Which of the following statements is incorrect?
A) The interests of managers are normally similar to those of the shareholders.
B) When a company gets into financial distress, the interests of managers and shareholders begin to differ.
C) When a company gets into financial distress, the actions managers and shareholders take to protect their interests often increase company value.
D) Indirect insolvency costs are costs associated with changes in the behaviour of people who deal with a company when it becomes financially distressed.

Question

Quizplus · Accepted Answer

Indirect insolvency costs are costs associated with changes in the behaviour of people who deal with a company when it becomes financially distressed. The interests of many people who deal with a company are normally similar to those of the shareholders - they all want to maximise the company's value. However, when a company gets into financial distress, the interests of these people begin to differ, and the actions they take to protect their interests often reduce company value.

Which of the Following Statements Is Incorrect