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Which of the following statements is CORRECT? Potential b . The riskiness conflicts of interest can exist between stockhold ers and managers, and also between
Which of the following statements is CORRECT? Potential b The riskiness conflicts of interest can exist between stockhold ers and managers, and also between stockhold ers and bondhold ers. inherent in a firm's earnings per share EPS depends on the characteristics of the projects the firm selects, which means it depends upon the firm's assets, but EPS does not depend on the manner in which those assets are financed Large, publiclyowned firms liked. The proper AT&T and GM are controlled by their management teams. Ownership is generally widely dispersed, hence managers have great freedom in how they manage the firm. Managers may operate in stockholdersbest interests, but they may also operate in their own personal best interests. As long as managers stay within the law, there are no effective tools that can be used to motivate them to take actions that are in the stockholders best interests goal of the financial manager should be to maximize the firm's expected cash flows, because this will add the most wealth to cach of the individual shareholders The financial manager should seek that combination of assets, liabilities and capital that will generate the largest expected aftertax income over the relevant owners of the time horizon. firm
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