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.

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Definitions:

Benjamin Graham

Widely recognized as the father of value investing, he was an economist, professional investor, and Columbia Business School professor.

Investment Funds

Pooled funds from investors that are managed on their behalf by an investment manager, investing in a variety of assets to meet specific investment goals.

Income Statement

A financial statement showing a firm’s revenues and expenses during a specified period.

Profitability

A measure of the efficiency and effectiveness of a company's operations, indicated by its ability to generate income from its activities.