Agency Problems Appear in Many Settings Within a Firm

question 10

Multiple Choice

Agency problems appear in many settings within a firm.All of the following are examples,except which is NOT a good example of this problem?

• A) Diversified stockholders are more enthusiastic on accepting business risks than are firm managers.
• B) Firm managers receive cash bonuses based on the performance of the firm.
• C) Employees sometime take items from the store in which they work.
• D) Lenders to firms want the managers to invest in safe projects to protect their collateral in the project but managers want to invest in projects that will make a name for them and warrant promotion.
• E) Firm managers sometime want to relax on the job.

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Definitions:

Adjust Expense

The process of allocating expenses incurred in one period to the correct period, often through adjusting entries in the accounting records.

Reported

Information that has been formally communicated or disclosed, often referring to financial data or significant events in a company.

Accrue

The process of recognizing revenue or expenses that have been earned or incurred but not yet officially recorded or received in cash.

Total Liabilities

The sum of all financial obligations or debts a company owes, including both short-term and long-term liabilities.