Because the Agent's Preferences Sometimes Differ from Those of the Principal

question 124

True/False

Because the agent's preferences sometimes differ from those of the principal, usually the principal entirely eliminates the agent's prospective deviations by spelling out the agent's actions in a detailed contract.

---

Definitions:

Liquidity

The ease with which an asset can be converted into cash without affecting its market price.

Asset Management

The process of developing, operating, maintaining, and selling assets in a cost-effective manner, often related to investment management in finance.

Profitability

A measure of how much profit a company generates compared to its revenues.

Debt

An amount of money borrowed by one party from another, under the condition that it is to be paid back at a later date, often with interest.