Why Do Shareholders Have a Greater Preference for Risk Than

question 72

Multiple Choice

Why do shareholders have a greater preference for risk than do managers?

• A) Shareholders are always richer than managers, and can afford to take more risk.
• B) Shareholders can diversify risk by holding many securities, while a manager's career is tied up with the firm.
• C) Because they are investing in the stock market, shareholders must naturally prefer taking more risk than managers.
• D) Managers do not like risk because it hurts the value of the company.

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Definitions:

Sales Prices

The set amount at which goods or services are sold to customers, influencing the business's revenue.

Salespeople

Individuals who are employed to sell products or services to customers.

Number Of Sales

quantifies the total sales transactions completed within a specific period, often used to gauge business performance.

Bonus

A form of additional compensation given to an employee or workers, above their normal pay, for achieving a certain level of performance or for special occasions.