True or false: One key value of limited liability is that it lowers owners’ risks and thereby enhances a firm’s value
True
True.
Limited liability is a legal protection afforded to owners of companies, which limits their personal financial responsibility to the amount of their investment in the company. This means that if a company were to go bankrupt or face any other legal claims, the owners are not personally liable for the debts incurred by the company beyond their investment.
The value of limited liability is that it lowers owners’ risks, as they have less personal financial responsibility than they would if they had unlimited liability. This makes it more attractive for investors to provide funding for companies, and it enhances the overall value of a firm because it reduces the perceived risk of investing in the company.
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