responsible for no more than their investment in the corporation. Should the firm acquire greater debt than assets and declare bankruptcy, the shareholders do not have personal assets at risk for creditors to acquire.