Corporate Finance - Corporate Finance Section 1

Avatto>>CFA Level 1>>PRACTICE QUESTIONS>>Corporate Finance>>Corporate Finance Section 1

6. Which group of stakeholders is least likely to benefit from an increase in the market value of a company?

  • Option : B
  • Explanation : An increase in market value of a company can benefit management because their compensation is likely to be linked with company value. Shareholders directly benefit from higher market value. Customers are least likely to benefit from an increase in market value of the company.
Cancel reply
Cancel reply

7. Which of the following is least likely an interest of the government as a stakeholder?

  • Option : B
  • Explanation : Management compensation does not directly impact the government's interest as a stakeholder. Being a tax collector, the government is interested in the company's profits whereas as in order to safeguard the interests of the public the government would want to ensure the environmental impact of the business's activities is not negative.
Cancel reply
Cancel reply

9. The shareholders of a company own a portfolio of several companies and have a high risk tolerance. Such a scenario can create a conflict of interest between:

  • Option : A
  • Explanation : When shareholders have a high risk tolerance, they would support venturing into risky projects. The management however, would be more risk averse in order to secure their employment.
Cancel reply
Cancel reply