Which of the following statements is CORRECT?
A) A good goal for a firm's management is maximization of expected EPS.
B) Most business in the U.S. is conducted by corporations, and corporations' popularity results primarily from their favorable tax
Treatment.
C) Because most stock ownership is concentrated in the hands of a relatively small segment of society, firms' actions to maximize
Their stock prices have little benefit to society.
D) Corporations and partnerships have an advantage over proprietorships because a sole proprietor is exposed to unlimited liability, but the liability of all investors in the other types of
Businesses is more limited.
E) The potential exists for agency conflicts between stockholders and
Managers.

Question

Quizplus · Accepted Answer

The potential for agency conflicts between stockholders and managers is a well-established concept in finance and corporate governance literature. This conflict arises because managers may prioritize their own goals and interests over those of the shareholders. Therefore, it is important for firms to design appropriate incentive structures and corporate governance mechanisms to align the interests of both parties. The other statements are either incorrect or incomplete.

Which of the Following Statements Is CORRECT