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:

Cost of Preferred Stock

The dividend required to be paid by a company for its preferred shares, expressed as a percentage of the current market price.

Yield-to-Maturity

The total expected return on a bond if the bond is held until its maturity date, considering all interest payments and the repayment of principal.

After Tax

Pertains to the amount of money left over or the value of transactions after all applicable taxes have been subtracted.

Perpetuity Rate of Return

The rate at which an infinite series of cash flows, received indefinitely, is discounted to equate its present value.