As It Relates to Corporations, the Principal-Agent Problem Is That

question 72

Multiple Choice

As it relates to corporations, the principal-agent problem is that

• A)the goals of the corporate managers (the principals)may not match the goals of the corporate owners (the agents).
• B)the goals of the corporate managers (the agents)may not match the goals of the corporate owners (the principals).
• C)the federal government (the agent)taxes both corporate profits and the dividends paid to stockholders (the principals).
• D)it is costly for the corporate owners (the principals)to obtain a corporate charter from government (the agent).

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Definitions:

Account Payable

Obligations or debts a company owes to suppliers or creditors for goods or services received that have not yet been paid for.

Increases Liabilities

Situations or transactions that result in a rise in the claims against a company’s assets.

Decreases Assets

Refers to any operation or transaction that results in a reduction of the value of assets owned by a business.

Account Receivable

Money owed to a company by customers who have purchased goods or services on credit.