A Major Conflict of Interest Between Top Executives and Owners

question 135

Multiple Choice

A major conflict of interest between top executives and owners, is that top executives wish to diversify the firm in order to ____, while owners wish to diversify the firm to ____.

• A) generate free cash flows, reduce the risk of total firm failure
• B) increase the price of the firm's stock, increase the dividends paid out from free cash flows
• C) reduce the risk of total firm failure, reduce their total portfolio risk
• D) reduce their employment risk, increase the company's value

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Definitions:

U.S. Economy

The economic system of the United States, characterized by a combination of free-market and planned economic activities, and is one of the largest economies globally.

Unemployment Rate

The chunk of the labor force that finds itself unemployed and in active pursuit of a job.

Economy

A system by which goods and services are produced, distributed, and consumed within a society or geographical area.

Point A

A specific position or location often used in graphs or discussions about economic models and theories.