As a large corporation, ABC plc. one ormore could be correct.i. more likely than smaller businesses toissue stocks to raise funding.ii. more likely than smaller businesses toissue bonds to raise funding.iii. can reduce its principal-agent problemby maintaining the confidentiality of itsboards decisions.iv. can reduce its principal-agent problemsby allowing its board to monitorshareholder activities more closely.

Corporation is where there is agency type relationship between the shareholders and managers of the…

As a large corporation, ABC plč. õné of more could be correct. more likely than smaller businesses to ssue stocks to raise funding. i. more likely than smaller businesses to ssue bonds to raise funding. ii an rodICe itc nrincinaLagent problo

As a large corporation, ABC plč. õné of more could be correct. more likely than smaller businesses to ssue stocks to raise funding. i. more likely than smaller businesses to ssue bonds to raise funding. ii an rodICe itc nrincinaLagent problo

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter6: Accounting Quality

Section: Chapter Questions

Problem 11QE

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Which of the following characteristics are not an advantage of being a publicly traded company? Group of answer choices A. Allows the firm to play the merger game, using marketable securities for the purchase of other firms. B. Prestige is helpful in bank negotiations, executive recruitment and the marketing of products. C. Tapping into the security markets for a greater amount of funds. D. Compliance costs because of various public disclosure requirements.
Which of the following statements is true? a. Restrictive covenants in debt agreements are an effective way to reduce agency conflicts between stockholders and managers. b. Managers generally welcome hostile takeovers since they often increase the company’s stock price. None of the choices is correct. c. One advantage of organizing your business as a corporation is that your shareholders are not subject to limited liability. d. An effective ethics program can enhance corporate value by producing a number of positive benefits like building shareholder confidence.
Which one of the following statements is TRUE? a. Creditors have a claim on a firm's earning stream through the dividend payments they receive. b. One tool of corporate governance is a company's tax avoidance strategy. c. One tool of corporate governance is stock repurchases. d. One tool of corporate governance is how the company's charter affects the likelihood of a takeover. e. One tool of corporate governance is choosing a good investment banker.
Which of the following statements is CORRECT? Select one: a. Conflict of interest between shareholders and managers is not possible. b. By definition, the agency problem can only take place in corporations but not in proprietorships and partnerships. c. Conflict of interest between shareholders and bondholders is not possible. d. Managers always work to maximize the long-run value, and therefore the price, of their company stocks. This is exactly what shareholders desire.
46. Which of the following situations are likely to reduce agency conflicts between stockholders and managers? Group of answer choices a. Paying managers large fixed salaries. b. Enacting laws that increase the likelihood of corporate takeovers. c. Placing restrictive covenants in debt agreements like avoiding risky projects. d. All of the statements are correct. e. Two of the statements are correct.
Which of the following statements is FALSE? In the shareholder/debtor relationship, the: a. Debtor is the principal, because they have delegated authority to management b. Shareholder and debtor interests are increasingly aligned as the company takes on more debt. c. Interests of the firm’s management tend to be aligned more closely with those of the firm’s shareholders d. Shareholders have an incentive to take on risky projects because they get to keep residual earnings of the firm a. Interests of the firm’s management tend to be aligned more closely with those of the firm’s shareholders b. Shareholders have an incentive to take on risky projects because they get to keep residual earnings of the firm c. Debtor is the principal, because they have delegated authority to management d. Shareholder and debtor interests are increasingly aligned as the company takes on more debt.
If a publicly traded company is trying to maximize its perceived value to decision makers external to the corporation, the company is most likely to report too small a valuefor which of the following on its balance sheet?a. Assetsb. Liabilitiesc. Retained Earningsd. Common Stock
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Which of the following methods would be most likely to decrease the agency problems by helping motivate managers to act in the best interests of shareholders? 1. Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cash salaries. 2. Eliminate a requirement that members of the board of directors have a substantial investment in the firm's stock. 3. Decrease the use of restrictive covenants in bond agreements. 4. Take actions that reduce the possibility of a hostile takeover. 5. Elect a board of directors that allows managers greater freedom of action.
Which of the following statements is NOT CORRECT? "Going public" establishes a firm's true intrinsic value and ensures that a liquid market will always exist for the firm's shares. Publicly owned companies have sold shares to investors who are not associated with management, and they must register with and report to a regulatory agency such as the SEC. e When stock in a closely held corporation is offered to the public for the first time, the transaction is called "going public," and the market for such stock is called the new issue market. O It is possible for a firm to go public and yet not raise any additional new capital. O When a corporation's shares are owned by a few individuals who own most of the stock or are part of the firm's management, we say that the firm is "closely, or privately, held.
11. Which of the following security holders receives a lower returns with low risk? . T-Bill B. Common shareholders C. Stakeholders D. Creditors 12. The advantage of a company compared a sole trader as form of business organisation is: A. Quick decision making B. Access to external professional management skills C. Use of own funds D. Inability to access external funds Thank you!!!
QA) State whether the following statements are true or false Within Corporation, one key value of limited liability is that it lowers owners' risks and thereby enhances a firm's value. Money markets are markets for short-term debt securities. Negative net operating cash flow of firm means that the firm has solvency.