Which of the following statements is correct?
A) The major disadvantage of organizing as a corporation is that it does not provide its owners with limited liability.
B) Bond covenants,or restrictions on debt,are an important device to reduce agency conflicts between stockholders and bondholders.
C) The threat of a hostile takeover serves to reduce agency conflicts between stockholders and bondholders.
D) Compensation packages are designed,in part,to reduce agency conflicts between shareholders and managers.
E) Both answers b and d are correct.

Question

Quizplus · Accepted Answer

Bond covenants are indeed used to mitigate potential conflicts of interest between shareholders and bondholders by imposing restrictions that protect bondholders' interests. Similarly, compensation packages for managers are often structured to align their interests with those of the shareholders, thereby reducing agency conflicts.

Which of the Following Statements Is Correct