Issuing Debt Instead of New Equity in a Closely Held

question 25

Multiple Choice

Issuing debt instead of new equity in a closely held firm more likely:

• A)causes the owner-manager to work less hard and shirk their duties as they have less capital
• At risk.
• B)causes the owner-manager to consume more perquisites because the cost is passed to the
• Debtholders.
• C)causes both more shirking and perquisite consumption since the government provides a tax
• Shield on debt.
• D)causes agency costs to fall as owner-managers do not need to worry about other
• Shareholders.
• E)causes the owner-manager to reduce shirking and perquisite consumption as the excess
• Cash flow must be used to meet debt payments.

Recognize the characteristics, advantages, and disadvantages of skill-based pay.

Identify the components and effectiveness of typical organizational reward systems.

Comprehend the motivational impact of various types of rewards and pay systems.

Understand the role of gain-sharing, profit-sharing, and employee stock ownership plans (ESOPs) in organizational performance and employee motivation.

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Definitions:

Time Management

It involves coordinating tasks and activities by priority and necessity to maximize the effectiveness of an individual's effort and focus.

Complicated Project

A project characterized by multiple challenging aspects, which could include intricate logistics, high levels of uncertainty, or complex stakeholder needs.

Smaller Tasks

Breaking down large projects or activities into more manageable and achievable parts or steps.

Time-Wasting Interruptions

Unnecessary breaks in focus or activity that hinder productivity and efficiency.