Which of the Following Statements Is CORRECT

question 5

Multiple Choice

Which of the following statements is CORRECT?

• A) Compensating managers with stock options can do nothing to help eliminate potential conflicts between stockholders and managers.
• B) Restrictions can be included in credit agreements, but these restrictions can do nothing to protect bondholders from conflicts of interest between them and the firm's managers and stockholders.
• C) The threat of takeovers reduces conflict of interest problems, but only between bondholders and stockholders.
• D) Compensating managers with stock options can help reduce conflicts of interest between stockholders and managers, but if the options are all exercisable on a specific date in the near future, this can motivate managers to do something other than try to maximize the stock's intrinsic value.
• E) Conflicts would not exist if the Security and Exchange Commission were abolished.

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Definitions:

Child Mortality

Refers to the death of children under the age of five.

Developed Countries

Nations with a high level of economic development and standard of living, characterized by high income per capita, advanced technological infrastructure, and a wide range of services available to citizens.

Literacy

The ability to read and write, providing the fundamental skill for communication and learning in society.

Malnutrition

A condition resulting from an imbalanced dietary intake, either through undernutrition or overnutrition.