Question

Question 1 3 pts Which of the following concepts is used by shareholders to get managers to act in shareholder's best interests? O A. Threat of firing. O B. Managerial compensation tied to the companys stock performance. O C. Bonus compensation plans for executives based on financial performance of the company. O D. Threat of takeover by another company O E. All of the above. O F. All of the above except C of the above except C

Answer 1

1: Option 3

(The threats will not work for very long. However linking compensation to stock price will drive managers to work for the benefit of shareholders which is wealth maximization. Option B is incorrect since it only looks at profit maximization.)

2: Option 1

Statement of cash flows gives the cash inflows and outflows from operating, investing and financing activities. Income statement shows the revenues ane expenses . Statement of Retained earnings shows the equity of the company while balance sheet shows the assets and liabilities as on a certain date.

3: Option 2

Wealth maximization is the highest goal of financial managers. Others are secondary goals.