Paying payroll service pps recently declared

This preview shows 8 out of 10 pages.

44. Paying Payroll Service (PPS) recently declared bankruptcy. The price of PPS's stock has dropped from approximately $10 per share one year ago to $1 today. You can imagine that stockholders are not happy that the value of their stock has dropped so significantly. At the same time the financial position of the firm was deteriorating, PPS executives increased their salaries and perquisites substantially. Nothing they did violated any laws or was considered an unethical act. We would most likely describe this situation as ____. A. an agency problem. B. an accounting glitch. C. an appropriate use of the tax laws. D. an appropriate action, because executive compensation should always be increased substantially each year. E. acceptable, because it is obvious that the executives were trying to maximize the value of the firm, which is what the shareholders want them to do.
Image of page 8

Subscribe to view the full document.

45. Compared to corporations, what is the primary disadvantage of partnerships as forms of business organizations? 46. All else equal, in which of the following forms of business would the possibility of an agency problem be the greatest ? 47. All of the following are external factors that influence the stock prices of the firm except 48. Management may expropriate wealth from bondholders to shareholders through which of the following actions: A. take on new ventures with much greater risk than was anticipated by creditors. B. take on more debt to increase the returns to shareholders. C. issue more stock than was anticipated by creditors. D. answers a and b are correct. E. answers b and c are correct.
Image of page 9
Image of page 10
You've reached the end of this preview.
  • Spring '10
  • Patterson
  • Finance, Corporation, Firm

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern