Question

Why in general do financial managers make financial decisions in a corporation, rather than the owners making these decisions themselves?

A. the owners may not be US citizens or residents

B. there are often many owners, and they can often change as they buy and sell stock

C. the interests of the various owners may conflict with each other

D. it is best for the control of the finances of a corporation to be in the hands of a disinterested third party

Answer 1

Financial managers make finance decision in a corporation because Interest of various owners may conflict with each other

Rest of the options except option (C) are false as it is not related to us citizenship or number of owners.

Statement(d) is also false because it says that it is best to control the finances to be in hands of disinterested third party,as disinterested third party must be authorised by shareholders and must be capable enough in finances in order to make decisions ,it is not just about being disinterested third party.

Statement( C) which says that the interest of various owners may conflict is it true answer because interest of various owners often conflict with each other so financial manager are needed to make finance decision

Correct answer is option (C).