Positive accounting theory suggests that the separation of ownership and control within an entity means managers, as agents are likely to act:

Select one:

a. in the interests of the shareholders.

b. in the interests of the directors

c. in the interests of the debtholders.

d. in their own interests.

Which of the following statements is true with regards to the political cost hypothesis?

Select one:

a. Smaller entities are more likely to be the target of environmental groups.

b. Managers of entities that are more politically visible are expected to choose accounting policies that reduce profit in order to avoid political costs.

c. Managers of financial institutions may prefer to increase profits to reduce government pressure to pass on interest rate cuts.

d. Political costs arise because of an entitys relationships with shareholders and lenders.