Compared to Shareholders,managers Prefer

question 18

Multiple Choice

Compared to shareholders,managers prefer:

• A) higher levels of diversification with lower levels of risk.
• B) higher levels of diversification with higher levels of risk.
• C) lower levels of diversification with lower levels of risk.
• D) lower levels of diversification with higher levels of risk.

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Definitions:

Bankruptcy Risk

The likelihood that a company will be unable to meet its financial obligations and may have to declare bankruptcy.

Debt Financing

Raising funds through borrowing, typically by issuing bonds or taking out loans, which must be repaid at a later date, usually with interest.

Cash Preservation

The practice of managing resources to ensure sufficient liquidity and minimize financial risk.

Capital Structure

The mix of various forms of financing used by a firm to fund its overall operations and growth, including debt, equity, and other financial instruments.