The Problem with the Separation of Ownership from Control Is

question 176

Multiple Choice

The problem with the separation of ownership from control is that

• A) the owner in a proprietorship may not always act in the profit-maximizing fashion because he or she may not have the experience or expertise that professional managers have.
• B) the managing partner of a firm may not always behave in the way that other managers would if they were the managing partners.
• C) the managers of the firm can make decisions that reduce the wealth of the owners while not reducing their own wealth.
• D) the owners of firms may not always know the best way to run a firm, yet they are the ones who elect the managers of the firm.

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Definitions:

Retained Earnings

Profits that a company has earned to date, less any dividends or other distributions paid to investors.

Stock Dividend

A dividend payment made in the form of additional shares rather than a cash payout.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities. It represents ownership equity spread among shareholders.

Shares Outstanding

The total number of shares of a corporation that have been issued and are held by shareholders.