To Reduce the Principal-Agent Problem

question 164

Multiple Choice

To reduce the principal-agent problem

• A)boards-of-directors can tie the salaries of top management to the profitability of the firm.
• B)managers can take on more risk than they disclose to investors.
• C)managers can inflate profits on financial statements.
• D)managers can hide liabilities by not disclosing them on financial statements.

---

Definitions:

Cognitive Ability

The capacity to perform various mental activities related to learning, problem-solving, and decision-making.

Selling Process

A systematic approach followed by salespeople involving several steps from prospecting to closing the sale, aimed at convincing a customer to purchase a product or service.

Technical Skill

The ability to perform tasks that require specific knowledge or abilities related to science, technology, engineering, or mathematics.

Analytical Ability

The skill of analyzing complex information or problems to identify patterns, extract key details, and solve problems logically.