Which of the Following Is the Source of the Principal-Agent

question 39

Multiple Choice

Which of the following is the source of the principal-agent problem in publicly traded companies?

• A) the law of legal personality
• B) the separation of ownership and control
• C) limited liability for investors
• D) transferability of investor ownership

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Definitions:

Accounts Receivable

Receivables by a corporation from its clients for goods or services that have been extended or utilized, yet the corresponding payments are awaited.

Common-base Year Statement

Financial statements that are adjusted to a single point in time or base year, facilitating comparison across different time periods.

Market-to-Book Ratio

A ratio used to compare a company's current market price to its book value.

Depreciation Life

The estimated period over which a fixed asset is expected to be usable, affecting its depreciation calculation for accounting purposes.