The Basic Incentive Problem Associated with Internal Transfers Is

question 29

Multiple Choice

The basic incentive problem associated with internal transfers is:

• A) divisional managers have private information about opportunity costs.
• B) divisional managers have only public information about opportunity costs.
• C) senior management have private information about opportunity costs.
• D) senior management must make all information about opportunity costs public.

Recognize the structure and purpose of internal corporate communication platforms and their similarities to the internet.

Understand the purpose and components of the statement of cash flows.

Distinguish between operating, investing, and financing activities.

Understand the differences and similarities between the direct and indirect methods of preparing the statement of cash flows.

---

Definitions:

Convertible Preferred Stock

A type of preferred stock that grants the holder the option to convert the stock into a set number of shares of common stock, usually at any time after a predetermined date.

Common Stock

Common stock represents ownership shares in a corporation, giving holders voting rights and a share in the company's profits through dividends.

Par Value

The face value of a bond or stock as stated by the issuing company, unrelated to its market value.

Transaction Fee

A charge levied for processing a payment or financial transaction.