If the Unity of Command Principle Is Followed

question 49

Multiple Choice

If the unity of command principle is followed,:

• A)each employee will report to only one manager.
• B)each employee will report to several managers.
• C)an upper limit will be set on the number ofsubordinates a supervisor canmanage.
• D)each employee will be given full autonomy.

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Definitions:

Miller Model

A theory that incorporates corporate taxes and bankruptcy costs to determine the optimal capital structure for a firm.

Trade-Off Theory

The addition of financial distress and agency costs to either the MM tax model or the Miller model. When trade-off is added to either model, the optimal capital structure can be visualized as a trade-off between the benefit of debt (the interest tax shield) and the costs of debt (financial distress and agency costs).

Debt Financing

A method of funding in which a company raises capital by borrowing money, agreeing to repay the principal amount along with interest on a specified schedule.

MM Model

The Modigliani-Miller theorem, proposing that in perfect markets, the value of a firm is unaffected by its capital structure.