You and Bob are enrolled together in a course on financial management. You misse
ID: 2369602 • Letter: Y
Question
You and Bob are enrolled together in a course on financial management. You missed the class last Friday, and Bob copied his lecture notes for you to study. Unfortunately, after reading the book, you believe the following statements in Bob's notes are incorrect:
A - "The amount money needed to borrow and invest in the purchase of land for expansion is a function of working capital management."
B - "The financial manager acts in the best interest of management."
C - "The general partners in a partnership are the only type of business owners that can be sued for their personal property to resolve the business' debt."
D - "The main purpose of financial management is to increase revenue annually by a percentage set by the Board of Directors."
E - "Management and owners generally agree on investment decisions because both are acting in the best interest of the company."
F - "All of the cash generated by a company's operations is either re-invested in assets or used to pay off debt."
What changes should Bob make to Statement E?
Management and owners might disagree on investment decisions because management is more concerned with long term effects.
Management and owners might disagree because owners often seek out a less expensive investment.
Owners are more concerned with job loss that results from an unsuccessful investment, and this might cause debate over investments.
A common goal of owners is to show that they have the resources to buy smaller companies; this type of investment does not benefit management and is a source of disagreement.
Explanation / Answer
Owners are more concerned with job loss that results from an unsuccessful investment, and this might cause debate over investments.
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