Chap1Solution

Chap1Solution - Chapter 1 Solutions 1-3. In a corporation,...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 1 Solutions 1-3. In a corporation, what group has the ultimate responsibility for protecting and managing the stockholders' interests? The board of directors. 1-5. What issue does agency theory examine? Why is it important in a public corporation rather than in a private corporation? Agency theory examines the relationship between the owners of the firm and the managers of the firm. In privately owned firms, management and the owners are usually the same people. Management operates the firm to satisfy its own goals, needs, financial requirements and the like. As a company moves from private to public ownership, management now represents all owners. This places management in the agency position of making decisions in the best interest of all shareholders. 1-7. Why is profit maximization, by itself, an inappropriate goal? What is meant by the goal of maximization of shareholder wealth?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/16/2011 for the course BUS-F 300 taught by Professor Jerryjames during the Spring '11 term at Indiana.

Page1 / 2

Chap1Solution - Chapter 1 Solutions 1-3. In a corporation,...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online