Why in general do financial managers make financial decisions in a public corporation, rather than the shareholders making these decisions themselves?Question 9Answera.The owners may not be the citizens or residents of where the company is headquartered.b.The interests of the various owners may conflict with each other.c.There are often many owners, and they can often change as they buy and sell stock.d.It is best for the control of the finances of a corporation to be in the hands of a disinterested third party.
Question
Why in general do financial managers make financial decisions in a public corporation, rather than the shareholders making these decisions themselves?Question 9Answera.The owners may not be the citizens or residents of where the company is headquartered.b.The interests of the various owners may conflict with each other.c.There are often many owners, and they can often change as they buy and sell stock.d.It is best for the control of the finances of a corporation to be in the hands of a disinterested third party.
Solution
Financial managers are typically tasked with making financial decisions in a public corporation for several reasons:
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Geographic Disparity: Shareholders of a public corporation can be located anywhere in the world. They may not be citizens or residents of the country where the company is headquartered. This can make it difficult for them to participate in decision-making processes.
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Conflicting Interests: Shareholders may have conflicting interests. Some may prioritize short-term profits while others may be more interested in long-term growth. Having a financial manager make decisions can help balance these differing perspectives.
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Large and Changing Ownership: Public corporations often have many owners, and ownership can frequently change as shareholders buy and sell stock. This can make it impractical for shareholders to make financial decisions.
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Professional Expertise: Financial managers are professionals who are trained and experienced in making financial decisions. They can provide a level of expertise and insight that individual shareholders may not have.
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Impartiality: Financial managers are typically disinterested third parties. This means they can make decisions that are in the best interest of the corporation as a whole, rather than being influenced by personal interests.
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