Legitimacy Theory and Stakeholder Theory May Both Generate Similar Hypotheses

question 72

Multiple Choice

Legitimacy Theory and Stakeholder Theory may both generate similar hypotheses to Positive Accounting Theory.The difference between PAT and the other two theories is that:

• A) different research methods are applied.
• B) PAT does not explicitly consider the organisation in its broader social context.
• C) PAT is the only theory that takes a 'positive' research perspective.
• D) PAT considers owners and managers who cannot be considered legitimate stakeholders.

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Definitions:

Required Rate

The minimum acceptable rate of return on an investment, considering its risk.

Cash Flow Growth

refers to the increase in the amount of cash that a company generates over a period, indicating how well a company is generating more cash from its operations.

Growing Annuity

A growing annuity is a series of cash flows that grow at a consistent rate per period over a finite number of periods.

Compounded Annually

The process of earning interest on both the initial principal and the accumulated interest from previous periods, calculated once a year.