The Attractiveness of Diversification Is Consistent with Which Agency Perspective

question 2

Multiple Choice

The attractiveness of diversification is consistent with which agency perspective?

• A)Management serves its own interests.
• B)Management and stockholders share the same interests.
• C)Management pursues the interests of the stakeholders.
• D)None of the above.

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Definitions:

Goodwill

An intangible asset that arises when a company acquires another company for a price higher than the fair value of its net identifiable assets.

Trial Balance

An accounting report that lists the balances of all ledgers in two columns, debit and credit, ensuring that total debits equal total credits.

Consolidated Balance Sheet

A financial statement that presents the assets, liabilities, and shareholders' equity of a conglomerate, combining the figures of the parent company and its subsidiaries.

Partial Equity Method

An accounting approach used for investments where the investor has significant influence (but not control) over the investee, leading to the recognition of their share of the investee's earnings.