Homework Clinic

Social Science Clinic => Business => Finance => Topic started by: jeatrice on Apr 25, 2021

Title: The process by which ownership of a firm passes from the equity holders to the debtholders is
Post by: jeatrice on Apr 25, 2021

Question 1

One CEO buys a fleet of private jets for the company. Another CEO uses company funds to host a birthday for his wife in Sardinia. These are examples of
◦ free cash flow problem.
◦ asymmetric information problem.
◦ ownership separation problem.
◦ principal-agent problem.

Question 2

The process by which ownership of a firm passes from the equity holders to the debtholders is
◦ bankruptcy.
◦ going private.
◦ leveraged buyout.
◦ recapitalization.

Title: The process by which ownership of a firm passes from the equity holders to the debtholders is
Post by: joneynes on Apr 25, 2021

Answer 1

principal-agent problem.

Answer 2

bankruptcy.