Methods of Encouraging Managers to Act in Shareholders' Best Interest

question 45

Multiple Choice

Methods of encouraging managers to act in shareholders' best interest include:
I. Threat of takeover.
II. Proxy fights for control of the board of directors.
III. Tying managers' compensation to stock price performance.

• A) I only
• B) I and II only
• C) II and III only
• D) I, II, and III

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Definitions:

Direct Write-off Method

A method of accounting for bad debts that involves charging unpaid customer invoices directly to the expense account at the time they are deemed uncollectible.

Net Realizable Value

The estimated selling price of an asset in the ordinary course of business minus any costs associated with its sale or disposal.

Aging Method

An accounting technique used to estimate uncollectible accounts receivable based on the age of each account's outstanding invoices.

Direct Write-off

The Direct Write-off method is an accounting procedure where uncollectible debts from customers are directly written off against income at the time they are deemed uncollectible.