When Managers Do Not Own Very Much of the Net

question 83

Multiple Choice

When managers do not own very much of the net worth of the firm, then

• A)there may be a principal-agent problem.
• B)the firm will usually have to raise most of its funds in financial markets.
• C)the firm will have to rely more on equity financing than debt financing.
• D)the firm will have to rely more on debt financing than equity financing.

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Definitions:

Reactants

are substances initially present in a chemical reaction that are consumed during the reaction to make products.

Products

Substances formed as a result of a chemical reaction, found on the right side of a chemical equation.

Potential Energy

The energy possessed by a body by virtue of its position relative to others, stresses within itself, electric charge, and other factors.

Chemical Energy

A form of potential energy stored in chemical bonds between atoms and molecules.