An Agency Relationship Exists When One Party Delegates

question 54

Multiple Choice

An agency relationship exists when one party delegates:

• A) decision-making responsibility to a second party.
• B) financial responsibility to employees.
• C) strategy implementation actions to functional managers.
• D) ownership of a company to a second party.

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets.

Return On Equity

A measure of a corporation's profitability that calculates how much profit a company generates with the money shareholders have invested.

Inventory Turnover

Inventory turnover is a ratio showing how many times a company has sold and replaced inventory over a period.

Operating Lease

An operating lease is a contract that allows for the use of an asset but does not transfer ownership rights of the asset to the lessee.