If High-Level Executives of a Company Award Themselves Sizable Bonuses

question 193

Multiple Choice

If high-level executives of a company award themselves sizable bonuses even though the firm they manage is making losses and performing poorly, this event is most likely to arise because of

• A) the law of diminishing marginal returns.
• B) competition among business firms for high-level executives.
• C) economies of scale.
• D) the principal-agent problem.

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Definitions:

Management's Responsibility

The obligation of an organization's management to ensure accurate and complete financial reporting, adherence to laws and regulations, and effective operation of the entity.

Primary User Groups

The main categories of users who rely on a company's financial information, typically including investors, creditors, and regulatory agencies.

Financial Information

Data pertaining to the financial status or operations of a business, including balance sheets, income statements, and cash flow statements.

Constraints

Limitations or restrictions that can affect the course of action or outcomes in a specific situation.