When Shareholders Pursue Selfish Strategies Such as Taking Large Risks

question 35

Multiple Choice

When shareholders pursue selfish strategies such as taking large risks or paying excessive dividends, these will result in:
I. no action by debtholders since these are equity holder concerns
II. positive agency costs, as bondholders impose various restrictions and covenants, which will diminish firm value
III. investments of the same risk class that the firm is in

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

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Definitions:

Rest Breaks

Short periods of time given to employees during work hours to rest and recover, contributing to better health, wellbeing, and productivity.

Dental Plan

A type of health insurance that covers a portion of the costs associated with dental care, including preventative services, treatments, and surgeries.

Tax Consequences

Refers to the fiscal impact of business decisions or personal actions on one's taxable income and liability.

Income Statement

A financial document that summarizes a company's revenue, expenses, and profits over a specific period, providing insight into its financial performance.