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agency relationship between government and the shareholdersshareholders and via extension the company they own operate within the environment
solutions to agency problemthe bondholders might receive the following procedures to protect themselves from the process of the shareholders that
restrictive bond or debt covenantin this case the debenture holders will impose strict conditions and terms on the borrower these restrictions may
actions of shareholders in agency conflicta disposal of assets required like collateral for the debt in thisin this case the bondholder is exposed to
important points for shareholders and creditors 1 in raising capital the borrowing firm will constantly question the financial securities in form of
shareholders and creditors shareholders and creditors or bond or debenture holdersbondholders are lenders or providers of long term debt capital
opportunity cost or residual lossit is the cost due to the failure of both parties to act optimally like as in example ofa lost opportunities because
monitoring costs - agency coststhis is incurred to prevent undesirable managerial actions they are meant to ensure that both parties live to the
contracting cost - agency coststhese are costs acquired in devising the contract between the shareholders and managersthe contract is drawn to ensure
selection of remuneration policy the alternative of a suitable remuneration policy through a company will depend with another thing on1 cost the
executive share options plansin a share option format selected staff can be provided a number of share alternatives each of which that provides the
solutions - shareholders and management conflict conflicts between management and shareholders may be resolved as follows like1 pegging or attaching
pursuing self esteem ambitions and creative accountingpursuing power and self esteem ambitionsthis is called empire building to enlarge the firm via
different evaluation horizons and mbodifferent evaluation horizonsmanagers might undertake projects that are profitable in short-run shareholders on
different risk-profile - shareholders and managementshareholders will generally prefer high-risk-high return investments while they are diversified
incentive problem and consumption of perquisitesincentive problemmanagers may have fixed salary and they may have no incentive to work hard and
shareholders and managementthere is near separation of ownership and management of the firm landlord employs professionals as managers who such have
stewardship accountingshareholders contribute capital that is provided to the directors that they employ and at the end of each accounting year
agency theory an agency relationship arises whether one or more parties identified the principal contracts or hires another identified an agent to
business ethics - objectives of business entityconnected to the question of social responsibility is the matter of business ethics ethics are
social responsibility - objectives of business entitythe firm must decide where to operate strictly in their shareholders best interests or be
shareholders wealth maximization - objectives of business entityshareholders wealth maximization refers to maximization of the total present value of
objectives of business entitythe main objectives of a business entity are clarified in detail below any business firm would have specific objectives
profit maximization - objectives of business entityconventionally this was considered to be the main goal of the firm profit maximization refers to
overlaps and conflicts overlaps - whenever attaining one means achieving the another conflicts - whenever attaining one cannot permit the achievement