Question #36
Reading: Reading 24 Private Company Valuation
PDF File: Reading 24 Private Company Valuation.pdf
Page: 19
Status: Incorrect
Correct Answer: A
Your Answer: C
Question
Which of the following statements most accurately describes the difference between private and public firm managers?
Answer Choices:
A. Although managers in a public firm are often paid with incentive compensation, public managers may take a shorter term view than private managers because shareholders often focus on the short-term
B. Because managers in a public firm are often paid with incentive compensation, public managers may take a longer term view than private managers
C. Because managers in a private firm are concerned with having the firm go public, private managers may take a shorter term view than public managers
Explanation
Although managers in a public firm are often paid with incentive compensation such as
options, shareholders often focus on short-term measures such as quarterly earnings and
the consistency of such. Management may therefore take a shorter term view than they
otherwise would. Private firms should be able to take a longer term view.