A Major Conflict of Interest Between Top Executives and Owners

question 115

Multiple Choice

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

Hydrophilic

Describes molecules or substances that are attracted to water and dissolve well in it.

Linoleic Acid

An essential polyunsaturated fatty acid belonging to the omega-6 fatty acid family, necessary for human health but cannot be synthesized by the human body.

HBr

Hydrobromic acid, a strong acid used in organic synthesis, notably for the addition of bromine across double bonds in alkenes.

KMnO4

Potassium permanganate, a strong oxidizing agent used in various chemical reactions, including organic synthesis and analytical chemistry.