Question Details

Which of the following actions are likely to reduce agency conflicts 


1.	Which of the following statements is most correct?

a.	One advantage of forming a corporation is that you have limited liability. 
b.	Corporations face fewer regulations than sole proprietorships.
c.	One disadvantage of being a sole proprietor is that you have to pay corporate taxes, even though you don’t realize the benefits of being a corporation.
d.	Statements b and c are correct.

2.	The primary goal of a publicly-owned firm interested in serving its stockholders should be to
a.	Maximize expected total corporate profit.
b.	Maximize expected EPS.
c.	Minimize the chances of losses.
d.	Maximize the stock price per share. 

3.	Which of the following actions are likely to reduce agency conflicts between stockholders and managers?
a.	Paying managers a large fixed salary.
b.	Increasing the threat of corporate takeover.   
c.	Placing restrictive covenants in debt agreements.
d.	All of the statements above are correct.

4.  Which of the following statements is most correct?
a.	A good goal for a corporate manager is maximization of expected EPS.
b.	Most business in the U.S. is conducted by corporations; corporations’ popularity results primarily from their favorable tax treatment.
c.	A good example of an agency relationship is the one between stockholders and managers. 
d.	Corporations and partnerships have an advantage over proprietorships because a sole proprietor is subject to unlimited liability, but investors in the other types of businesses are not.

5.	Which of the following statements is most correct?

a.	If an investor sells 100 shares of Microsoft to his brother-in-law, this is a primary market transaction.
b.	Private securities are generally less liquid than publicly traded securities.
c.	Money markets are where short-term, liquid securities are traded, whereas capital markets represent the markets for long-term debt and common stock.
	d.	Statements b and c are correct.  




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