The Principal-Agent Problem Happens Because the Owner Cannot

question 2

Multiple Choice

The principal-agent problem happens because the owner cannot:

• A) control the production process.
• B) spend time at the physical plant site.
• C) monitor the efforts of the manager.
• D) evaluate the efforts of the manager.

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Definitions:

Joint Control

A situation in corporate governance where two or more parties agree to share control over a business activity, ensuring decisions are made unanimously.

Deferred Exploration Expenditure

Costs incurred in the exploration of resources which are not immediately expensed but are capitalized and amortized over time.

Accumulated Depreciation

The total amount of a tangible asset's cost that has been allocated as depreciation expense since the asset was put into use.

Sundry Liabilities

Various small or infrequent debts and liabilities not classified in the main liabilities categories on a company's balance sheet.