Question

Which of the following statements is CORRECT? a. Most business in the U.S. is conducted by corporations, and corporations' popularity results primarily from their favorable tax treatment. b. Corporations and partnerships have an advantage over proprietorships because a proprietor is exposed to unlimited liability, but the liability of all investors in the other types of businesses is more limited. c. A good goal for a firm's management is the maximization of expected EPS. d. For a stock to be in equilibrium, its intrinsic value must be greater than the actual market price. e. Conflicts can exist between stockholders and managers, but potential conflicts are reduced by the possibility of hostile takeovers.

Answer 1

Answer:

Option E                    

Explanation:

In simple words, every stakeholder in the organisation has their own personal goals from the investments they made in form of money or time. Managers might want to increase their salary by increasing short term profits and shareholders might be interested in reinvestment for log term purposes, leading to conflict.

However such conflicts do get less probability because of hostile takeovers under which another company directly approach the shareholders for acquisition or from the removal of board. Such acquisitions result in loss form both the parties.