Which of the following statements is CORRECT? a. Corporations and partnerships have an advantage over proprietorships because a sole proprietor is exposed to unlimited liability, but the liability of all investors in the other types of businesses is more limited. b. Because most stock ownership is concentrated in the hands of a relatively small segment of society, firms' actions to maximize their stock prices have little benefit to society. c. Most business in the U.S. is conducted by corporations, and corporations' popularity results primarily from their favorable tax treatment. d. The potential exists for agency conflicts between stockholders and managers. e. A good goal for a firm's management is maximization of expected EPS. 1 points

In a company the shareholders are the owners of the company who own shares and have stake in the company. They employ managers to take care of the daily running of the company.

There is the potential of conflict between the shareholders and the management of the company because shareholders just want to make short term profit, whole the management of the company may want to take initiatives that will lead to future gains.

Management will need to communicate effectively reason for temporary slump in profits, and emphasise future gains the company stands to get.