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Management of a limited liability company is appointed to promote and protect shareholders’ interest in the performance of their functions. The aim is to maximise shareholder value. Management, however, could have interests that might be incompatible and in conflict with shareholders’ interest.
Required:
i) Identify this type of conflict in modern-day management. (2 marks)
ii) Explain THREE (3) different factors that contribute to this conflict in (i) above. (4 marks)
iii) As a Management professional, explain FOUR (4) strategies that can be used to manage or mitigate this conflict to protect shareholders. (4 marks)
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a) Explain the term Agency problem in relation to a Public Limited Liability Company? (2 marks)
b) As a Finance expert, explain THREE practical steps to manage agency problem in public limited liability companies. (3 marks)
c) Profit maximization is the core objective of shareholders in Public limited Liability Companies. Identify and explain THREE other non-financial objectives that can be pursued by a Public limited liability Company. (3 marks)
d) Shareholders are risk-takers but Directors are risk-averse. Explain THREE approaches that corporate governance has identified for addressing conflict of interest between shareholders and Directors. Reference can be made to Companies Act 1963, (Act 179) (6 marks)
e) Explain THREE internal hedging methods that a company can use in order to minimize translation risk and transaction risk. (6 marks)
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a) Economist has always maintained that to increase inflation, the government ought to implement a policy of high interest rate to dampen demand.
Required:
Identify the effects on the economy of a policy of high interest rate on expenditure and investments.
b) Agency problem is pervasive and exists in practically every organization whether a business, church, club, or government. Organizations try to solve it by instituting measures but no organization can remedy it completely.
Required:
i) What is the agency problem within the context of a limited liability company?
ii) Explain TWO causes of the agency problem.
(2 marks)
iii) Explain FOUR remedies to the agency problem.
(4 marks)
c) For a business, it is not necessary that profit should be the only objective; it may concentrate on various aspects such as maximization of share price, maximization of sales, capturing more market shares, return on capital employed among others, which will take care of profitability.
Required:
Explain why maximization of a company’s share price is preferred as a financial objective to maximization of its sales.
(6 marks)
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
Management of a limited liability company is appointed to promote and protect shareholders’ interest in the performance of their functions. The aim is to maximise shareholder value. Management, however, could have interests that might be incompatible and in conflict with shareholders’ interest.
Required:
i) Identify this type of conflict in modern-day management. (2 marks)
ii) Explain THREE (3) different factors that contribute to this conflict in (i) above. (4 marks)
iii) As a Management professional, explain FOUR (4) strategies that can be used to manage or mitigate this conflict to protect shareholders. (4 marks)
Find Related Questions by Tags, levels, etc.
a) Explain the term Agency problem in relation to a Public Limited Liability Company? (2 marks)
b) As a Finance expert, explain THREE practical steps to manage agency problem in public limited liability companies. (3 marks)
c) Profit maximization is the core objective of shareholders in Public limited Liability Companies. Identify and explain THREE other non-financial objectives that can be pursued by a Public limited liability Company. (3 marks)
d) Shareholders are risk-takers but Directors are risk-averse. Explain THREE approaches that corporate governance has identified for addressing conflict of interest between shareholders and Directors. Reference can be made to Companies Act 1963, (Act 179) (6 marks)
e) Explain THREE internal hedging methods that a company can use in order to minimize translation risk and transaction risk. (6 marks)
Find Related Questions by Tags, levels, etc.
a) Economist has always maintained that to increase inflation, the government ought to implement a policy of high interest rate to dampen demand.
Required:
Identify the effects on the economy of a policy of high interest rate on expenditure and investments.
b) Agency problem is pervasive and exists in practically every organization whether a business, church, club, or government. Organizations try to solve it by instituting measures but no organization can remedy it completely.
Required:
i) What is the agency problem within the context of a limited liability company?
ii) Explain TWO causes of the agency problem.
(2 marks)
iii) Explain FOUR remedies to the agency problem.
(4 marks)
c) For a business, it is not necessary that profit should be the only objective; it may concentrate on various aspects such as maximization of share price, maximization of sales, capturing more market shares, return on capital employed among others, which will take care of profitability.
Required:
Explain why maximization of a company’s share price is preferred as a financial objective to maximization of its sales.
(6 marks)
Find Related Questions by Tags, levels, etc.
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