- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 1. Organizational Forms, Corporate Issuer Features, and Ownership
- Subject 2. Key Features of Corporate Issuers
CFA Practice Question
The following are advantages of separation of ownership and management of corporations except:
B. Facilitate transfer of ownership without affecting the operations of the firm.
C. Hire professional managers.
D. Incur agency costs.
A. Corporations can exist forever.
B. Facilitate transfer of ownership without affecting the operations of the firm.
C. Hire professional managers.
D. Incur agency costs.
Correct Answer: D
Another advantage is corporations can hire professional managers.
User Contributed Comments 4
| User | Comment |
|---|---|
| game2004 | Incur agency costs is an advantages? Oh, it is asking for 'except' |
| volkovv | oh yeah, it never sucks more of knowing the material, getting the hard questions right, and misreading easy ones and getting them wrong. Got them one right, just venting... |
| micheleus | agency cost? what does it mean? |
| copus | an agency cost is the cost of hiring an external third party (or an agent)such as an auditor or an attorney or even an employee. Agency costs are incurred in corporations (where there is a separation of ownership and management). This is a cost of doing business. As far as I am concerned, it is neither an advantage nor a disadvantage, it is just a given. For this reason, C is correct. |