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1. Availability of finance. Certain decisions will be rejected because they cost too much

2. Existing Business/Company Policy. It is not always practical to re-write

business policy to accommodate one decision

3. People's behavior, abilities and feelings. A decision cannot be taken if it assumes higher skills than employees actually have, or if the decision is so unpopular no-one

will work properly on it.


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What is meant by debt as a disciplinary mechanism?

Given the fact that debt has to be repaid and interest has to be paid, having corporate debt on the balance sheet forces managers to provide enough cash flows to service the debt obligations. Thus, these cash flows go to the debt holders and cannot be used for perks for the managers or for unprofitable empire building. Furthermore, debt covenants can restrict managers in their (self interest maximizing) decisions. Finally, if debt is provided by a large e.g. institutional lender, this lender may have such a large stake in the firm that the lender acts as a valuable monitor


Can a company restrict employee contributions to a 401k based on length of time with the company cannot contribute to the 401k until with the company 3 months Is this legal?

Yes, this is legal. The company has previously established eligibility requirements for the account that have been approved by the Internal Revenue Service and the Department of Labor. Some companies may do this based open length of employment with the company or hours worked or both.


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To prevent inflation growth.


What was the main goal of the Taft-Hartley Act passed in 1947?

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Why the cost for capital is important in the management?

The cost of capital is crucial in management as it represents the minimum return that investors expect for providing capital to the company. It impacts investment decisions, project evaluations, and overall financial strategy, helping managers determine which projects are worth pursuing. A lower cost of capital can enhance profitability and competitive advantage, while a higher cost may restrict growth opportunities. Ultimately, effectively managing the cost of capital aids in optimizing the company's financial performance and shareholder value.

Related Questions

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Is restrict a positive connotation?

The term "restrict" generally carries a neutral to negative connotation, as it implies limitations or constraints on freedom, options, or actions. While it can be seen positively in contexts where boundaries are necessary for safety or order, the overall perception often leans towards the idea of reduction or control, which may not be viewed favorably.