Which of the Following Management Actions Reflects Agency Problems Due

question 2

Multiple Choice

Which of the following management actions reflects agency problems due to the fact that information held by the agent is hard to observe?

• A)Enriching managers themselves even if shareholders do not benefit
• B)Avoiding risky strategic initiatives even if shareholders view them as "reasonable"
• C)Paying for services that seem excessive to the shareholders
• D)Pumping up the firm's short-run performance even if shareholders are harmed in the long-run
• E)Giving work a mediocre effort so managers do not have to work excessive hours

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Definitions:

Statement of Cash Flows

A financial statement showing the cash inflows and outflows from operating, investing, and financing activities over a specific period.

Operating Activities

Day-to-day business functions and transactions related to a company's core business operations, such as sales and purchasing.

Net Income

The profit a company has after all expenses, taxes, and costs have been subtracted from total revenue.

Cash Dividends

Payments made by a corporation to its shareholders, usually in the form of cash, as a distribution of the company’s earnings.