When Managers Knowingly Bias Estimates of Cash Flows from Investment

question 41

Multiple Choice

When managers knowingly bias estimates of cash flows from investment projects in order to serve their personal objectives, they are ____.

• A) performing management by exception
• B) increasing their total compensation
• C) departing from the shareholder wealth maximization goal
• D) increasing their confidence level

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Definitions:

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its stock price, typically expressed as a percentage.

Price/earnings Ratio

A valuation metric for companies, calculated as the market value per share divided by the earnings per share.

Excess Cash

Refers to the amount of cash held by a company that exceeds the normal operational needs, often indicating a potential for investment, distribution to shareholders, or acquisition.

Dividend

A part of a company's profits distributed to its shareholders, usually four times a year.