Which of the Following Is Not a Valid Criticism That

question 13

Multiple Choice

Which of the following is not a valid criticism that management will enter performance-based contracts that will reward or constrain their behaviour,to maximise the value of the firm?

• A) It assumes management can gain more by entering a performance-based contract than by continuing to act opportunistically.
• B) It relies on credible accounting numbers to monitor performance, but there is no incentive to provide credible unbiased information.
• C) It assumes that managers always act from self-interest and do not attempt to maximise the value of the firm, which may not be true.
• D) It is too difficult to achieve in practice if there is a multitude of different contracting parties.

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Definitions:

Interquartile Range

Range of the middle 50% of the scores in a set of data.

Variance

A statistical measure expressing the degree of dispersion or spread in a set of values, specifically the average of the squared differences from the mean.

Range

Mathematical difference between the lowest and highest scores in a set of data.

Interquartile Range

A measure of statistical dispersion, representing the difference between the 75th and 25th percentiles.