The Ability of an Investing Company to Affect the Operating

question 47

Multiple Choice

The ability of an investing company to affect the operating and financial activities of another company, even though the investor holds less than 50% of the stock, is known as

• A) significant influence.
• B) control.
• C) a combination.
• D) influence and control.

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Definitions:

Agency Problem

A conflict of interest arising between principals (owners/shareholders) and agents (company executives/managers), where the agent may make decisions that benefit themselves at the expense of the principals.

Partnership Agreement

A legal document that outlines the rights, responsibilities, and profit and loss distribution among partners in a business partnership.

Corporate Officer

An executive or high-ranking official within a corporation, often with legal responsibilities.

Corporate Treasurer

A senior executive responsible for managing the company’s investments, capital structure, risk management, and liquidity, including handling corporate financing activities.