Which of the Following Is Not an Example of a Principal

question 139

Multiple Choice

Which of the following is not an example of a principal trying to solve the moral-hazard problem?

• A) the principal conducts an extensive interview of the agent
• B) the principal installs hidden cameras to monitor the agent's behavior
• C) the principal pays the agent efficiency wages
• D) the principal pays the agent a year-end bonus

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Definitions:

Treasury Stock

Refers to shares that were once part of the circulation on the open market and have been bought back by the issuing company, reducing shareholders' equity.

Cash Flow Statement

A financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.

Retained Earnings

The portion of net income that is retained by the company rather than distributed to shareholders as dividends, representing the cumulative earnings of the company over time.

Common Stock

Equity ownership in a corporation, with rights to vote on corporate matters and share in the profits through dividends.