When Managers Do Not Own Very Much of the Net

question 83

Multiple Choice

When managers do not own very much of the net worth of the firm, then

• A)there may be a principal-agent problem.
• B)the firm will usually have to raise most of its funds in financial markets.
• C)the firm will have to rely more on equity financing than debt financing.
• D)the firm will have to rely more on debt financing than equity financing.

Understand the concepts of price elasticity of demand and supply.

Recognize the effects of government taxation on product consumption.

Differentiate between normal and inferior goods.

Analyze the impact of complementary and substitute goods on market demand.

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Definitions:

Financial Statement

A written record that conveys the business activities and the financial performance of a company, usually consisting of the balance sheet, income statement, and cash flow statement.

Normal Balance

Refers to the side (debit or credit) where increases in the account are recorded, which is a fundamental aspect of double-entry bookkeeping.

Subsidiary Ledger

An accounting ledger containing detailed information for individual accounts, used to support the main ledger.