The Principal-Agent Problem ________

question 90

Multiple Choice

The principal-agent problem ________.

• A) occurs when managers have more incentive to maximize profits than the stockholders-owners do
• B) in financial markets helps to explain why equity is a relatively important source of finance for Canadian business
• C) would not arise if the owners of the firm had complete information about the activities of the managers
• D) explains why direct finance is more important than indirect finance as a source of business finance

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Definitions:

Perpetually Advertises

A marketing approach that involves continuous and ongoing promotion of a product or brand.

Adaptation

The process of adjusting or changing to become suitable for a new environment or conditions.

Contrast

The state of being strikingly different from something else, typically something in juxtaposition or close association.

Novelty

refers to the quality of being new, original, or unusual, often sought after in products or experiences to stimulate interest or excitement.