A Store Owner May Not Be Available to Monitor the Manager

question 3

Multiple Choice

A store owner may not be available to monitor the manager' actions continuously and at all times.This inability to observe actions falls under the class of problems called:

• A)the principle-agent problem.
• B)adverse selection.
• C)the conflict of interest.
• D)the false consensus problem.
• E)fundamental attribution error.

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Definitions:

Net Working Capital

The discrepancy between a firm's immediate assets and its short-term obligations.

Liquid Ratio

A financial metric comparing a company's liquid assets (cash and marketable securities) to its current liabilities, often used to assess liquidity.

Common Size Statement

A financial statement in which each line item is expressed as a percentage of a significant total, facilitating comparison across companies or periods.

Liabilities Plus Equity

Liabilities plus equity represents the total value of a company's financial obligations plus its owners' investments, crucial for understanding its financial health.