Which of the following statements is TRUE? Multiple Choice The goal of a corporate financial manager...

Which of the following statements is TRUE?

Multiple Choice

The goal of a corporate financial manager is to maximize the wealth of the firm’s lenders.
A distinct feature of sole proprietorship is the separation of ownership and management.
The goal of a corporate financial manager is to maximize the firm’s profit.
Agency problem is the conflict of interest between a firm’s principal and its agent.

Solutions

Expert Solution

Option D is correct.

Agency problem is the conflict of interest between a firm’s principal and its agent.

Firm's principal are the shareholders of the company and the agents are the managers of the company.

The goal of a corporate financial manager is to maximize the wealth of the firm’s lenders. Incorrect because the goal of a corporate financial manager is to maximize the wealth of the firm’s shareholders.
A distinct feature of sole proprietorship is the separation of ownership and management. Incorrect because a distinct feature of a corporation is the separation of ownership and management.
The goal of a corporate financial manager is to maximize the firm’s profit. Incorrect because the goal of a corporate financial manager is to maximize the firm’s value.

jeff jeffy answered 1 year ago

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