Why in General Do Financial Managers Make Financial Decisions in a Corporation

question 76

Multiple Choice

Why in general do financial managers make financial decisions in a corporation, rather than the owners making these decisions themselves?

• A) It is best for the control of the finances of a corporation to be in the hands of a disinterested third party.
• B) The interests of the various owners may conflict with each other.
• C) The owners may not be U.S. citizens or residents.
• D) There are often many owners, and they can often change as they buy and sell stock.

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Definitions:

Self-dealing

Conduct by a fiduciary or a person in a position of trust that involves taking advantage of their position for personal gain at the expense of those to whom they owe a duty.

Agent

An individual or entity authorized to act on behalf of another person or entity, known as the principal, in transactions or legal matters.

Fiduciary Duty

The legal obligation of one party to act in the best interest of another party, such as the responsibility of a trustee to safeguard the interests of the beneficiaries.

Compensation

Payment or rewards provided in exchange for services or to cover losses or damages.