BUISENESS MANAGEMENT
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Managers might attempt to benefit themselves in terms of salary and perquisites at the expense of shareholders.
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The agency problem results from the separation of management and the ownership of the firm.
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The agency problem may interfere with the implementation of maximizing shareholder wealth.
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all of the above
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Detailed explanation-1: -Which of the following statements best represents the “Agency Problem"? Managers might attempt to benefit themselves in terms of salary and perquisites at the expense of shareholders. The agency problem results from the separation of management and the ownership of the firm.
Detailed explanation-2: -An agency problem is a conflict of interest inherent in any relationship where one party is expected to act in another’s best interests. In corporate finance, an agency problem usually refers to a conflict of interest between a company’s management and the company’s stockholders.
Detailed explanation-3: -The best example of an agency problem is: Lenders disagreeing with hotel owners about dividend payments.
Detailed explanation-4: -Answer and Explanation: The answer is D-Ratio analysis of other firms in the same industry-this is internal information for the financial managers as they are performing their ben-chmarking activities.
Detailed explanation-5: -The agency cost of debt is the conflict that arises between shareholders and debtholders of a public company. Agency costs of debt arise when debtholders place limits on the use of their capital if they believe that management will take actions that favor shareholders instead of debtholders.