Which of the Following Statements Is False

question 24

Multiple Choice

Which of the following statements is false?

• A) The conflict of interest between managers and investors derives from the separation of ownership and control in a corporation.
• B) Any discussion of corporate controls-the system of controls, regulations, and incentives designed to prevent fraud-is a story of conflicts of interest and attempts to minimize them.
• C) Once control and ownership are separated a conflict of interest arises between the owners and the people in control of a corporation.
• D) The separation of ownership and control is perhaps the most important reason for the success of the corporate organizational form. Because any investor can hold an ownership stake in a corporation, investors are able to diversify and thus, with no costs, reduce their risk exposures.

Understand the impact of treasury stock transactions on earnings per share and owners' equity.

Comprehend the classification and accounting treatment of mandatorily redeemable preferred stock under current GAAP.

Recognize the role of state law in the governance of corporate distributions to shareholders.

Appreciate the nuances of preferred stock as a financing option for companies, including its benefits and limitations.