A Major Conflict of Interest Between Top Executives and Owners

question 135

Multiple Choice

A major conflict of interest between top executives and owners, is that top executives wish to diversify the firm in order to ____, while owners wish to diversify the firm to ____.

• A) generate free cash flows, reduce the risk of total firm failure
• B) increase the price of the firm's stock, increase the dividends paid out from free cash flows
• C) reduce the risk of total firm failure, reduce their total portfolio risk
• D) reduce their employment risk, increase the company's value

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Definitions:

Sales Tax

Sales tax is a government levy imposed on the sale of goods and services, collected by the seller from the buyer at the point of sale.

Cash Sales

Transactions in which payment is received at the time of sale, typically in cash or equivalent.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that aim to make financial statements comparable across international boundaries.

Liabilities

Liabilities represent obligations that a company owes to external parties, which might include loans, accounts payable, and other debts.