Contingent Contracts

question 51

Multiple Choice

Contingent contracts

• A)are inefficient when monitoring is possible.
• B)equally divide the risk between principal and agent.
• C)can be used when monitoring is not reasonably possible.
• D)put the risk on the principal.

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Definitions:

Operating Cycle

The average time period between the acquisition of materials for production and the receipt of cash from sales of the finished goods, critical for managing cash flow.

Current Liabilities

Financial obligations that a company is expected to pay within one year.

Liquidity

The ability to pay current obligations.

Liabilities

Financial obligations or debts that a company owes to external parties.